A Big Year for the Charity Reform Movement

The numbers are in: Philanthropy is top-heavier than ever…

In March, we published “Top Heavy Philanthropy Explained In 8 Charts,” illustrating how concentration in the philanthropic sector echoes all-time wealth inequality. As small-dollar donors find themselves with less disposable income, charities are increasingly turning to higher-income donors, whose ever-larger mega gifts reflect narrow personal priorities and a preference for intermediaries that they control.

We also published our inequality and philanthropy fact page, explaining the relationship between the consolidation of charitable resources and entrenched inequalities in our economy, social world, and democracy. 

… And charitable intermediaries have never been trendier. 

In 2022, the value of funds placed in donor-advised funds (DAFs) rocketed to new heights. 

We covered the “Rise of the Monster DAFs,” funds that have eclipsed the largest private foundations in size and charitable sector share. 

Our research team is always looking for ways to reflect the magnitude of big-dollar donation diversion – and this animated chart, showing the increase of DAF wealth over the last thirty years, does just that:

Remember: Some philanthropists can take continuous advantage of intermediaries and shuffle donations between private foundations and donor-advised funds. By doing so, they dodge responsibility to on-the-ground charities.

Our analysis this year found that private foundations gave nearly a billion dollars to commercial donor-advised funds in 2018, commercial DAFs gave over a billion dollars to each other in 2019, and that community foundations have become increasingly reliant on DAFs.

Read a summary of these in-depth reports in “Time to Move the Money: Independent Research on Donor-Advised Funds.”

We’ll keep publishing original research on donor-advised funds, which have few transparency requirements under current law.

Our Gilded Giving 2022 report, framing these trends and recommending fixes, made major waves.

Our biennial report illustrated the dire problems of the philanthropic sector, and recommended a suite of reforms that could increase the revenue flowing towards working charities and charity’s representativeness of the popular will. 

We estimate, for example, that if foundations had a 10 percent minimum payout and DAFs had a three-year mandated payout between 2018 and 2020, at least $193 billion in additional donations would have flowed to nonprofits.

With pickups by the Associated Press (syndicated across the country), Axios, Inside Philanthropy, and Nonprofit Quarterly, and even substantive critiques from wealth management officials themselves, our report and recommendations got people reading, learning, and talking!

So did our groundbreaking webinar.

Our “Where Has All the Money Gone?” webinar featured conversation between Ray Madoff (Co-founder and Director of the Boston College Law School Forum on Philanthropy and the Public Good), Susannah Morgan (CEO of Oregon Food Bank), Vu Le (writer of NonprofitAF), and our very own Chuck Collins – and led to a vigorous debate about how philanthropy might be, at times, a “hobby for the rich” (and how it should not be).

Thousands of viewers engaged with the webinar live and afterwards in extensive online discourse. When it comes to “#DonorGeddon,” we’re on the side of our friend Vu Le. Read his brilliant response on the NonProfitAF blog here. 

The public made it clear – we need big, bold charity reform. 

This summer, we conducted a poll with Ipsos to determine popular support for the bold charity reform agenda we laid out in our Gilded Giving report. The results were overwhelming: a broad, bipartisan majority wants donors to make a fair exchange for their charitable tax benefits and move their money quickly to working charities.

82 percent of Americans support the role of charitable foundations in our society, but 81 percent don’t believe taxpayers should subsidize the wealthy to keep money on the sidelines in perpetually existing private foundations. 

Only 17 percent of Americans polled said they were aware that one third of individual charitable donations go to private foundations & DAFs to begin with— or that more than $1 trillion is sidelined in them. Once they knew, some 81 percent supported accelerating payout minimums and timelines.

73 percent of those surveyed supported creating a 2-5 year payout window for donor-advised funds, and 69 percent support a 10 percent payout requirement for foundations and DAFs, even if it reduces their future value. 

Broader conversation echoed our poll results – the world is attuned to the perils of billionaire philanthropy.

From Barre Seid’s controversial, tax-dodging-yet-completely-legal transformation of his company (into 501(c)(4) dark money for right wing causes) to Sam Bankman-Fried’s implosion – highlighting the fraught relationship between earning and giving – our media has seemed especially alert to how philanthropy can be wielded for problematic ends.

Read our takes on the mechanics of news-making giving by Tripp Lite owner Barre Seid and Patagonia founder Yvon Chouinard, respectively, in “Weaponizing Charity to Advance a Political Agenda” and “Making Earth the Shareholder.”

2022 was chock-full of high-dollar donors pledging to give vast sums away – on their own timelines. As Chuck Collins wrote in CNN, “we should assume a skeptical posture” towards billionaire’s philanthropic pledges until the money is out the door. 

Dubious charitable conduct was not constrained to just United States-based donors. Our Research Director Helen Flannery also investigated how “Russian Oligarchs Funnel Money to U.S. Charities” to burnish their reputations while under intense scrutiny. 

That includes United States politics.

Beyond media coverage, the legislature held bipartisan hearings on the structure and flaws of our current charitable system – which included moments like Senator Lankford (R-OK) extolling the non-itemizer charitable tax deduction, Oregon Food Bank CEO Susannah Morgan calling for policy to expedite charitable giving from intermediaries, and Senator Whitehouse (D-RI) excoriating dark money in politics. 

And, of course, the bipartisan ACE Act – calling for common-sense loophole closures and donor-advised fund disbursement regulations – made its grand debut in Congress. Even though the bill hasn’t passed yet, its introduction proved that political interest in reassessing philanthropy has reached a promising new pitch. (The last time the United States restructured philanthropy through policy was in 1969, creating the current conditions of the sector.)

Even President Biden’s 2023 budget reflected awareness of the philanthropic sector’s design flaws, recommending to close the loophole that allows for foundation-to-DAF giving to count towards foundations’ annual payout. 

We’re getting ready for a busy year ahead. 

There’s much to do in 2023: We’ll have new information about the sector to unpack and new advocacy opportunities to reform charity with a new Congress (whether for the ACE Act or an even bolder reform package). You can count on our team to deliver the latest. 

We’re not slowing down – we’re picking up the pace, the way that our wealthiest philanthropists should!