Philanthropists, Foundation Leaders Call on Congress to Inject $200B from Their Endowments into Economy
May 19, 2020
Grantee News From Institute for Policy Studies:
A 3-Year Emergency Charity Stimulus would Boost Flows to Charities by $200 Billion
A Stimulus that is “Already Paid For” by Tax Deductions Benefiting Donors
WASHINGTON – A group of more than 275 foundation trustees, donors and philanthropic leaders today released a letter urging Congress to mandate an emergency charity stimulus increase in the pay-out percentage required of foundations by law. The letter comes amid public calls for the philanthropic sector to do more in response to the COVID-19 pandemic.
Private foundations hold $1.2 trillion and donor-advised charity funds (DAFs) hold another $120 billion with minimal payout requirements. Foundations are mandated to pay out a minimum of 5 percent of funds on an annual basis no matter what the invested endowment accrues in returns. Donor-advised funds have no mandated payout. DAF donors receive tax deductions at the moment the funds are created, but the funds can then sit for years or even decades before being transferred to active charities. In practice, this means that wealth and endowments meant for the public good often grow in size rather than being put to use.
Signatories are calling on Congressional leaders to introduce an Emergency Charity Stimulus by enacting the following measures: 1) Mandating a temporary doubling of private foundation payout from 5 percent to 10 percent for three years, and 2) Establishing a similar 10 percent payout for donor-advised funds (DAFs) that currently have no mandate.
Researchers at the Institute for Policy Studies estimate these policies would unleash an estimated $200 billion in additional charity funds over three years. These funds would support vital social services at no cost to taxpayers.
“Only Congress has the power to compel a massive injection of wealthy people’s money into jobs and nonprofit charitable organizations working in areas vital for our recovery,” said Scott Wallace, co-chair of the Wallace Global Fund, a private foundation that recently committed to spend 20% of its own endowment in 2020. “The wealthy donors who created these foundations and DAFs have already reaped vast taxpayer subsidies for their future generosity. But in this moment of crisis, it’s time we sped that generosity and paid more right now.”
“It is past time to surrender to the truth that there is no legacy for any of us if we don’t align our resources now toward a more sustainable and compassionate future,” said Aileen Getty, founder and president of the Aileen Getty Foundation and granddaughter of billionaire J. Paul Getty. “We are collectively facing the most dire moment that many of us have seen in our lifetimes, and it is likely the tip of the iceberg in terms of the challenges that await us as a society and a planet.”
“While some foundations and donors are stepping up at this moment, others continue to treat the 5 percent payout as a ceiling not a floor,” said Chuck Collins, director of the Charity Reform Initiative at the Institute for Policy Studies. “The independent nonprofit sector is part of the front-line response to the pandemic, with everything from food banks, mental and physical health services, culture and educational institutions. The sector employs 12 million workers, over 10 percent of the private workforce.”
“This is not a time for the philanthropic community to pull back,” said Stephen Prince, Vice-Chair of the Patriotic Millionaires and a businessman who founded Card Marketing Services. “We don’t want charitable giving to drop off a cliff in 2021 and 2022. Our tax code has provided wealthy people with these huge loopholes over the past 45 years. In these troubling times, we need to rise to the occasion and double down on our giving back.”
Prominent signers of the letter include: Scott Wallace, Wallace Global Fund (PA); Abigail Disney (NY); Aileen Getty, Aileen Getty Foundation (CA), Sara Miller, Miranda Family Fund (NY), Rory Kennedy (CA), Ning Mosberger-Tang (CO); Catherine Gund, George Gund Foundation (NY); Mary Mountcastle, Mary Reynolds Babcock Foundation (NC); Anna Fink, Amalgamated Charitable; Ellen Friedman, Compton Foundation (CA); Jerry Hirsch, Lodestar Foundation (AZ); Morris Pearl (NY); and Stephen Prince (TN). To-date, 275 philanthropic leaders have signed the letter.
The letter states in part, “Increased funding could be immediately absorbed by food banks, health care providers, educational institutions, and organizations addressing issues like poverty alleviation, economic development, safe and secure voting, and social justice. Otherwise, foundations which are losing assets on Wall Street will cut their grant-making correspondingly – as they did in the years after the 2009 recession – forcing many nonprofit organizations they fund to reduce budgets, lay off staff, and cut back on their charitable work.”
The letter also says, “Private foundations are currently mandated by federal law to spend five percent of their assets each year in grants and overhead, and DAFs are not required to spend a dime. While some foundations pay out more, the vast majority of American foundations treat the five percent floor as a ceiling on their giving, in part to ensure that the institutions will live in perpetuity. Wealthy donors take an immediate, taxpayer-subsidized deduction when giving money to these entities, regardless of when the money is distributed. And in this time of unprecedented crisis, the money is not reaching charities fast enough.”
The letter was organized by the Charity Reform Initiative of the Institute for Policy Studies, Patriotic Millionaires, and the Wallace Global Fund.
About the Charity Reform Initiative
The Charity Reform Initiative of the Institute for Policy Studies aims to modernize the rules governing philanthropy to increase the flow of resources to the nonprofit independent sector and protect the integrity of the tax system.
About the Patriotic Millionaires
The Patriotic Millionaires are high-net worth Americans, business leaders, and investors who are united in their concern about the destabilizing concentration of wealth and power in America. The mission of The Patriotic Millionaires organization is to build a more stable, prosperous, and inclusive nation by promoting public policies based on the “first principles” of equal political representation, a guaranteed living wage for all working citizens, and a fair tax system.
About the Wallace Global Fund:
The mission of the Wallace Global Fund is to support people-powered movements to advance democracy and rights and to fight for a healthy planet.
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