Expanding Our Commitment to Philanthropic Freedom

The Philanthropy Roundtable has decided this year to make a significant long-term commitment to the protection of philanthropic freedom—the right of donors and foundations to choose how and where to give their grants and charitable contributions.

In January 2005, we created the Alliance for Charitable Reform (ACR) as an ad hoc self-defense lobbying initiative to respond to legislative proposals in the Senate Finance Committee. The mission of ACR has been to offer common-sense proposals for addressing abuses in the charitable sector, while protecting the freedom of donors and foundations to use their best judgment in carrying out their charitable objectives.

We have decided we need a larger and more permanent operation to protect philanthropic freedom. We are creating a public policy division of The Philanthropy Roundtable with a budget of at least $1 million per year. This division will include ACR, whose self-defense legislative work will continue under the able direction of Sandra Swirski of Venn Strategies. And it will also include expanded non-legislative activity, as we represent the cause of philanthropic freedom in media, nonprofit, and academic debates—to anticipate and respond to emerging issues before they reach the level of legislation. The following are just several of the threatening proposals our public policy arm must defend against:

· Legislation requiring large foundations to disclose the racial, ethnic, and gender composition of their own boards and staffs and those of their grantees has passed the California Assembly and is currently before the state Senate. ACR has engaged a self-defense lobbyist to work to defeat AB 624 in Sacramento, but the battle won’t stop there. The bill’s chief advocate, the Greenlining Institute of Berkeley, California, says it will push for similar legislation in Congress and other states including New York, Illinois, New Jersey, Florida, and Texas. Articles by Greenlining’s executive director John Gamboa show that his agenda is much larger than “diversity”: it is to challenge the tax exemption of giving to universities, the arts, and other causes that do not fit Greenlining’s definition of direct funding for “poor and underserved communities.”

· There is a growing movement for a one-size-fits-all approach to foundation governance. For instance, Independent Sector’s report, Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations, declares that boards should generally have at least five members and that “board members are generally expected to serve without compensation”—even though there are numerous examples of well-run, highly effective foundations with smaller boards or compensated trustees. Because of the close connection between IS and the Senate Finance Committee and the IRS, there is a danger that the IS recommendations will be written into law or regulation if it is perceived that there is a strong consensus for them within the philanthropic community.

· The Internal Revenue Service is calling for vast expansions in the scope of its oversight over foundations and public charities. Historically, the IRS oversight role has focused on ensuring compliance with the tax code. But in remarks delivered at The Philanthropy Roundtable’s 2007 annual meeting, Steven T. Miller, commissioner of the agency’s exempt organizations and government entities division, said that the IRS is planning “to promote standards of good governance, management, and accountability” at nonprofits and is considering making assessments of the effectiveness and efficiency of tax-exempt organizations. Miller also asked whether there are too many tax-exempt organizations and suggested that Americans may be “spending too much on duplicative infrastructure.” Giving the IRS the authority to assess the effectiveness, efficiency, and governance of tax-exempt organizations would give the federal agency unprecedented discretionary power and would be a threat to the independence of foundations and charities.

· There are growing calls from within the legal, academic, and nonprofit communities for a new regulatory agency governing foundations and charities.

· Senator Charles Grassley (R-Iowa), ranking member of the Senate Finance Committee, says that reform of charities and foundations remains one of his highest priorities. The Finance Committee still features on its website its 2004 “staff discussion draft” on legislative proposals for charity and foundation oversight. Among its many frightening recommendations: a call for five-year IRS review of tax-exempt status, possibly contingent upon accreditation.

The Philanthropy Roundtable and ACR are determined to fight these proposals-and others like them as they arise. If you would like more information about our expanded work to protect philanthropic freedom, please contact me at [email protected], or the Roundtable’s director of community relations, Lynn Gibson, at [email protected], or Sandra Swirski at [email protected].

Adam Meyerson is president of The Philanthropy Roundtable.