New Public Polling Shows Appetite for Bold Charity Reform

Two years ago, we first proposed an Emergency Charity Stimulus to address the urgent crisis nonprofits faced, brought on by the COVID-19 pandemic. Our thinking was simple: Foundations and donor-advised funds were sitting on well over $1.2 trillion in charitable assets — assets for which the donors had already received generous tax benefits. Mandating even a temporary, three-year increase in payouts would have moved some $200 billion to charities during the crisis, without Congress having to spend an additional dime of taxpayer funds.

At the time, conservative philanthropist Bill Schambra warned that this signaled a potentially dangerous moment for philanthropy. He saw rising populist sentiments on both the left and the right, and argued that if elite philanthropy failed to take steps to support more moderate reforms it could find itself on the receiving end of the proverbial pitchforks.

But that’s just what elite philanthropy failed to do. Yes, many funders voluntarily increased their giving, though for the most part quite modestly, and far below their market gains during the period. Led by umbrella institutions like the Council on Foundations and spearheaded by community foundation lobbyists, the defenders of the status quo went all out to block even the very modest reforms of the Accelerating Charitable Efforts Act (ACE Act).

Now, a new Ipsos poll illustrates the huge gulf between the defensive crouch of elite philanthropy and public sentiment at large. By very large margins, Americans do not want the U.S. tax code subsidizing wealthy donors to create perpetual private foundations and warehouse wealth in donor-advised funds (DAFs). And a broad, bipartisan majority wants donors who are receiving preferential tax treatment for their charitable contributions to move funds quickly to active charities on the ground. Very quickly.

Public sentiment goes well beyond a temporary Emergency Charity Stimulus proposal or the ACE Act. In fact, it demonstrates there is tremendous potential appetite for bolder reforms, especially as the public better understands the ways that taxpayers are subsidizing the private power and influence of the nation’s wealthiest donors.

The findings come from a new survey of over 1,000 adults by Ipsos, commissioned by the Charity Reform Initiative at the Institute for Policy Studies conducted in June 2022. Specifically, the new survey reveals:

Most Americans (82%) support the important role that charitable foundations play in society. At the same time, they remain unaware of specific details about foundations and donor-advised funds (DAFs), which have become the vehicle of choice for the wealthiest givers.
Once informed that donors receive generous tax breaks when they give to charities, while one third of all charitable donations accumulates in private foundations and DAFs, the vast majority (81%) do not believe taxpayers should subsidize the wealthy to keep money on the sidelines through private foundations that will exist in perpetuity.
With more than $1.2 trillion in charitable contributions currently sitting on the sidelines, 69% of adults surveyed support a 10% payout requirement for foundations (up from the current 5%) and for DAFs (which currently have no payout requirement), even if this reduces the amount of money in foundations and DAFs in the future.
73% support requiring DAFs to make grants within two to five years of receiving donations.

The Ipsos survey mirrors the attitudes found in a recent survey of philanthropy professionals conducted by Inside Philanthropy. Like the wider public, the people who work at foundations or in fundraising voiced strong support for “changes in the laws that govern philanthropy.” Over 70% favored mandatory payouts for DAFs and “increasing required foundation payout.” Industry professionals support increased donor transparency and 40% said they favored “limiting the tax breaks that wealthy donors can receive.”

In addition to money, one thing defenders of the philanthropic status quo have going for them is ignorance: The public has little understanding of the rules governing the field. Why is that an advantage? Because when people find out how the system works, they are NOT happy campers.

The Ipsos survey revealed that broader public awareness about the nonprofit sector, including foundations and DAFs, remains low and unchanged from a previous 2020 Ipsos benchmark poll. For example, only 17% said they were aware that a third of all individual charitable donations now go into private foundations and DAFs, and of the amounts accumulated there.

Those surveyed were similarly unaware that foundations are required to pay out just 5% of their assets each year (21%) and that DAFs have no such requirement (18%). At the same, it is well known that food banks and other working charities are facing challenges such as more strain on limited resources and rising costs due to inflation.

The Ipsos survey demonstrates that the better the public understands these issues, the more intensely they support reforms that ensure charitable tax benefits to donors also provide timely benefits to actual charities. Specifically, respondents across the political spectrum expressed a strong discomfort with taxpayer subsidies allowing donors to set up perpetual foundations, with conservatives objecting to such subsidies even more strongly than liberals. What is more, both liberals (74%) and conservatives (70%) favor increasing foundation and DAF payouts to 10%, even if it would reduce foundation assets in the future.

When it comes to DAFs, survey respondents across the political spectrum expressed even more intense support for moving the money sooner rather than later: Americans want a quick return, with a relatively short timeline for grantmaking: Half of those surveyed want DAFs to make grants within just two years of receiving funds; 72% want the payout within five years; and only 25% believe no timeline should be applied.

This last finding was one of the surprise findings of the survey. The ACE Act proposes a 15-year payout horizon for DAFs, a proposal aggressively opposed by lobbyists for the community foundation sector, even though there is a carveout for community foundations. But the common-sense public attitude is that if you get a tax break, you should move the funds in a timely manner.

The more the public understands how the tax code allows for the taxpayer-subsidized warehousing of charitable dollars, the more they support a systemic change in philanthropy. The results are clear: An informed public is solidly behind common sense reforms that would curtail the warehousing of charitable wealth.

Chuck Collins is director of the Program on Inequality at the Institute for Policy Studies. Dan Petegorsky is coordinator of the Charity Reform Initiative at the Institute for Policy Studies.

Featured