The Donor Revolt for Charity Reform
Prominent philanthropists, national funders, and policy organizations are launching a campaign to call for common sense charity reforms.
Billionaire hedge fund mogul Bill Ackman’s been busy lately. He’s waging an increasingly unhinged and pathetic campaign against MIT — its faculty, directors, and any reporters bold enough to challenge him — and strong-arming his preferred presidential candidates. But let’s set all these antics aside for a moment: Ackman’s power tripping has brought to light an important and glaring failure in the regulation of donor-advised funds (DAFs).
Ackman has alleged that MIT’s chairman Mark Gorenberg, by routing very large personal contributions to his wife’s nonprofit through a donor-advised fund administered by MIT, is both scamming the tax system and maintaining the nonprofit as a public charity when it does not merit that status.
In Ackman’s words, “In this case, the Chairman of MIT made a donation to the MIT DAF, which in turn funneled the money to Parity.org, the Founder, CEO, and CFO of which is his wife, and where Gorenberg serves as treasurer.”
To allow their donors to receive the biggest tax breaks for their contributions, nonprofits classified as public charities need to show that at least one third of their funding comes from a range of public sources, not just a few individuals.
But there’s a loophole. Since the groups that administer DAFs (known as sponsors) are themselves classified as public charities, if mega-donors route their money through a DAF instead of giving directly, then bingo: They reap the additional tax benefits and the grantee’s public charity status isn’t in jeopardy.
Tax filings show that, between 2019 and 2022, Gorenberg indeed appears to have used his MIT donor-advised fund to donate over $1.8 million to the nonprofit Parity.Org. These contributions represented over 80 percent of the group’s total revenue over those years. (I say “appears” because DAF sponsors are not required to identify which donors make which grants, though Forbes has verified the basics with MIT.)
And in addition to Gorenberg’s wife, Cathrin Stickney, serving as a director and CEO of Parity.Org — a role for which, contrary to Ackman’s assertions, she does not appear to have received any compensation — Gorenberg himself also serves as a director on the group’s board and is listed as treasurer in 2021 and 2022.
This is yet another example of a giant flaw in DAF regulations, one that we’ve been waiting many years for the IRS to address. The 85 Fund — a key piece in conservative power broker Leonard Leo’s secretive funding puzzle — provided a much larger example, and its most recent tax filing shows that things are only getting worse.
We first wrote about this last spring, when an enormous grant of $141.5 million to The 85 Fund showed up in the annual report filed by Schwab Charitable, one of the nation’s largest donor-advised fund sponsors.
Just days after our post, New York Times reporter Rebecca Davis O’Brien put together another piece of the puzzle. In roughly the same time frame, the advocacy organization Leo controls – Marble Freedom Trust, the recipient of the then record $1.6 billion contribution from Barre Seid – made a grant of $153.8 million to Schwab Charitable. This was most likely the source of the $141.5 million Schwab then sent to The 85 Fund.
If that was the case, the money funneled via the DAF at Schwab was how Leo managed to steer the money to The 85 Fund without jeopardizing its public charity status.
We now have further evidence with the release of The 85 Fund’s latest tax filings. The records show that almost all of the Fund’s money again came from a single source: an unidentified contribution of $127.5 million that made up 95 percent of The 85 Fund’s total income for the year.
While we don’t have a new filing from Schwab, the only way that contribution could not have resulted in The 85 Fund flunking its public support test is if it came from a public charity like Schwab Charitable.
In other words, The 85 Fund is masquerading as a public charity, when in reality it’s almost totally reliant on one source of funding. That source? The Marble Freedom Trust, “Leonard Leo’s billion-dollar slush fund to erode democracy,” as Accountable.US president Kyle Herrig put it.
And to bring things full circle: Ackman’s vendetta against Mark Gorenberg aligns not only with his attacks against Harvard and MIT for their responses to antisemitism and pro-Palestine demonstrations on campus, but also to his assaults on diversity, equity, and inclusion (DEI), which Parity.org promotes.
As Ackman concluded one of his X broadsides: “[MIT’s] funds went to a non-profit which promotes DEI ideology, which I have come to learn is not in society’s best interests.”
But while he’s shocked, shocked to discover that Gorenberg used his DAF towards such nefarious ends, at least thus far he’s taken no issue with Leonard Leo using the same DAF loophole in support of the groups who fought to win a major Supreme Court decision dismantling campus affirmative action admissions programs.
No sauce for that gander on Bill Ackman’s plate.
Ackman’s hypocrisy on the issue of plagiarism is already making him a laughingstock, derided as just another billionaire cry-bully.
If he wants to avoid similar derision for his apparent concerns about tax avoidance and donor-advised funds, he can join the Donor Revolt for Philanthropy Reform and employ his prodigious advocacy skills to lobby for much-needed reforms to the tax code.
We’re not holding our breath.
by Oliva Alperstein
/by Chuck Collins
/by Inequality.org
/by Helen Flannery
/by Dan Petegorsky
/by Bella DeVaan
Prominent philanthropists, national funders, and policy organizations are launching a campaign to call for common sense charity reforms.
by Helen Flannery
/by Dan Petegorsky
Some donor-advised fund sponsors claim to democratize giving. They are making themselves look more egalitarian than they actually are.
by Dan Petegorsky
Like a blind squirrel finding a nut, Bill Ackman’s antics reveal a huge flaw in donor-advised fund regulation.
Inequality.org
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