Elise Westhoff Responds to the Arnold-Madoff Proposal

On Dec. 1, a coalition of philanthropists and foundations called the Initiative to Accelerate Charitable Giving, which is led by billionaire John Arnold and Boston college law professor Ray Madoff, released a set of policy proposals to encourage Congress to further regulate the philanthropic sector. The Philanthropy Roundtable opposed the outlines of this plan, which would impose unnecessary regulations on private foundations and donor-advised funds, when it was first floated a couple of months ago. 

On Tuesday afternoon, the Roundtable released a full statement on the recently released set of proposals:

The Philanthropy Roundtable’s President and CEO Elise Westhoff Responds to New Proposal to Regulate Private Foundations and Donor-Advised Funds

WASHINGTON — Today, a coalition of foundations led by billionaire philanthropist John Arnold and Boston College Law School’s Ray Madoff released new policy proposals asking Congress to impose special and unnecessary regulations on private foundations, specifically singling out family foundations. The proposal also calls for further regulation of donor-advised funds (DAFs), individual charitable accounts that grow over time and allow Americans to easily set aside funds for charitable giving, which have been critical to supporting covid-19 relief efforts.

At a time when individuals are voluntarily increasing their giving to solve our nation’s most pressing challenges through charitable donations, the Arnold-Madoff proposal would undermine many of the advantages of DAFs—America’s fastest-growing charitable-giving vehicles—including robust protections for donors, recipients, and DAFs themselves. 

Elise Westhoff, president and CEO of The Philanthropy Roundtable, issued the following statement in response:

“The Arnold-Madoff proposal is a solution in search of a problem, calling for unnecessary regulations to private foundations and donor-advised funds. The proposal suggests that the work and expense of family members involved in the time-consuming and important work of their family foundations should not count as legitimate operating expenses when it comes to payout,” said Westhoff. “And its proposed regulations for donor-advised funds would stifle charitable giving when it is most needed. Giving through donor-advised funds tripled between 2007 and 2018. And Fidelity Charitable, a DAF-sponsoring organization, reports that a survey of its account holders indicates 79 percent plan to maintain or increase their giving in 2020. Rather than accelerating giving, the Arnold-Madoff proposal would make it harder for smaller donors to help those in need and would decrease overall giving in the long-run.”

The Philanthropy Roundtable has serious concerns about two major tenets of the Arnold-Madoff proposal:

  • Penalizing private foundations, specifically generous family foundations: The proposal targets private foundations by forbidding them to count giving from donor-advised funds toward their payout requirements. It also imposes more mandates on how family foundations must handle operating expenses, salaries, and more. DAFs are used for a variety of legitimate reasons—for example, to protect the safety and privacy of individual donors and their freedom to give to unpopular causes without fear of threats, intimidation, and violence. There are already reasonable and necessary rules in place to govern these institutions as well as civil and criminal penalties in cases of abuse. Someone’s last name should not matter when devising charitable-giving rules.
  • Forcing individuals and organizations to increase payouts from donor-advised funds over an arbitrary time horizon: We believe donors are capable of making informed and intelligent choices about how, when, and where to give. Allowing a government regulator to force payouts against an individual’s long-term plan and better judgment—or face punishment—makes it harder for donors to support the long-term future of a community or cause, which is why so many across the political spectrum oppose this idea. It’s impossible to predict the next crisis, and we must protect our ability to save for unprecedented emergencies and hard times in the future.

 Additional Sources:

Howard Husock, Senior Executive Fellow at The Philanthropy Roundtable: The Hill | The Pandemic and a ‘Rainy Day Fund’ for American Charity

Debi Ghate, Vice President of Strategy and Innovation at The Philanthropy Roundtable: The Philanthropy Roundtable Urges Congress NOT to Force More Giving from Donor-advised Funds and Foundations

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