The leaders of 65 conservative-leaning philanthropy organizations have urged Congress to reject tax proposals intended to speed up distributions from foundations and donor-advised funds.
In particular, the letter takes aim at the “Initiative to Accelerate Charitable Giving,” developed by the billionaire philanthropist John Arnold and Boston College law professor Ray Madoff. It would allow donors to claim an immediate charitable deduction for contributions to their donor-advised-fund accounts only if the funds are distributed to charities within 15 years. It also would provide a tax incentive for foundations to increase their annual payout to least 7 percent of assets annually or spend down all of their assets within 25 years.
“This proposal would severely hamper Americans’ ability to give to causes they care about,” states the letter, which was distributed by the Philanthropy Roundtable.
Annie Dwyer, a spokeswoman for the Philanthropy Roundtable, described the signatories as “free-market and conservative organizations.” They include the leaders of the Commonwealth Foundation, DonorsTrust, FreedomWorks, the Goldwater Institute, Heritage Action for America, and National Taxpayers Union.
“Donor-advised funds allow individuals to donate as much as they can in a given year; they facilitate both immediate and long-term giving for a specific cause or local community,” the letter states.
The letter also criticizes a provision of the Madoff-Arnold proposal that would no longer allow foundations to meet their payout obligations by paying salaries or travel expenses of foundation family members. “The Initiative also takes aim at a family’s ability to serve its own foundation, which would unfairly target smaller and less-wealthy institutions,” the letter states.
The proposal attracted support from the leaders of some large grant makers, including Larry Kramer of the Hewlett Foundation and Darren Walker of the Ford Foundation, and other prominent philanthropists, including Seth and Beth Klarman. However, some experts say that such efforts face an uphill climb in a new Congress that will be busy dealing with a lengthy list of other pressing issues.
Advocates of the proposal say that with nonprofits across the nation facing crushing financial woes amid the pandemic, the time is right to impose tougher payout rules on donors who enjoy substantial tax advantages for their giving.
“We are disappointed that some in the philanthropic community continue to defend loopholes, which currently enable donors to claim charitable tax benefits for funds that might never make their way to working charities,” wrote the members of the coalition in response to the letter. “Donor-advised funds and private foundations have important roles to play in the charitable landscape, but the fact remains that giving to financial accounts without any guarantee the public will receive the intended benefit is not the same thing as giving directly to charities.”
(The Hewlett Foundation is a financial supporter of the Chronicle of Philanthropy.)
Alex Daniels contributed to this article.
