Last week, I hosted a webinar called “Defending the Freedom to Give in 2021.” The webinar’s expert panel—Sandra Swirski, partner at Urban Swirski & Associates in Washington, D.C.; Kristina Rasmussen, project lead at The Philanthropy Roundtable; and Christie Herrera, the Roundtable’s vice president of policy and government affairs—provided our audience with a robust and informative assessment of the challenges to philanthropic freedom in a changed political environment.
With unified government, Swirski warned, policy proposals can be bigger and rhetoric bolder. Narrow margins in both House and Senate may temper this somewhat, but a focus on redistributing wealth could pull in philanthropic assets as part of personal wealth. Legislators who view the charitable deduction and tax exemption as government subsidies that convert charitable dollars into public property will not hesitate to impose regulations and mandates on generous donors about how, when, and where they disburse their charitable dollars. She also cautioned our audience to be alert to “state and federal efforts to chip away at donor privacy” and to push back against any casual attempt to use the term “dark money” to describe charitable donations.
Rasmussen built on Swirski’s discussion of one-party control, calling it “a moment of great opportunity, as well as great risk, for the philanthropic sector.” Opportunities include proposals that recognize the important roles charities have played—and will continue to play—as communities confront ongoing health and economic crises. An expansion of the charitable deduction, for example, could be on the table.
On the other hand, existing risks include the Patriotic Millionaires’ push to force a three-year, 10% payout rate on private foundations and donor-advised funds (DAFs), as well as problematic donor disclosure rules for some 501(c) groups that could easily expand to include all tax-exempt organizations.
Rasmussen also highlighted several troublesome aspects of a proposal coming from philanthropist John Arnold and Boston College law professor Ray Madoff, who would force Congress to make making sweeping changes to laws governing donor-advised funds and private foundations:
- Ending DAFs as we know them and creating new rules that would withhold upfront tax benefits for donors who want more than 15 years to distribute funds. This rule makes a dangerous distinction among 501(c)(3) organizations that could be expanded to make subjective distinctions among “worthy” and “unworthy” charities.
- Threatening donor privacy by disallowing private foundation gifts to DAFs to count toward the required 5% distribution. We know that donors often use DAFs to support controversial causes while protecting the personal safety of both grantors and grantees.
- Questioning the role of family members in family foundations by disallowing the salaries and travel costs of family staff performing necessary foundation functions to count toward the required 5% distribution. This would make a dangerous distinction between family and non-family staff members with identical roles and responsibilities, and would open the door to other unnecessary restrictions on family philanthropy.
Following up on the donor-privacy concerns expressed by her fellow panelists, Herrera provided a timely view of recent developments in this area on both the federal and state levels. Most encouraging was her reminder that the U.S. Supreme Court will hear its first donor-privacy case in 63 years sometime in the next session.
The case now before it stems from a lawsuit filed in 2016 by the Americans for Prosperity Foundation against then-California Attorney General Kamala Harris, challenging her requirement that charitable organizations turn over the names and addresses of their donors, arguing that there is no compelling state interest for the government to have this information, and noting that leaks of donors’ names and addresses could put those people at risk for real harm. The Roundtable will file an amicus brief in this case (as we have done previously), Herrera noted, because “charitable donor privacy is a longstanding and vital part of a robust and free civil society and the state does not need the bulk collection of donor information in order to have proper oversight of charitable organizations.”
At The Philanthropy Roundtable, protecting philanthropic freedom is a critical component of our mission, and we define it as first, an individual or organization’s freedom to exercise generosity by making voluntary charitable donations for the sake of the wellbeing and improvement of society, and second, as an individual or organization’s freedom from restriction or coercion in the exercise of such generosity.
You can view the full webinar here:
