A new national Ipsos poll illuminates that there is broad and nonpartisan support for changes in laws governing charitable giving.
The March 2024 poll was the product of a common-ground collaboration between Inequality.org and The Giving Review. It mirrors findings from a similar 2022 Ipsos poll and dramatizes how associations representing foundations and donor-advised funds (DAFs) — with their rigorous defense of the status quo — are wildly out of step with wider public attitudes about the need for common-sense charity reform.
Starting in 2020, at the onset of the global COVID-19 pandemic, charity researchers (including the IPS Charity Reform Initiative) started to identify troubling trends in the philanthropic sector. These included, during a period of urgent community needs and nonprofit layoffs, the increased warehousing of charity dollars in private foundations and donor-advised funds, and the use of opaque giving vehicles to mask donations to white supremacist and overtly political organizations.
The new Ipsos poll indicates that while most Americans are aware that charities are struggling to meet current needs, they’re concerned about the ways taxpayer-subsidized charitable giving vehicles are operating without accountability.
According to the poll, most Americans are unaware of the details of how private foundations and donor-advised funds operate and the way current tax incentives reward wealthy donors who contribute to private foundations and DAFs.
Once those are explained, however, reform proposals to address these challenges earn solid support. For example, a strong majority (83%) agree that taxpayers shouldn’t have to subsidize wealthy Americans to create permanent legacy foundations, and 71% believe that Congress should raise annual foundation payout from 5% to 10%, even if it means foundation assets diminish over time.
This runs counter to the position taken by the Council on Foundations, which has lobbied against any increase in foundation payout, arguing that payout rates greater than the current 5% could lessen endowments and undermine perpetual legacy foundations. However, the Ipsos polling underscores a fundamental skepticism among the American public about the notion of taxpayers subsidizing legacy foundations that may exist for generations.
The wider public is also alarmed that donors to DAFs receive immediate tax deductions but have no mandated payout requirement to ensure funds reach working nonprofit charities. When asked how quickly money should move out from DAFs, 79% of Americans feel distribution should be required within five years (with 52% preferring distribution within two years).
To put this in context, in 2021, charity reform advocates and members of Congress introduced the Accelerating Charitable Efforts (ACE) Act that included a DAF payout requirement over 15 years. The Community Foundation Awareness Initiative, an association funded by community foundations, spent an estimated $4 million to lobby against this legislation — despite the ACE Act’s provisions being considerably weaker than what broader public opinion might stipulate.
Public opinion also supports increased transparency and reporting, especially when donors are getting a tax reduction and exercising significant influence and power. While most of those polled support the principle of donor privacy, a strong majority (83%) believe that wealthy donors should be required to report large contributions due to the influence such donations may have on nonprofits and the civic sector.
This runs counter to the position of national associations like the Philanthropy Roundtable. Christie Herrera, the Roundtable’s new director, told the Associated Press in November that her No. 1 priority is protecting donor privacy. But the Ipsos poll shows that donors and donations should be disclosed when recipients receive tax reductions and exercise considerable influence.
The tax deduction for charitable giving flows to less than 10% of taxpayers in part because of the 2017 increase in the standard deduction and a diminishing number of households that itemize deductions. And the current charitable tax benefit is skewed to the wealthy. For every dollar that a billionaire donates to a charity, including their private foundation or DAF, we taxpayers chip in as much as 74 cents in lost federal tax revenue. This is because high-net-worth donors are not only reducing their income taxes, but also their estate, gift and capital gains taxes.
This may be why there is support for capping the amount that wealthy donors can deduct. The Ipsos poll found that a solid majority (75%) believe there should be a maximum amount that ultra-wealthy donors can claim to reduce their taxes. This could be a lifetime maximum or an annual cap.
We live in a highly politically polarized time. In this context, one of the most interesting findings of the Ipsos poll is the strength of right-left alignment on the need for charity reform. For example, when asked how quickly donors should move money out of donor-advised fund accounts to working charities, 74% of conservatives agree with 88% of liberals that it should be within five years or less. This reflects the promise of right-left alliances around charity reform. The only defenders of the status quo are the professional associations and industry representatives who benefit from the current practices.
Chuck Collins directs the Charity Reform Initiative at the Institute for Policy Studies, where he also co-edits Inequality.org. He is the author of The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions (Polity) and in 2016 he published Born on Third Base. Collins co-founded the Patriotic Millionaires and United for a Fair Economy.
Dan Petegorsky is coordinator of the Charity Reform Initiative at the Institute for Policy Studies.
