The Donor Revolt for Charity Reform
Prominent philanthropists, national funders, and policy organizations are launching a campaign to call for common sense charity reforms.
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Philanthropy
New Ipsos Poll Shows Broad Support for Bold Charity Reform
Concerns about warehousing charity dollars and tax subsidies for wealthy donors and perpetual foundations transcend partisan divide.
Over the last two years of the pandemic, several coalitions have pressed for modest reforms to the laws governing charitable giving. These have included the Emergency Charity Stimulus to require temporary increases in grant payout rates and the Accelerating Charitable Efforts Act (ACE Act) to increase grant flow and reforms to donor-advised funds (DAFs). A new Ipsos poll shows broad public support for reforms such as these.
By very large margins, Americans do not want the U.S. tax code subsidizing wealthy donors to create perpetual private foundations and warehouse wealth in DAFs. And a broad, bipartisan majority wants donors who are receiving preferable tax treatment for their charitable contributions to move funds quickly to active charities on the ground.
Those are the findings of a new survey of over 1,000 adults by Ipsos and the Charity Reform Initiative at the Institute for Policy Studies conducted in June 2022.
For a summary of polling results, see HERE.
Specifically, the new survey reveals:
- Most Americans (82 percent) support the important role that charitable foundations play. At the same time, they remain unaware of specific details about foundations and donor-advised funds, which have become the vehicle of choice for the wealthiest givers.
- Once informed that donors receive generous tax breaks when they give to charities while one-third of all charitable donations accumulates in private foundations and DAFs, the vast majority (81 percent) do not believe taxpayers should subsidize the wealthy to keep money on the sidelines through private foundations that will exist in perpetuity.
- With more than $1.2 trillion in charitable contributions currently sitting on the sidelines, 69 percent of adults surveyed support a 10 percent payout requirement for foundations (up from the current 5 percent) and for DAFs (which currently have no payout requirement), even if this reduces the amount of money in foundations and DAFs in the future.
- 73 percent support requiring DAFs to make grants within 2 to 5 years of receiving donations.
More generally speaking, the survey revealed that broader public awareness about the non-profit sector, including foundations and DAFs, remains low and unchanged from a previous 2020 Ipsos benchmark poll:
- Only 17 percent said they were aware that a third of all individual charitable donations now go into private foundations and DAFs and of the amounts accumulated there.
- Those surveyed were similarly unaware that foundations are required to pay out just 5 percent of their assets each year (21 percent) and that DAFs have no such requirement (18 percent). At the same, it is well known that food banks and other working charities are facing challenges such as more strain on limited resources and rising costs due to inflation.
The Ipsos survey also revealed the better the public understands these issues, the more intensely they support reforms that ensure charitable tax benefits to donors also provide benefits to actual charities. Specifically, respondents across the political spectrum expressed a strong discomfort with taxpayer subsidies allowing donors to set up perpetual foundations, with conservatives objecting to such subsidies even more strongly than liberals. What is more, both liberals (74 percent) and conservatives (70 percent) favor increasing foundation and DAF payouts to 10 percent, even if it would reduce foundation assets in the future.
When it comes to DAFs, survey respondents across the political spectrum expressed even more intense support for moving the money sooner rather than later. Americans want a relatively quick return, with a relatively short timeline for grant-making:
- Half of those surveyed want DAFs to make grants within just two years of receiving funds;
- 72 percent want the payout within 5 years; and
- Just 25 percent believe no timeline should be applied.
The more the public understands how tax loopholes allow for the taxpayer-subsidized warehousing of charitable dollars, the more they support a systemic change in philanthropy. The results are clear — an informed public is solidly behind common sense reforms that would curtail the warehousing of charitable wealth.