A group of fabulously wealthy philanthropists are launching a campaign to stop their peers from hoarding their riches in private foundations.
The Donor Revolt for Charity Reform launched Thursday with a signed letter from more than 160 prominent philanthropists—including Abigail Disney, oil heiress Leah Hunt-Hendrix, and Bradco founder Barry Segal—urging Congress to strengthen charity laws and force big-money donors to spread the wealth.
“It’s time to take a stand,” the group said on a newly launched website. “We, a group of wealthy charitable donors, are calling for urgently-needed, common-sense reform. We must ensure that large charitable gifts don’t languish idly for years in intermediaries, and instead flow to the causes they are intended to support.”
The group aims to tackle what it calls the “hoarding” of wealth in private foundations or donor-advised funds, where money can sit for generations without ever making it to a charitable cause or organization. According to a study by the Institute for Policy Studies released alongside the campaign, 41 percent of all individual donations in 2022 went to private foundations, which are required to pay out just 5 percent of their assets per year, and DAFs, which have no payout requirement at all.
Donor Revolt seeks to reduce the amount of wealth stabled in these institutions by increasing the minimum yearly payout for foundations to 7 percent of assets, excluding most management fees and payments to family members from payout calculations, and requiring DAFs to pay out funds within five years of receiving them, among other changes.
“We stand for the common sense principle that if you receive a tax break for making a charitable donation, those donations should benefit someone other than the donor within a reasonable amount of time, and the minimum payout calculations should not include the salaries paid to the donor's family,” Morris Pearl, a former managing director of BlackRock and chairman of the Patriotic Millionaires, said in a statement.
The organizers are part of a growing group of high-net-worth Americans interested in giving away more, some of whom belong to groups like the Patriotic Millionaires, Resource Generation, and the Decolonizing Wealth Project.
Scott Wallace, the grandson of agriculture magnate Henry Wallace, told The Daily Beast he joined the campaign because he knows of too many other foundations using the 5 percent payout minimum as a ceiling, rather than a floor.
“I’ve come to learn that there are a lot of very conservative, cautious board members of foundations who believe that their fiduciary duty requires them to maximize the assets of the institution,” he said. “And they interpret that as meaning that they should not spend one dime more than is legally required.”
“Given that a majority of foundations in the country appear to have that as their rule, then the only possible solution is to increase the legal minimum—get those trustees off their assets, so to speak,” he added.
Wallace, a multimillionaire, is co-chair of the Wallace Global Fund, which has donated millions of dollars to left-leaning causes and spends about 20 percent of its assets in a given year, putting it on track to spend itself out of existence in the next 10 years.
Oil heiress Leah Hunt-Hendrix is part of the Donor Revolt movement.
During the COVID pandemic, Wallace’s foundation increased donations, while others decreased their giving in proportion to their shrinking investment returns, he said. That ensured they did not lose any money, but the charities they were supposed to benefit suffered.
When Wallace wrote an op-ed for The Hill suggesting Congress double the payout requirement for foundations for two years during the pandemic—a move he claimed would raise $200 billion to fund stimulus packages—he said he was “viciously attacked” by organizations advocating for the rights of foundations.
“It’s so disgraceful and so incredibly obnoxious that the people with the most money at the time of greatest crisis would fight like hell to avoid spending it,” he said. “So many have shown that they will not under any circumstances—even a global pandemic of historic proportions—spend a dime more than they are forced to.”
Many of Donor Revolt’s aims appear to be popular: An Ipos poll commissioned by members found a majority of Americans agreed with many of their proposed reforms, including 71 percent who thought Congress should raise the foundation payout to 10 percent and 79 percent who felt DAFs should be required to pay out their donations within five years.
But Harvey Dale, a professor of philanthropy and the law at New York University, said it isn’t that simple. He told The Daily Beast that research shows an organization that spends more than 7 percent of its resources in a given year will eventually run out of money.
Some donors may want that—Dale was formerly president of The Atlantic Philanthropies, a nonprofit started by billionaire Chuck Feeney that spent it all in 40 years—but others may want their philanthropy to outlive them.
“If you want people to be able to give money and have it last beyond their lifetime—and for sure that is an incredibly powerful, emotional claim for some donors—then you can’t set a 10 percent spend rate,” he said.
There are also powerful national organizations lobbying against this kind of reform. Researchers at the Institute for Policy Studies found that private and public organizations——including some nonprofits like the Council on Foundations and Philanthropy Roundtable, and the sponsors of major donor-advised funds affiliated with Fidelity, Schwab and Vanguard—spent more than $11 million lobbying against DAF reform between 2018 and 2022.
Some $3 million of it was spent lobbying against the 2021 Accelerating Charitable Efforts Act—a federal bill that would have implemented several of the reforms now being demanded by Donor’s Revolt. It never even made it to a vote.
But the members of Donor’s Revolt believe they can prevail. Bella DeVaan, associate director of the Charity Reform Initiative at the institute, said in a statement there is a “growing appetite for reforming some basic rules governing charity,” and that she expected “many more donors” will join the campaign.
“These donors are powerful, especially when they band together — and the general public will be with them,” she said.
Wallace, meanwhile, said he will continue spending down his foundation's resources regardless, on issues like climate, democracy, and women’s reproductive rights.
“These things are at a crisis level right now,” he told The Daily Beast. “What the hell are we waiting for?”
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