The IPS Charity Reform Initiative aims to overhaul the rules governing philanthropy to boost the flow of funds and protect democratic institutions as well as the entire independent nonprofit sector.
The growing concentration of wealth and power is distorting philanthropy and imperiling our democratic institutions. Philanthropy has become one more way for the ultra-wealthy to use their wealth and power to exert undue influence over public policy and foundations of our democracy such as education and healthcare.
Over the last two decades, charitable giving has been on a steady upward trajectory. But this growth has masked a troubling trend: Charity is becoming increasingly undemocratic, with organizations relying more on larger donations from a smaller number of wealthy donors, while receiving shrinking amounts of revenue from donors at lower-and middle-income levels. This reliance can create pressure on organizations to shift missions and programming towards the interest of those wealthy donors.
As one philanthropic leader put it, “This isn’t the government collecting taxes and deciding which social problems it wants to solve through a democratic process…. This is a small group of people, who have made way more money than they need, deciding what issues they care about. That affects us all.”
Our goals are to:
- Increase the flow of resources to the independent nonprofit sector through a healthy, vibrant, diversified donor base (and discourage warehousing of wealth, philanthropic wealth dynasties, and inefficient private foundations).
- Protect democratic institutions from concentrated private power, including concentrated philanthropic power and influence.
- Protect the integrity of the tax system, particularly as it relates to taxing income, wealth and estates of the very wealthy (prevent charity from being an escape hatch/tax dodge).
- Protect the independence and integrity of the nonprofit sector against pressures from concentrated wealth –restore broad donor support for the sector.
- Strengthen public oversight of the charitable giving system and strengthen private association norms to prevent future abuses.
Breaking analysis of nonprofit tax return information processed by our Charity Data Lab.
How the concentration of wealth is warping the giving sector.
Concerns about warehousing charity dollars and tax subsidies for wealthy donors and perpetual foundations transcend partisan divide.
The ultra-rich are using philanthropic vehicles to shield their wealth. It’s time Congress acted, our Chuck Collins writes.
The rules governing philanthropy should be overhauled to maximize the public good. Proposed reforms include:
- Levy a wealth tax on closely held private foundation assets, and establish a lifetime cap on charitable deductions.
- Make private foundation payout requirements meaningful and increase the flow of funds to working charities. Eliminate the perpetual private foundation as it is currently constituted.
- Require donor-advised funds to have a minimum annual payout and increase transparency and reporting.
- Implement a universal giving credit to broaden giving by the non-wealthy.
- Prevent abuses and encourage transparency with reforms requiring board independence, banning compensation of family members, and requiring donor disclosures.
- Create a new federal oversight agency for foundations and charities, funded by foundation excise taxes.