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Nonprofit AF: We need to support legislation on philanthropy’s crappy, inequitable practices

June 21, 2021 Category: FeaturedLongPurpose


This guest post was written by Vu Le of Nonprofit AF. Read and subscribe to their blog here.
Hi everyone. This blog post may be a little wonky, but it is important, so thank you for reading it all the way through.

Last week, a bunch of us had a Party to Enhance Equity in Philanthropy (PEEP) event, a time for funders and nonprofit folks to get together and just hang out without an agenda. In Seattle, we met for a picnic. This was the first time in over a year that many of us were in the same physical space, and it was wonderful. (And slightly awkward; someone offered me their hand to shake, and I nearly dropped my hibiscus-flavored sparkling water and ran screaming down the park).

While it was nice to see one another, and we should continue this tradition, having a fun event is not sufficient to solve many of the crappy, archaic, frustrating, inequitable practices in philanthropy. For that, we need legislation. Which is why I am happy to see that the Accelerate Charitable Efforts (ACE) act is moving forward. Here is an article on this bipartisan effort. The bill will do a few things, including:

  • Makes sure the money wealthy people put into Donor-Advised Funds (DAFs) are spent out in a timely manner. Currently, donors can put money into DAFs, get an immediate tax break, and yet have no legal obligation to give a dime out to nonprofits ever. They could keep it there in the DAF for a 100 or a 1,000 years. The bill would require DAFs to be spent out within 15 years. Or 50 years, but donors can’t take an immediate tax break if that’s the timeline they choose.
  • Stops foundations from counting money they transfer to DAFs as part of their legally-required 5% payout minimum. This practice, honestly, is gross. Foundations are required to give out a minimum of 5% of their endowments each year. But right now, they can include the money to give to DAFs, which, again, currently have no legal obligations to spend out EVER!
  • Stops foundations from counting money they spend on salaries and travel expenses of family members toward the 5% payout minimum. OK, this practice is even grosser. A family foundation hires a family member, pays them a salary, and then gets to count this money toward their legal payout requirement? Seriously? That’s a recipe for nepotism, self-dealing, and other unethical behaviors.

There’s some other stuff that the bill would do, and these are all really mild, reasonable proposals. Which is why it’s disappointing to see some of the strong opposition to this bill by some philanthropic institutions. They are getting worked up, organizing petitions and other actions against it. There will likely be more sky-is-falling-type responses from panicking dinosaurs.

From our Partners

I am not surprised by this reaction, but I am exhausted, and so are lots of other nonprofit colleagues. During the pandemic, while people of color, disabled people, the poor, and other marginalized people grew poorer and died, rich mostly white people grew their wealth by over a trillion dollars. They squirrel their money into DAFs or foundations, have barely any legal requirements to give it out, and we nonprofits have been trained to be appreciative of the crumbs they scatter over their favorite causes. And now, when there’s some hope that there might be some legislative changes, even incremental ones, the forces of philanthropy mobilize to protect the status quo.

Philanthropy has been talking about equity, undoing racism, supporting marginalized communities, etc., for decades; when is it going to walk its talk?

Philanthropy can do, and has done, good things. But it has been a tool of white moderation, allowing rich white people to continue hoarding resources and we nonprofits have been trained to conscience-launder and charity-wash for them.

Philanthropy has been talking about equity, undoing racism, supporting marginalized communities, etc., for decades; when is it going to walk its talk? If it cannot support even this simple, mild set of regulations, then how can we possibly deal with much more difficult and necessary ones, like reparation for slavery and stolen Indigenous land, and tax reform to ensure wealthy mostly white people are paying their fair share? Foundations and philanthropic associations need to reflect on whether they want to continue on the path toward being ossified, irrelevant institutions upholding white moderation and white supremacy.

But we don’t have time to wait. There’s legislative efforts right now that require our attention. We all need to support the Accelerate Charitable Efforts Act as well as the Emergency Charity Stimulus effort. Here are things we must do:

Philanthropic institutions, be vocal in support of legislation: Foundations that support the ACE bill, you can’t do it silently. We need you out in front organizing, using your weight to advance this effort. Otherwise, the loud people who oppose the bill continue to dominate the airwaves and sway people’s opinions. Write op-eds and articles, host some webinars, get on TV, call your electeds. You have way more influence than the rest of us. Use it.

Foundations, cancel your membership with philanthropic associations that oppose: If your foundation belongs to a philanthropic association that opposes these legislative efforts, put pressure on it to do the right thing by canceling your membership until the leadership gets with the program. You don’t need to belong to ancient, stodgy associations that are holding back our sector. Seriously, do you want to be a member of a group that thinks it’s OK to count money paid to family members as part of the 5% legal minimum?

State nonprofit associations, educate and mobilize your members in support of the bill: You play a vital role in our sector, and one of the things we need you to do is help advance efforts to improve philanthropy. I know that many state associations are fearful of controversies because of power dynamics, being at the whims of foundations for funding and support. But this is what leadership looks like, so please gather your courage to lead by publicly supporting this bill and encouraging other state associations to do the same.

Nonprofit colleagues, contact your legislators in support of this and other efforts: For months I’ve been involved with the Emergency Charity Stimulus effort, which is similar to the ACE bill, but in some ways goes even further (like requiring foundations to double its minimum 5% payout to 10%). You can go here, sign up, and it will find all your elected leaders based on your address and sends them each a letter supporting efforts to increase payout and regulate DAFs. I just did it; it literally took two minutes. You can also call them up or email them for a more personal approach.

Our entire sector is at a crossroad. We can continue putting up with the same crappy, inequitable practices, or we can be better.

Canadian colleagues, start mobilizing to increase your 3.5% payout: While we in the United States have been frustrated with the 5% payout rates, our Canadian neighbors in the sector have had to contend with 3.5% legal minimum. This is ridiculous. Please organize to increase this payout rate. There is so much inequity that it is unconscionable that 96.5% of foundation assets are just sitting there.

I know that was very wonky. Thank you for sticking around. This matter is not just about this bill, which is a long time coming. Our entire sector is at a crossroad. We can continue putting up with the same crappy, inequitable practices, or we can be better, we can evolve into our full potential to tackle systemic injustice. This bill should not be controversial. Let’s help it pass so we can focus our attention on other necessary laws needed in our sector.

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