January 08, 2009
Should Foundations Be Required to Give 10 Percent a Year?
The Obama administration should require foundations to spend at least 10 percent of their assets on grant making and other charitable activities annually to help America solve its economic crisis, writes Martin Kearns, an online advocacy expert.
Currently the Internal Revenue Service makes foundations give on average 5 percent a year, but that is not enough, writes Mr. Kearns, the co-founder and executive director of the Green Media Toolshed, a nonprofit group that helps environmental organizations improve their communications skills.
“As part of the stimulus plan, the administration should shift the IRS rule that minimum payout must exceed 10 percent for the next 3 to 5 years. The money in foundations is money that our society has set aside without taxation to improve our common good,” he writes on his blog, Network-Centric Advocacy.
“Our society and the nonprofit sector need the influx of that cash now.”
What do you think of Mr. Kearns’s proposal? Would foundations be able to sustain increased giving with the current stock-market volatility? Click the comment button below to share your views.
Comments
Commenting is closed for this article.
Previous: The Challenges of Providing Aid in Gaza
Next: Concern Over New Restrictions on Aid In Ethiopia
Absolutely NOT.
http://hanktechentin.blogspot.com/2009/01/im-from-government-and-im-here-to-help.html
— Hank Techentin Jan 8, 05:23 PM #
Killing the golden goose. The five percent, give or take a half percent, is based on the spending rules that intelligent organizations around the world have adopted to stabilize their giving year after year. Mr. Kearn’s proposal is the same as when cities sell their assets for quick dollars now and regret it later.
— Rick Schwartz Jan 9, 11:57 AM #
I don’t know how Mr. Kearns arrived at 10%, so I won’t speak to that figure, but 5% isn’t enough. Remember that in most years, foundation assets grow by much more than 5%, and in the years when they don’t, communities need foundation support more than ever.
There’s a common assumption that foundations should be self-perpetuating, but some – a recent example is the Beldon Fund – make conscious decisions to spend out, because the causes they’re there to support need the money now.
Further, foundation assets are often invested in the very industries that make charity necessary. The Gates Foundation is a well-publicized example. Funding a community’s health services while fouling its air, for instance, is good PR but a bad practice.
Better to invest assets in grants to communities. That’s where the real payback to ordinary people happens, which is what foundations are – or should be – about.
One last comment to Rick Schwartz: You’re making a very valid point. But Mr Kearns isn’t proposing that foundations sell all their assets (even if, in some cases, I am). He’s making an argument about scale: Money meant for charitable purposes shouldn’t be trumped by profitable investment opportunities. The foundations get their tax-exempt status because they’re about people, not profits. So running a profitable foundation is a practice worth challenging.
— Charlie Bernstein Jan 9, 02:02 PM #
Foundations in caring for people should seriously consider spending more than 5% in this difficult time, but should determine the % based upon a 3-5 year investment strategy. Assuming a healthy asset base even down by 40% from Jan. 09, a grantmaker will not recoup losses by reducing the scale of of grants funded but will hurt struggling communities, programs and institutions during this difficult time. Take the high road.
— Lisa Block Jan 14, 12:18 PM #