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Nonprofit Law Prof Blog

Top Heavy Philanthropy

By nonprofitlawprof

Washington, D.C. — On November 15, the Institute for Policy Studies released a crucial new report revealing the true cost of billionaire philanthropy to taxpayers, the nonprofit sector, and our society.  The report comprehensively details how the ultra-wealthy use charitable giving to avoid taxes and exert influence, while ordinary taxpayers foot the bill.

As communities prepare to enter the season of giving and highlight charitable donations as a critical way to support communities’ urgent needs, this report reveals how the wealthiest donors in our society give differently than ordinary donors. 

  • The ultra-wealthy claim the lion’s share of the hundreds of billions in annual tax subsidies to incentivize charitable giving.
  • Yet most donations by the ultra-wealthy flow to private foundations and donor-advised funds (DAFs), intermediaries controlled by these donors (As our report shows, 41 cents of every dollar of individual giving in 2022 went to one of these intermediaries). At best, this delays the flow of funds to working nonprofit charities on the ground. At worst, it leads to a warehousing of charitable funds. Private foundations are only required to payout 5 percent of assets annually to charities and donor-advised funds (DAFs) have no payout requirement.  To make matters worse, some wealthy donors are playing shell-games to fulfill these minimal obligations.
  • The most charitably-orientated billionaires in the U.S., those who have signed the Giving Pledge to donate half their wealth during their lifetime, are not immune from these trends.  At their current pace, most funds will end up in perpetual family foundations, not in the hands of active charities.

As wealth concentrates in fewer hands, the imbalance is having a corrosive impact on our nonprofit sector. U.S. nonprofit charities are currently experiencing a transition from broad-based support across a wide range of donors to an increasing reliance on a small number of ultra-wealthy people, a trend IPS has named “top-heavy philanthropy.”

 

darryll k. jones