Americans are a generous people, donating billions of dollars every year to sustain a vibrant independent nonprofit sector. But as wealth has concentrated in fewer hands over the last forty years, philanthropy has become less democratic. Giving by low- and middle-income donors has declined while the ultra-wealthy have come to dominate philanthropy in America. The result has been less money getting to the causes that desperately need it.

Why does this happen? Because wealthy donors are more likely to give through intermediaries like private foundations, which are required to pay out just 5 percent of their assets each year, and donor-advised funds (DAFs), which have no payout requirements. This stifles the flow of funds to charities on the ground, preventing them from delivering their unique good.

While the Council on Foundations, Philanthropy Roundtable, and the Community Foundation Awareness Initiative actively lobby against any reasonable change, a group of wealthy charitable donors, national funders, and policy organizations are launching a campaign to call for common sense charity reforms.

Our Charity Reform Initiative at Inequality.org is helping to power this campaign alongside the Patriotic Millionaires, Solidaire Action, the Excessive Wealth Disorder Institute, Resource Generation, the #HalfMyDAF campaign, and the Decolonizing Wealth Project.

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Inaugural signers include filmmaker Abigail Disney, Scott Wallace, chair of the Wallace Global Fund and grandson of Henry Wallace, and author and activist Leah Hunt-Hendrix, among other high-profile donors. 

“I’m a millionaire who strives to do some good with my wealth. As such, I regularly donate to charity each year. But the laws governing philanthropy are being abused by the ultra-wealthy to benefit Wall Street fund managers, ultimately resulting in less money getting to charitable causes,” said Morris Pearl, Chairman of the Patriotic Millionaires.

“We stand for the common sense principle that if you receive a tax break for making a charitable donation, those donations should benefit someone other than the donor within a reasonable amount of time, and the minimum payout calculations should not include the salaries paid to the donor’s family.”

Signers’ thoughts

New research: Who is lobbying against common-sense charity reform?

We must ensure that large charitable gifts don’t languish idly for years in intermediaries, and instead flow to the causes they are intended to support.

Public opinion strides in step with the Donor Revolt: A recent Ipsos poll commissioned by our team and The Giving Review shows overwhelming support among Americans across the political spectrum for basic charity reforms.

But there’s a concerted effort to maintain a less-than-charitable status quo.

Our new report reveals how Charity Lobby groups have spent millions of dollars lobbying against common sense reforms. Some concerning key findings:

• In 2022, 41 percent of all individual donations went to private foundations and donor-advised funds (DAFs) — leading to concerns that these intermediaries are warehousing charitable funds.
• Since 2018, 21 for-profit firms and nonprofit organizations have spent a combined $11 million in lobbying efforts that included attempts to influence policy around DAFs. These include DAF sponsors affiliated with investment firms Fidelity, Schwab, and Vanguard, and an association of community foundations.
• Of this amount, an estimated $3 million was spent on defeating the ACE Act, a modest charity reform proposal introduced in 2021. Much of the funding against the ACE Act came from large commercially-affiliated DAF sponsors
  such as Fidelity Charitable, Schwab, and Vanguard Charitable.
• The organizations spending the most on lobbying include not only DAF sponsors but also umbrella groups that advocate for the DAF industry. The Community Foundation Awareness Initiative, or CFAI, a network representing community foundations around the country, spent an estimated $4 million between 2018 and 2023 on lobbying, including an estimated $900,000 spent on the ACE Act. The Council on Foundations and Philanthropy Roundtable, both of which are philanthropy advocacy groups, spent a combined $795,000 lobbying around charity reform, with an estimated $450,000 aimed at the ACE Act.

Many donors with private foundations and donor-advised funds (DAFs) will be surprised to learn how their national associations are lobbying and spending money to oppose common sense charity reform. The Donor Revolt campaign aims to ask those national associations and DAF sponsoring organizations why they’re opposing basic reforms supported by their members and by broad public opinion across the political divide.

Not a donor or DAF holder? You can still advocate for charity reform.

Beyond the Donor Revolt, charity reform advocates are also launching a new portal for non-donors and nonprofit organizations to have the opportunity to add their individual voices in support of key charitable giving reform measures.

“Our entire nation is suffering from decades of disinvestment in basic civic infrastructure.  It’s time to build a collective voice to tell the story of what’s really needed – more and bigger investments on the ground in local communities,” said Gerry Roll, Founder in Residence, Foundation for Appalachian Kentucky. “We’ve created a system where donor advised funds are simply another transactional part of wealth management.  Let’s stop pretending everything is working just fine and figure out how to make it right.”

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