Hate Groups Are Using DAFs to Raise Millions. Why Stopping That isn't So Easy
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Marchers in Charlottesville, VA, 2017. F42PIX/shutterstock
This article was originally published on March 13, 2020.
Hate groups that promote racism and bigotry—and in some cases, violence—have been actively leveraging donor-advised funds and community foundations to attract donor dollars. That is a finding highlighted in a recent report by the Southern Poverty Law Center (SPLC) and the Council on American Islamic Relations (CAIR) titled “Hate Free Philanthropy: Identifying Opportunities and Obstacles to Safeguard the Sector.” The report follows on the heels of an August 2019 symposium on the subject of hate funding in philanthropy, hosted by the two organizations in concert with the American Muslim Fund.
Yet while the problem seems clear-cut, the solution is anything but. There are now nearly 1,000 DAF sponsors that together host over 750,000 donor-advised funds in the United States. (Fidelity Charitable alone hosts nearly 150,000 such accounts.) These funds are designed to be largely controlled by their donors—acting as a kind of charitable checking account. While mission-driven DAF sponsors can and do impose restrictions on what kinds of gifts their clients may make, that task is more challenging—both practically and philosophically—for large community foundations, and especially for commercial DAF sponsors like Fidelity and Vanguard. Turning off the spigot of hate funding sounds like a laudable goal. In fact, policing the giving of hundreds of thousands of donors would be a tricky undertaking, to say the least.
Hate Funding on the Rise
IP has reported often on the “dark side of philanthropy,” looking at the tax-exempt funding that flows to nonprofit organizations that promote hate and seek to undermine democratic rights. For example, after the violence in Charlottesville, Virginia, we dug into the funding of white supremacist groups, tracing the grantmaking that helps support their work. We’ve also explored the funding behind the anti-immigration groups that have helped shape Trump administration policies.
Tracking this kind of funding has become more urgent in recent years, as hate crimes have risen in the United States. FBI data showed a 12 percent year-over-year rise in violent crimes in 2018, setting hate crimes at their highest levels in 16 years. Over the last five years, CAIR has recorded over 10,000 incidents of bias against Muslims, including significant increases in hate crimes, harassment and property damage.
In their new report, Dr. Abbas Barzegar, national research and advocacy director at CAIR, and Willemijn Keizer, director of institutional giving at SPLC, explain that hate groups have been leveraging the tax code to raise millions of dollars in philanthropic contributions. The New Century Foundation, National Policy Institute and VDare Foundation are all white supremacist organizations, yet each has raised millions in tax-deductible donations. In 2013 and 2014, the National Policy Institute—founded by white nationalist Richard Spencer—received a pair of anonymous DAF grants from the Community Foundation for the Central Savannah River Area. Once the foundation discovered that the National Policy Institute advocates for a white ethno-state, it severed all ties with the organization.
This episode illustrates the challenge of policing donors who move funds through DAFs. It can be difficult for DAF sponsors—even community foundations with a relatively small number of account holders—to be aware of the activities of recipient organizations, thanks to people like Spencer who deftly belie the true nature of their work. And it’s exponentially harder for the large commercial DAF sponsors. Not surprisingly, according to the Hate Free Philanthropy report, “the vast majority of DAF funding to hate groups stems from commercially backed charities such as Schwab Charitable Fund, Vanguard Charitable and Fidelity Charitable Gift Fund.” The report also notes, however, that community foundations, which hosted nearly 78,000 DAFs in 2018, are equally at risk of inadvertently funding hate.
Meanwhile, it’s no secret that DAF funding overall is on the rise. IP recently reported on this phenomenon, noting that DAF contributions as a share of total individual giving has doubled over the past decade. According to the National Philanthropic Trust, donors made more than $23 billion in grants through DAFs in 2018, funds that went to a vast array of nonprofits of every size. Donors giving through Fidelity Charitable alone supported 155,000 organizations in 2019.
It’s hard to argue that DAFs don’t accomplish some measure of good for the philanthropic sector. By allowing someone with as little as $5,000 essentially to form their own private foundations, the vehicle democratizes philanthropy and has fueled the rise of a whole new class of donors. However, that value proposition can cut both ways: In allowing anyone to get more intentional about their giving, DAFs have empowered fringe donors who have extreme views.
To clamp down on hate funding, SPLC and CAIR are calling on both community foundations and commercially backed DAF sponsors to align their DAF sponsorship principles with their broader giving principles. SPLC and CAIR want these funds to adopt “comprehensive and concrete anti-hate policies that are transparent to their donors and the wider public.”
Many Responses, No Easy Solution
Sponsors of donor-advised funds take a range of approaches when it comes to oversight of donations. Some view themselves as strictly pass-through entities with no responsibility over the ultimate use of donor dollars. Other DAF sponsors have strong missions and only work with donors whose giving aligns with that mission. However, even for those organizations that take a more laissez-faire approach, there are strong reasons to be wary of hate funding. Ultimately, it will be a community foundation or DAF sponsor’s name on the check—not the donor who chooses to remain anonymous.
To reduce the risks of hate funding, one approach that some DAF sponsors have already implemented is alerting the donor about the nature of the organization to which they are requesting that funds be directed. This mechanism allows for a discreet opportunity to inform the donor about a grantee’s alleged nefarious activities. As with the case of the Community Foundation for the Central Savannah River Area unwittingly funding the National Policy Institute, donors and foundations may simply not be aware of a recipient organization’s status as a hate group.
While this approach provides an attractive middle-ground solution, Barzegar and Keizer argue that it does not go far enough. After all, what if a donor insists on continuing to support the hate group, even after they are made aware of the organization’s practices? In response, Barzegar and Keizer advocate for community foundations and commercially backed DAFs to actively screen out hate groups from their recipient organization pool. Barzegar told me, “We’re trying to empower foundations and charities with the tools necessary to make concrete decisions about how to manage these competing interests.” One suggestion they make is to align DAF agreements with the Diversity, Equity and Inclusion (DEI) policies that a growing number of organizations already have in place.
A larger practical challenge, though, is determining what constitutes hate funding to begin with. To some skeptics, the concept of hate groups has been perverted and weaponized by progressive advocates looking to delegitimize viewpoints with which they disagree. In particular, SPLC has been criticized for how it categorizes hate groups. Writing in the Washington Post in 2018, after the organization settled a defamation lawsuit by someone who objected to being included in the SPLC’s “Field Guide to Anti-Muslim Extremists,” Marc Thiessen argued that the organization had “become a caricature of itself, labeling virtually anyone who does not fall in line with its left-wing ideology an ‘extremist’ or ‘hate group.’”
But even assuming that DAF sponsors could feel confident in defining hate groups, a move to bar the funding of such organizations may open the door to restricting funds to other causes that advocates might find objectionable. In today’s highly polarized moment, there’s no shortage of hot-button issues that arouse passion: abortion, guns, climate change, immigration, private prisons, and the list goes on.
When I pressed Barzegar and Keizer on this, they noted that many across the political spectrum are already active in applying a values lens to businesses and organizations. “That’s just the nature of advocacy in the civil society space,” says Barzegar. He has a point. While this may be a slippery slope, it’s one we’ve been on for quite a while.
A bigger challenge to stopping the use of DAFs to make tax-deductible gifts to hate groups is that donors now have hundreds of DAF sponsors to choose from. Many donors already actively shop around among DAF sponsors and have funds with multiple organizations. If one DAF sponsor tightens its guidelines on acceptable giving, it’s easy for donors to keep their money elsewhere. Until the IRS changes its rules governing tax-deductible giving—which few experts see happening anytime soon—there is no clear way to stop philanthropic hate funding.
One reason that tax law isn’t likely to change is that many advocates and nonprofit leaders, including those on the left, worry that efforts to regulate what causes or activities donors can support could have negative effects. They fear that once the principle of “philanthropic freedom” is compromised, political actors will jockey to massage IRS rules in ways that support their own ideological agendas and de-fund organizations that oppose that agenda.
Community Foundations Lead the Way
Barzegar and Keizer are placing specific emphasis on community foundations to get the ball rolling—institutions they say are already acting on this issue. Kezier notes that “in recent years, a growing number of community foundations have been working internally to come up with ways to screen out hate from their grantmaking, to align their grantmaking with their overall mission and vision, and to incorporate DEI efforts within their grantmaking.” These initiatives often occur in isolation, though, and Barzegar and Kezier saw an opportunity to foster collaboration around a shared mission.
They also stressed that community foundations are very different than commercially backed DAFs. “Community foundations are one of the few remaining ‘bit tent’ institutions in society,” says Barzegar. “They play an important role in society by bringing together individuals with a broad range of perspectives. In that sense, they are stewards of local philanthropy, stewards of the public interest in localized regions.” That stands in stark contrast to large commercial entities like Schwab, Vanguard and Fidelity, where community stewardship is little more than a sales pitch.
A growing number of community foundations have already begun screening out hate groups, as Barzegar and Keizer suggest. According to their report, “the most immediate way for a foundation to move in this direction (endorsing anti-hate policies and programs) is to become a signatory to the Amalgamated Foundation’s Hate is Not Charitable campaign, and thereby make its commitment to the anti-hate part of its overall mission and values statement.”
Hate is Not Charitable is a campaign backed by over 80 institutional sponsors that is dedicated to encouraging formal pledges from foundations and nonprofits that donor dollars won’t be distributed to hate groups. Anna Fink, executive director of the Amalgamated Foundation, says, “Creating a screen on hate groups provides an additional and proactive tool to use in engaging with donors. It was important to Amalgamated Foundation to take this extra step to ensure that donations made through our DAFs are aligned with our values of positive social change. We consider the Hate Is Not Charitable Campaign part of our broader commitment to provide donors with a DAF platform hard-wired to support positive social change.”
A Growing Interest
Barzegar and Keizer believe that philanthropy has a responsibility to address the recent growth in discrimination and hate-fueled violence. Many in the sector agree, and the response to their initiative has been overwhelmingly positive, with many foundations expressing interest. “There’s a real need for this,” says Keizer. “And they want to continue collaborating on this issue.”
Barzegar points out that their white paper is more a snapshot of where stakeholders currently stand on the specific issues, as opposed to a dictate on how to proceed from here. For example, the varying responses for best dealing with donors funding hate through DAFs—whether by alerting them or encouraging them to actively screen for hate—stems from conversations with the stakeholders themselves, as opposed to being SPLC and CAIR’s advice.
Barzegar explains, “Everybody is excited to move forward and find solutions and work together. It’s structures like this that enable everybody to move forward at the same time.”
