Thursday, April 11, 2024

Institute for Policy Studies Reports on Charity Reform Lobbying


From the IPS Report

The Institute for Policy Studies is out with a new report this week entitled "Who is Lobbying Against Common-Sense Charity Reform."  The report focuses especially on lobbying with respect to donor advised funds.  Here are the authors' concerns and call to action: 

Chasing the Charity Lobby  

We need common-sense charity reform to increase the flow of funds to nonprofits and discourage the warehousing of charitable dollars in intermediaries. For example, donor-advised funds, or DAFs, should have at least a minimal incentive to pay out funds. Unfortunately, however, those invested in maintaining the status quo have deep pockets, and spend a great deal of money to pressure legislators to block needed reforms.

Our charitable sector is becoming dominated by large legacy foundations and donor-advised funds while working nonprofit charities face greater fiscal austerity. An ever-larger share of charitable dollars — currently 41 percent of all individual giving — is diverted into these wealth warehousing vehicles, rather than going to nonprofits serving critical needs. And ultra-wealthy donors are increasingly able to use charitable gifts to opt out of paying their fair share in taxes to support the public infrastructure we all rely on.

Without intervention, wealthy philanthropists will continue to divert more and more charity dollars from operating nonprofits, and will rival state and local governments in their ability to shape public policy in their interest. This means less money going towards the issues the general public cares about, and more going towards the pet issues of major donors, all at the public’s expense. We urgently need to overhaul the rules governing philanthropy to discourage the warehousing of charitable wealth, to align tax incentives with the public interest, and to encourage broad-based giving across all segments of society.

But those that benefit from the current system — such as donor-advised fund sponsors, wealth advisors, and the funders of anti-tax organizations — continue to push against changes in charitable regulations. In this policy brief, we lay out what we know about the parties that are working against reform.

Here are the Key Findings:

  • As U.S. philanthropy becomes increasingly commandeered by ultra-high-net-worth donors, we see more examples of charitable abuses and self-dealing, along with growing public distrust in the charity system. And, in 2022, 41 percent of all individual donations went to private foundations and donor-advised funds, or DAFs — leading to concerns that these intermediaries are warehousing charitable funds.
  • Because of this, there is growing popular bipartisan support for charity reform — as evidenced by a recent Ipsos poll and an emerging Donor Revolt for Charity Reform.
  • Yet the DAF industry has spent millions lobbying to block even basic common-sense changes. For example, the Accelerating Charitable Efforts Act, or ACE Act, was introduced in 2021 with bipartisan support and proposed relatively modest reforms. But it failed to get traction thanks to aggressive lobbying both by organizations that manage DAFs and by industry advocacy groups that support them.
  • We estimate that since 2018, 21 for-profit firms and nonprofit organizations have spent a combined $11 million in lobbying efforts that included attempts to influence policy around DAFs one way or another.
  • An estimated $3 million of that total was spent to defeat the ACE Act. Much of the funding against the ACE Act came from large commercially-affiliated DAF sponsors such as Fidelity Charitable, Schwab, and Vanguard Charitable.
  • The organizations spending the most on lobbying include not only DAF sponsors but also umbrella groups that advocate for the DAF industry. The Community Foundation Awareness Initiative, or CFAI, a network representing community foundations around the country, spent an estimated $4 million between 2018 and 2023 on lobbying, including an estimated $900,000 spent on the ACE Act. The Council on Foundations and Philanthropy Roundtable, both of which are philanthropy advocacy groups, spent a combined $795,000 lobbying around charity reform, with an estimated $450,000 aimed at the ACE Act.

darryll k. jones

| Permalink


Post a comment