A so-called ‘reform’ of charitable activity being considered by Congress would do long-term, tremendous harm to philanthropic institutions.
A so-called ‘reform’ of charitable activity being considered by Congress would do long-term, tremendous harm to philanthropic institutions.
I t’s a longstanding practice that has become remarkably energized — the better word may be “exploited” — in recent years: the palpable, calculated, and extraordinary political use and abuse of (and by) nonprofits, and of federal laws relating to charitable giving, by leftist philanthropies and the partisan billionaires whose targeted largesse fill and pass through organizational coffers for the purpose of partisan mischief and ballot-box influence. The abuse is blatant — and surely deserving debate and reform by Congress, the guardian of America’s tax laws.
Could this abuse be so blatant that Congress might take notice? After all, formidable legislation addressing tax-exempt concerns is being raised up the Capitol Hill flagpole.
Alas, it’s a head fake: The bill’s promoters are intent on reforming anything but this practice of mixing sharp-elbowed partisan politics imbued with non-taxable dollars.
The “reform” now in the legislative pipeline and seeking salutes from federal lawmakers is S. 1891, the “Accelerating Charitable Efforts Act,” better known by its spiffy acronym, “ACE,” and sponsored by Senators Angus King (I., Maine) and (go ahead, scratch your heads) Charles Grassley (R., Iowa). Little more than an undertaking in political projection, ACE is fitting for an era when the race-obsessed are the ones leveling the accusations of racism, and when those genuflecting before the green altars leave the biggest carbon footprints. Why shouldn’t leftists exploiting “501(c)3” tax laws get in on the thou-doth-too-much protesting?
What do ACE’s sponsors find so wrong that it requires congressional fixing? Well, it’s not the enormous amount of tax-deductible cash going to interacting, intersecting, and coordinated nonprofits that are de facto Democrat “get out the vote” campaign operations. No, nothing to see here! Instead, S. 1981, engaging in textbook Capitol Hill misdirection, takes aim at imposing harsh new restrictions on private foundations and “donor advised funds.”
Why? These thoroughly legitimate financial instruments — known as “DAFs,” and in no way the exclusive domain of center-right givers — have nevertheless developed a following on this side of the political divide, where conservatives and libertarians have found entities like Donors Trust and the Bradley Impact Fund, among others, to be trustworthy stewards of generosity and charity (and democratic ones too: DAFs’ entry thresholds are suitable even for thousandaires).
DAFs earn the Left’s opprobrium because of their explicit protection of donor privacy. That is a no-no with progressive ideologues, whose political playbook prioritizes the outing, publicizing, isolating, and bullying of donors (lest we forget the crusade that took down Mozilla’s Brendan Eich) to conservative causes and candidates. Having failed to persuade the Supreme Court of the virtues of exposing donors (the High Court’s recent 6–3 ruling in Americans for Prosperity Foundation v. Bonta deemed unconstitutional the efforts of California Democrats to make mincemeat of donor-privacy and associative rights), friendlier outlets for end-running the First Amendment have been sought. And found in S. 1981.
Of interest: The principal proponents of the ACE Act include the nation’s largest and most liberal foundations — Ford, Kellogg, Kresge, and Hewlett. They are determined to see that Congress legislate onerous DAF regulations, demanding they spend their assets in short order (within 15 years) or face massive excise-tax penalties — this in addition to imposing numerous additional burdens whose goal is to hamstring, kneecap, and minimize influence.
In this lobbying one finds a pontificatory pinnacle of Capitol Hill’s do-as-I-say, not-as-I-do ways. Important analysis by the American Enterprise Institute’s Howard Husock exposes these same massive foundations — those demanding DAFs chop chop with the check-cutting — as staggering hypocrites.
By law, IRS-sanctioned grant-making entities are required to allocate a minimum of 5 percent of their assets annually to recognized charities (a threshold that includes foundation’s administrative and operating costs). In practice, what was initially a floor has become the ceiling. The act of giving is of less focus and purpose to many foundation overseers, now prioritizing growing their obese endowments and making their institutions permanent.
Glaring cases in point, per Husock’s analysis, are found in the most recent available figures for annual expenditures by Ford (5.3 percent), Kellogg (5.0 percent), Kresge (5.2 percent) and Hewlett (3.9 percent). Among the nation’s top 15 foundations, these decidedly liberal entities all hover around the federal minimum-giving requirement. Meanwhile, their portfolios balloon. Based on the most recent available figures, Husock calculates asset growth — Ford (6.4 percent), Kellogg (6.8 percent), Kresge (9.2 percent), and Hewlett (8.1 percent) — that far outpaces expenditures.
Even a Common Core student can calculate that Ford et al enjoy a net larger endowment at the fiscal year’s end, and might even deduce that these foundations have made a virtue of permanence. And yes: This aforementioned quartet of overstuffed and growing liberal philanthropies all belong to the vocal coalition proposing and lobbying for the ACE Act and its goal of placing extraordinary limits on DAFs.
There’s more hypocrisy afoot. Given the objectives of ACE (and given the legislation’s actual name, which includes “accelerating” in its title), one might conclude that DAFs are deliberately failing to dole out the generosity.
More Husock: His analysis finds that while the average annual percentage of giving (based on assets) from America’s top philanthropies is 5.94 percent, the average annual payout rate of DAFs is a comparatively enormous 21.2 percent. Do the math: The pay-out rate is 370 percent that of the very bloated, leftist, and often politically engaged foundations that are calling for tormenting DAFs.
Who here needs a lesson in accelerating?
The duplicity of its proponents aside, the ACE Act also proves willful in its disregard of what truly needs reform — the massive infusion of nonprofit dollars into America’s political, campaign, and ballot-box processes. It happens in plain sight, is regaled by those who practice dark-money arts, and has become the subject of public demands for much more of the same. The call has gone out for more billionaire tax-exempt cash to influence the next election cycle.
An example of this leftist bravado can be found in a recent op-ed by Nsé Ufot, CEO of the “New Georgia Project,” published in The Chronicle of Philanthropy, and making no pretense about the nonprofit’s objective: “win elections.” From the piece:
With Congressional elections less than a year away, the New Georgia Project, like so many grassroots organizations, needs the continued support of our philanthropic partners — many of whom only pay attention to us during high-profile national and state campaigns. Such funding patterns leave us tethered to a boom-and-bust investment cycle that makes it harder to galvanize voters and win elections. Our approach to organizing revolves around solving problems and improving lives in local communities. There are 159 counties in Georgia, and we need to be present in all of them to keep voters engaged.
Imagine what we could have accomplished during the 2018 midterm elections if we had the funding to open more field offices, hire and train organizers from the communities where we work, and develop robust outreach and communications operations to engage constituents year round. We could have accelerated Georgia’s much-delayed role as a battleground state and gained greater traction on all of the issues that matter to the communities we represent, including voting rights, boosting the minimum wage, expanding health care, and fighting for environmental justice.
During municipal elections this year, we spent resources analyzing the Georgia voter suppression bill passed in March. We gauged the impact of the bill during the election by tracking early voting trends and the rate of absentee ballot rejections, deploying voter protection teams across seven counties, and piloting programs to ensure long lines wouldn’t depress overall turnout.
All of this took valuable resources that could have gone to hiring more organizers to reach isolated communities or to provide free, wheelchair accessible rides in an additional eight counties. With consistent funding through all election cycles, we would not have to make these tradeoffs. When statewide elections are decided by less than 12,000 votes, which was Biden’s margin of victory in Georgia, any gaps in support can make an enormous difference.
So what is ACE? It is in some way an obfuscation of the problem that truly needs reform — the Left’s orchestrated use of well-funded nonprofits to influence elections.
It is also an act of political disdain for the kinds of people who seem to prefer using DAFs — namely, conservatives. It is also a middle finger directed towards to Supreme Court’s reaffirmation of the fact that donor privacy is part of every American’s First Amendment rights, which S. 1981 seems quite intent on weakening.
And it is malarkey, of the typical, retrograde congressional type: ACE contends its effect will be to increase charitable giving. But as a Philanthropy Roundtable study concludes, “the provisions within the bill would do the opposite — harming the exact charitable organizations and communities they seek to help.”
Malicious intentions, boomeranging effects, political projection, willful disregard of actual abuse, all while left-wing foundations turn philanthropy into a battlefield of partisanship — this legislative card is marked. In reality, ACE is proving to be a Joker.
Conservatives and Republicans should not cut this deck.