On July 19, the Charity Reform Initiative at the Institute for Policy Studies released the latest edition of IPS’s seminal biennial report exposing the need for reforms to charitable giving, entitled “Gilded Giving 2022: How Wealth Inequality Distorts Philanthropy and Imperils Democracy.”

This 2022 edition of the report, authored by Chuck Collins and Helen Flannery, finds that:

• Fewer than half of all U.S. households now give to charity. From 2000 to 2018, the most recent data available, the proportion of households giving to charity has dropped from 66 percent to just under 50 percent. These declines track indicators of economic insecurity such as employment, wages, and homeownership rates.
• Philanthropy has become much more top-heavy. The proportion of charitable contributions coming from donors at the top of the income and wealth ladder has increased significantly over the past three decades. In the early 1990s, households earning $200,000 or more accounted for less than 25 percent of all charitable deductions. By 2019, the most recent year available, this group accounted for 67 percent.
• Mega-giving is booming. The mega-gift threshold in Giving USA, the gold standard of reporting on nationwide charitable giving, has been increasing rapidly as ultra-wealthy donors dole out ever-greater gifts. In 2011, Giving USA’s threshold for mega-gifts was just $30 million, and gifts of that size or larger totaled $2.7 billion. By 2021, just ten years later, the mega-gift threshold had jumped to $450 million, and gifts of that size or larger added up to nearly $14.9 billion.
• The top two charitable causes of ultra-wealthy donors are their own private foundations and donor-advised funds. According to the Chronicle of Philanthropy, of the $25 billion in identifiable gifts that America’s top fifty philanthropists donated in 2021, 69 percent — more than $17 billion — went to private foundations. The second-largest chunk, more than $2.6 billion, went to donor-advised funds.
• Donor-advised funds, or DAFs, have been the fastest-growing recipients of charitable dollars in the U.S. in recent decades. In 2020, for the first time, donations to DAFs were equal to contributions to private foundations, with both receiving roughly $48 billion from donors. The largest single recipient of charitable giving in the U.S. for the past six years has been the Fidelity Charitable Gift Fund — a commercial DAF sponsor. For the past three years, six of the top ten charities have been DAF sponsors.
• Gifts to private foundations and donor-advised funds now divert nearly a third of charitable giving in the U.S. Together, these charitable intermediaries now soak up 30 percent of all U.S. donations, and have more than quintupled their share of the charitable pie in less than thirty years.

Key Recommendations:

• Require donor-advised funds to have a payout. DAFs should pay out the entirety of any donations within three years after donations have gone into the fund, including any income earned on the donations during that time.
• Increase DAF transparency and reporting. Donations to and from DAFs should be publicly disclosed and reported on an account-by-account basis. This could be done in such a way as to protect anonymous givers.
• Increase the annual foundation payout requirement to 10 percent of assets.
• Reform foundation payout requirements to exclude both administrative overhead and grants to donor-advised funds from counting towards a foundation’s payout requirement.
• Replace the itemized charitable deduction with a universal charitable tax deduction for households that give more than 2 percent of their adjusted gross income to charity.
• Establish a lifetime cap on charitable gift deductions to prevent donors from using charitable giving to reduce their taxes to zero indefinitely.
• Establish a cap on the charitable estate tax deduction. There is currently no limit on the amount of money that a person can pass tax-free to charity in their estate. To ensure that every person contributes to the costs of government, we should limit the estate tax charitable deduction to 50 percent of a donor’s estate.

We estimate in Gilded Giving 2022 that if foundations had a 10 percent minimum payout and DAFs had a three-year mandated payout between 2018 and 2020, at least $193 billion in additional donations would have flowed to charities.

“As wealth concentrates in fewer hands, it causes troubling distortions in the charity sector,” noted Chuck Collins, director of the Charity Reform Initiative at the Institute for Policy Studies and co-author of the report. “When wealthy donors can claim big tax deductions for charitable giving to private foundations that they control in perpetuity, it allows them to opt out of paying their fair share in taxes to support the systems on which we all depend. This effectively enables already powerful multi-millionaires and billionaires to maintain a taxpayer-subsidized form of private power and influence.”

“We have so many critical issues to tackle right now,” said Helen Flannery, IPS Associate Fellow and co-author of the report. “But when we hand the reins of philanthropy over to ultra-wealthy donors, it takes the power away from charities and from the public to decide which problems get fixed, and what the fixes should be.”

A new Ipsos poll shows broad bipartisan support among a majority of Americans for bold charity reforms that would address some of the “Gilded Giving 2022“ report’s key findings and recommendations.

On July 14, Ipsos and the Charity Reform Initiative at the Institute for Policy Studies released the striking results of a new survey of over 1,000 adults conducted in June 2022. The poll found that a broad bipartisan majority of Americans strongly support common-sense reforms that would curtail the warehousing of charitable wealth. This includes requiring donor-advised funds to make timely distributions to charities as well as curbing public subsidies of perpetual private foundations.

The more clearly Americans across the political spectrum understand how private foundations and donor-advised funds work, the poll found, the more strongly they support changes to ensure that charitable donations directly benefit working charities.

Read the full report here.

For interviews with co-authors Chuck Collins and Helen Flannery and for further comments regarding these findings, please contact Chuck Collins at chuck@ips-dc.org or (617) 308-4433 or Robert Alvarez Pineda at robert@ips-dc.org. 

About the Charity Reform Initiative

The Charity Reform Initiative at the Institute for Policy Studies aims to modernize the rules governing philanthropy to increase the flow of resources to the nonprofit independent sector and protect the integrity of the tax system.

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