Plan to Regulate Foundations and DAFs Opens Door to Burdensome Government Intrusion

Plan to Regulate Foundations and DAFs Opens Door to Burdensome Government Intrusion

Mar 30, 2021 Elise Westhoff and Richard Graber

Philanthropy Roundtable president and CEO Elise Westhoff and Philanthropy Roundtable chairman Richard Graber wrote a letter to the editor at the Chronicle of Philanthropy in response to a recent push to curb philanthropic freedom. You can read the full text, published on Mar. 30, below. 

To the Editor:

The Chronicle opinion article “Conservatives Should Applaud — Not Fight — Efforts to Change Philanthropic Giving Rules” (March 19) was disappointing for its support of positions that are neither principled nor pragmatic. Writers Craig Kennedy and William Schambra claim that the recently proposed Initiative to Accelerate Charitable Giving, led by billionaire John Arnold and Professor Ray Madoff, will help address a “philanthropic world that has become too politicized and self-interested.”

However, they are dangerously wrong for several reasons.

First is their assertion that philanthropic freedom is not “an untrammeled right.” This view opens the door to more government regulation over how, when, and for what purposes charitable giving is appropriate. The Philanthropy Roundtable believes it’s the right of donors to choose how and when they give, not government.

Second, the authors suggest that Arnold-Madoff’s proposed regulations governing donor-advised funds are “innocuous.”

This couldn’t be further off base. The stipulation that DAFs must make payouts within 15 years is arbitrary and capricious. Further, it risks funds not being available at times of greatest need, such as during the pandemic.

There is no evidence that DAF grant making shortchanges current needs. DAFs are the fastest growing vehicles for charitable giving, and their payout rates far exceed the minimum required payout for private foundations. It is their very independence and decentralization that can counter the type of politicized grant making by large, progressive foundations the authors denounce.

Similarly, their concern that DAF-initiated grants can be made anonymously is misguided. Donors to unpopular causes have been subjected to violence, threats, canceling, and shaming. Donor privacy deserves a hearty defense.

The authors’ hostility toward family foundations is equally mystifying. According to the Council on Foundations, three out of five family foundations have less than $1 million in assets. The view that even modest compensation for time and labor by family members should be penalized is unfounded.

Curiously, the authors take no issue with the staggering staff and overall administrative expenses incurred by the largest foundations, which are legally counted as part of their required 5 percent disbursement. In 2018 alone, the Ford Foundation reported $136 million in overhead expenses making up 18 percent of their overall payout. Training government’s guns on foundations that have only a tiny proportion of the assets and overhead expenses of megafoundations defies logic.

DAFs and small family foundations embody America’s rich tradition of contributing time, talent, and resources. The Philanthropy Roundtable is unapologetic in defending the right of donors from all walks of life to participate in charitable giving — for the benefit of America.

Richard Graber
Chairman
Philanthropy Roundtable

Elise Westhoff
CEO
Philanthropy Roundtable
Washington, D.C.