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An earlier version of this article originally appeared at American Affairs on April 5, 2020.


Establishment philanthropy in America is on the defensive—as it should be. Measured in terms of its size, the philanthropic sector is big and getting bigger; this is not necessarily a bad development in itself, but the sector’s growth in recent decades has been striking. Ideologically, the largest foundations’ policy-oriented grantmaking is lopsidedly liberal and getting more so—or, in the current jargon, it is “woke” and getting “woker.” Most troubling, perhaps, is that philanthropic organizations have become more and more politicized. This trend is increasingly in tension with, if not outright contrary to, that which is supposed to be the purpose of their tax-advantaged status: charity.

Perhaps curiously, critiques of Big Philanthropy are mostly being made by progressives, though lately some prominent populist conservatives have fired salvos of their own. Progressive or populist, however, the critics of the philanthropic establishment need to be bolder and more creative in considering how to turn their criticism into policy and practice.

Big and bigger

There are approximately eighty-six thousand private grant-making foundations in America. FoundationMark estimates their total assets at more than $1.1 trillion as of the end of 2020; after a decade of steady growth, their valuation has increased 81.9 percent since the end of 2010, when they had total assets worth $604.8 billion, as shown in figure 1 below. The decade also saw a comparable increase in their grants to public charities and their expenses; FoundationMark estimates that these grew from a total of $44.5 billion in 2010 to $92.7 billion in 2020, a change of 108.3 percent. As of the end of 2021, their assets exceeded $1.3 trillion and their grants and expenses, approached $97 billion.

Source: FoundationMark.

But estimates of the total assets of the sector as a whole do not provide a clear picture of the “wealth inequality” among philanthropic organizations. For most of these assets are held by a “One Percent” made up of the largest thousand or so foundations. “The FoundationMark 15” alone held a total of about $196.8 billion, or almost 17 percent of all foundation assets that year.1

The growth of Big Philanthropy has, of course, been facilitated by tax law. Private charitable foundations are exempt from taxation on their income, including on any income generated by the investment of these large and growing asset bases. They are eligible for tax-exempt status under Internal Revenue Code Section 501(c)(3), which exempts corporations and other entities—both grant makers and recipients—that are dedicated to certain specific purposes:

Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition . . . or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual.2

In return for this exemption, organizations essentially agree to limit their political activity. As is—or ought to be—well known by those who run nonprofits, this same section states that, for these foundations, “no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation . . . and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”3 Likewise, Section 170 of the Internal Revenue Code allows for the tax-deductibility of contributions to public charities—which are also 501(c)(3) groups—and includes comparable restrictions against the political use of tax-deducted dollars.

Further, tax-exempt private grant-making foundations in particular are also required, with certain exceptions, to spend at least 5 percent of their assets each year on grants to charities and/or on expenses incurred in deciding to whom they should make grants.

The nature of the bargain between nonprofit foundations and American society was summarized by entrepreneur and investor Vivek Ramaswamy in his 2021 book Woke, Inc.: “In return for tax-exempt status, we demand that nonprofits confine their activities to the sphere of charitable causes. With for-profit corporations, we do precisely the reverse—not just to protect corporate shareholders but also to protect the rest of society from frighteningly expansive corporate power to influence every aspect of our lives.”4 But there are signs that this bargain is not working as it is supposed to.

Back to the philanthro-future

Philanthropy in America has been criticized for its antidemocratic nature since at least the Progressive Era; typical of attitudes in this period were the objections to the initial formation of the Rockefeller Foundation in the early 1910s. Deep suspicion about the family’s power and how a philanthropy might be used to further it caused the foundation to drop its attempt to seek a federal charter and opt instead for one from New York State, which it granted in 1913. There were at that time, and there have continued to be, grave reservations about wealthy, well-connected, and inordinately influential philanthropists having too great an effect on the development and implementation of public policy—which they might then influence in a bid to protect their own interests, while others were not in a position to do the same.

Some of these historic concerns are reflected in existing nonprofit law. The strictures against political spending quoted above, for instance, were borne of Congress’s aggressive investigation of the Ford Foundation, whose funding was seen to be partisan before and during elections, including the 1967 Cleveland mayoral election. Of a piece with the work of the Cox and Reece Committee in the 1950s, this investigation led to the 1969 Tax Reform Act, passed on a bipartisan basis, which restructured nonprofitdom in a manner that for the most part still stands today.

Foundations, in other words, have been on the defensive before—and are finding themselves on the defensive again. In recent years, alongside overarching concerns about wealth inequality, there has been an increase in the frequency and harshness of critiques of philanthropy, most of which have come from the Left. With varying emphases, progressive critics are attacking the very formation, structure, and practice of the entire philanthropic enterprise—the creation and maintenance of which is tax-incentivized by a fisc of federal funds to which all taxpayers necessarily contribute.

The more optimistic side of the progressive critique is offered by Stanford University political scientist Robert Reich in his 2018 book Just Giving, which calls for a set of reforms to the nonprofit sector in the hope that philanthropy and democracy can still be reconciled. “The existence and growing power of private foundations to influence public policy sits in tension with ordinary democratic expectations of the political equality of citizens,” Reich writes, but he adds that “foundations, when accompanied by the right policy structure, can serve as a mechanism for domesticating plutocrats to serve rather than subvert democratic aims.”5

A more systemic, though less academic, critique is offered by philanthropic advisor and activist Edgar Villanueva in his 2018 book Decolonizing Wealth, which calls for recognition of philanthropy as “a sleepwalking sector, white zombies spewing the money of dead white people in the name of charity and benevolence.” Villanueva asserts that it is “colonialism in the empire’s newest clothes” and “racism in institutional form.”6 Likewise, Maribel Morey’s provocative and thoroughly researched White Philanthropy does not shed a very sympathetic light on establishment philanthropy’s historical roots, either.7

Equally pessimistic is the assessment of contemporary philanthropy offered by high-profile commentator Anand Giridharadas in Winners Take All. Giridharadas notes that “many millions of Americans, on the left and right, feel one thing in common: that the game is rigged against people like them.” In response, “a great many fortunate people” have tried “something both laudable and self-serving: They have tried to help by taking ownership of the problem.” But the solutions that these elites promote and fund “reflect a highly influential view that the winners of an unjust status quo—and the tools and mentalities and values that helped them win—are the secret to redressing the injustices.”8 They are thus predatorily preserving, including by means of philanthropy, a system from which they themselves have personally benefited and which maintains their social position. And they often do so, Giridharadas notes, as an exercise in “reputation-laundering” or a means of expiating their guilt over having ill-gotten their gains.

Liberal and more liberal

Many, though not all, of the examples upon which popular progressive critics have relied to demonstrate the antidemocratic nature of contemporary philanthropy have been conservative grantmakers—perhaps most prominently among them being the brothers Charles and David Koch, whose perceived partisanship is a frequent target of American liberals.

But contemporary policy-oriented Big Philanthropy in the United States is actually an overbearingly progressive monoculture. Although there is inherent risk in any oversimplified ideological categorization, it is reasonable to conclude that none of the FoundationMark 15 is principally dedicated to funding recipients pursuing conservative principles or policies. On the contrary, many of these foundations, especially those with policy-related program interests, are clearly dedicated to just the opposite.

David Callahan, the influential founder and editor of Inside Philanthropy and of Blue Tent, which advises liberal and progressive donors, examines political donations in his 2017 book The Givers. “What might be a ballpark estimate of the total tax-deductible charitable contributions made to policy and advocacy groups every year?” Callahan asks. His estimate is that this amount is probably “a sum in the low billions, less than $10 billion. That number doesn’t sound huge, but it’s much more than the combined annual political giving to candidates, party committees, 501(c)(4)s, and super PACS.”9 (Entities with 501(c)(4) status are tax-exempt, but contributions to them are not tax-deductible and they can engage in politics.)

For a 2018 Capital Research Center (CRC) report, The Flow of Funding to Conservative and Liberal Political Campaigns, Independent Groups, and Traditional Public Policy Organizations Before and After Citizens United, my colleague Michael Watson and I asked this same basic question, and our findings were basically consistent with Callahan’s estimate: in 2014, the reported revenues of 1,450 selected policy-oriented 501(c)(3) public charities totaled approximately $9.6 billion, up from about $6.2 billion in 2006. And in each year, the (c)(3) amounts far exceeded those for explicitly political giving.

To this, however, we added the question of political orientation: what if, with all of the necessary caveats, one tried to ideologically categorize this policy-oriented giving? The groups for this study were therefore selected from the grant-recipient lists of twelve major charitable private foundations, six of them right-leaning and six left-leaning. There were 372 right-leaning recipients and 1,078 left-leaning ones. The right-leaning groups’ revenues totaled just under $2.2 billion in 2014, up 71 percent from $1.3 billion in 2006. But the left-leaning groups’ revenues totaled more than $7.4 billion in 2014, up 50 percent from $4.9 billion in 2006.10

In 2020, Watson and Shane Devine revisited the question in a follow-up report for CRC, similarly comparing support of and right- and left-leaning 501(c)(3)s. According to the most-recently-reported figures (from either 2017 or 2018), this analysis found that 298 selected right-leaning groups’ revenues totaled just over $2.2 billion, about the same as the conservative total in 2014, and that 906 left-leaning groups’ revenue totaled almost $8.1 billion, up 9.65 percent from 2014.

As shown in figure 2 below, conservative policy- and advocacy-oriented 501(c)(3)s received 20.5 percent and liberal ones received 79.5 percent of donations given to policy-oriented groups in 2006. And in subsequent years, this ratio remained relatively stable: in 2014, conservative policy groups received 22.7 percent and liberal ones received 77.3 percent of total policy-oriented donations; and in 2017–18, conservative groups received 21.5 percent and liberal ones received 78.5 percent.11 Policy-oriented giving skews sharply to the left.

Source: Capital Research Center.

Politicized philanthropy in the post-Trump era

The forces that lay behind Donald Trump’s political ascendancy cannot fairly be considered a product of conservative philanthropy; conservative donors were in fact caught embarrassingly flat-footed by the rise of Trump. Their flat-footedness, moreover, was not simply a result of conservative grant makers’ and recipients’ raw monetary disadvantage in comparison with their liberal counterparts. The populist sentiment expressed in Trump’s candidacy and presidency has come to challenge conservatism’s very understanding of itself, and likely will take decades to work out—probably with conservative funders’ support and participation, whether this be through direct political donations, through politicized philanthropy, or through more traditional, policy-oriented giving.

Since 2016, liberal donors, including the largest private foundations, have sought to produce and may have actually produced results for Trump’s opponents—in think tanks, in activism and organizing, and in politics. The degree to which 2020’s political outcome may have been directly caused by supposedly charitable grants is, to many, at least an open question. And their effects may well be scrutinized by Trumpian or populist policymakers, among others, if and when they are in position to lead formal investigations and hold hearings in the next Congress.

In a now-famous postmortem on the 2020 election, Time’s Molly Ball describes a “shadow campaign” conducted by liberal and progressive activists and organizers, who held urgent Zoom meetings for hours a day to avert “the potential for a November meltdown”—meetings that included “representatives of donors and foundations.”12 Ball later notes that the Voter Participation Center (VPC) sent fifteen million vote-by-mail applications to “people in key states.” VPC, which was founded as Women’s Voices Women’s Vote in 2003, is officially a tax-exempt, charitable entity. According to Sasha Issenberg’s 2012 The Victory Lab, however, this status is a thin veil for partisan political organizing: “Even though the group was officially nonpartisan, for tax purposes, there was no secret that the goal of all its efforts was to generate new votes for Democrats,” including by means of financial support from private, purportedly “charitable” foundations.13

VPC may not be an outlier. The tax-exempt Center for Tech and Civic Life (CTCL) likely receives some private-foundation support. In 2020, CTCL funneled hundreds of millions of dollars to certain local election administrators. There has been some state-level probing of the group as part of larger post-election investigations—which have themselves been denounced as partisan by many on the left—but many questions remain regarding the intent and effects of CTCL’s election-related donations.

Regarding any potentially relevant intent, a December 18, 2021, e-mail from Blue Tent’s Callahan advises donors,

As you think about last-minute charitable donations before December 31, here’s a tip: focus on helping Democrats win victories in next year’s high-stakes elections. 

I know: Tax-deductible gifts to 501(c)(3)s supposedly can’t be used for electoral work. But that law is a joke. Any donor who does a little homework can find lots of ways to make “charitable” donations that help their political party.

While stated brazenly, the thinking is consistent with some of what Callahan writes in The Givers. It is also almost exactly the kind of thing that prompted Congress to investigate the Ford Foundation’s funding practices in the late 1960s, and subsequently to include explicit language to prevent the mixing of politics and tax-incentivized charity in the 1969 Tax Reform Act. Despite the efforts of the mid-century Congress, such mixing is now rampant, growing, and probably bipartisan; the two parties do not, however, draw on equal proportions of 501(c)(3) funding. The time may be ripe for an(other) official look into some of these “charities.”

History repeats itself

“In recent years, private foundations had become increasingly active in political and legislative activities,” observes the General Explanation of the Tax Reform Act of 1969 prepared by the staff of the Joint Committee on Internal Revenue Taxation. The report goes on to explain the way the reform was meant to respond to this influence:

In several instances called to the Congress’ attention, funds were spent in a ways clearly designed to favor certain candidates. In some cases, this was done by financing registration campaigns in limited geographical areas. . . . Accordingly, the Congress determined that a tax should be imposed upon expenditures by private foundations for activities that should not be carried on by exempt organizations (such as lobbying, electioneering, and “grass roots” campaigning). The Congress also believes that granting foundations should take substantial responsibility for the proper use of the funds they give away.

In general, the Congress’ decisions reflect the concept that private foundations are stewards of public trusts and their assets are no longer in the same status as the assets of individuals who may dispose of their own money in any lawful way they see fit.

Explanation of provisions.—The Act forbids private foundations to spend money for lobbying, electioneering (unless certain standards are met, this includes voter registration drives), … and for any purpose other than the exempt purposes of private foundations. Any improper expenditure is subject to tax.14

Both houses of Congress were controlled by Democrats when the bill was passed in 1969. It was signed into law by Republican president Richard Nixon.

Some populist conservatives understand but are not “in on” the joke, as told by Callahan in his 2021 Blue Tent e-mail. These populists likely could ally themselves—perhaps only conceptually at first, later in practice—with some of the recent, harshly negative appraisals of Big Philanthropy that have been offered by progressives. J. D. Vance, for instance, said last September that “the basic way this works is that the Ford Foundation, the Gates Foundation, the Harvard University endowment, these are fundamentally cancers on American society, but they pretend to be charities, so they benefit from preferential tax treatment.”15 Vance’s characterization of the problem presented by Big Philanthropy is brazen but refreshing.

“All across our country, we have nonprofits—big foundations—that are effectively social-justice hedge funds,” Vance told a conference on woke capital hosted by the Claremont Institute’s Center for the American Way of Life earlier last year. “The decision to give those foundations and those organizations special privileges is a decision made by public policy. It was made by man, and we can undo it.”16 Vance is, at present, an aspiring policymaker, but such views are not atypical among populist conservatives. The growing number of critiques of large philanthropic foundations from both progressive left and populist right presents an opportunity for actual changes in policy in the years to come.

Coulds and woulds

The extant menu of proposals to reform the philanthropic sector grows ever longer. Broadly, it could include the redefinition—or,in truth, a return to the definitions—of the very terms that underlie 501(c)(3) legal structure, including “charity” and politics.” In The Givers, Callahan floats the idea of redefinitions that would serve to move many (c)(3)s into the politically permissive (c)(4) category, where contributions to them would not be tax-deductible. Lloyd Hitoshi Mayer has comprehensively examined the issue and helpfully proposes in a 2019 article for the Notre Dame Journal of Legislation what he describes as “an overall approach to modifying the existing legal rules that relieves the identified pressure points without compromising the important public policies underlying the current legal rules, including ensuring the continuing ability of nonprofits to contribute to political debates in the United States.”17

Legislators could make changes in the actual dollar amounts permitted to be “spent” or given away under the tax-exempt status of the 501(c)(3) structure, or in the amounts that could be deducted for charitable donations. Some have suggested pairing an elimination of the charitable deduction with the institution of a charitable tax credit.18 There could also be a change in the percentage or amount of assets that private foundations are required to spend per year on grants and/or expenses to retain their tax exemption; this has essentially already been proposed for DAF-account deductibility. A time limit could be established for tax-exempt grantmaking, either an absolute limit or one relative to the date of death of an original donor. Changes could also be made in the taxable-expenditure rates that would apply if and when legally mandated dollar amounts, percentages, or timelines are breached.

The 2017 Tax Cuts and Jobs Act already took a modest step toward reining in nonprofit pools of money, imposing a relatively small excise tax on the large endowments of certain higher-education institutions, and some have seen this as a potential model for future regulation. “While it is a relatively small tax, this new law is a first step towards the exploration of taxing non-profit entities on the vast sums of wealth they hold in their endowments,” according to Jennifer Bird-Pollan in a 2021 Pepperdine Law Review article.19Bird-Pollan imagines a much wider scope for such an excise tax: “Why are we focused only on universities? Could the same rationale be used to impose a tax on hospitals? Museums? Other wealthy non-profits? And why stop at the imposition of only a 1.4% excise tax on income produced by the endowment? Why not tax all income produced by the non-profit that is not reinvested in the charitable purposes of the non-profit?”20

Most broadly, if even only as a hypothetical matter, the charitable exemption could be downright denied to private foundations. In his introduction to a collection of papers presented at a 2019 symposium on the 1969 Tax Reform Act and published in the Pittsburgh Tax Review, Philip Hackney writes: “I think about the great potential of well-democratically-harnessed philanthropy and seriously doubt that can be accomplished within the space of ‘private’ philanthropy. I lean strongly towards eliminating tax benefits for this private ‘philanthropy’ by denying tax exempt status to those organizations that are not public charities.”21

Less expansively, limits could be imposed on the degree to which a tax-exempt private foundation’s operating expenses can be counted as part of its required minimum five-percent payout. New governance requirements for tax exemption could be issued, with the goal of strengthening independent voices on foundations’ boards, mandating the demographic composition of boards and staff, or restricting board and staff compensation. Lawmakers could more narrowly tailor the oft-abused or at least overused “fiscal-sponsorship” mechanism, by which existing 501(c)(3)s can accept tax-deductible donations on behalf of another, separate group that either has applied or says it plans to apply for such status. They might also strengthen the “public-support test,” by which public charities are supposed to demonstrate broad public support, from more than just a few funders. And transparency or reporting requirements for all (c)(3)s could be increased.

It could also be worth considering whether an overhaul of the organs of the administrative state that oversee tax-exempt foundations and enforce the relevant sections of the Internal Revenue Code. At minimum, the budget for the Internal Revenue Service’s oversight of the nonprofit sector might be increased, some would suggest, allowing for enhanced regulation and enforcement. Or an entirely new agency might be created to take over the IRS’s duties and responsibilities in this area. Further, as has recently been passed and proposed in other contexts—and depending on whether and how such laws are upheld by the courts—the United States could even create a private civil right of action to enforce existing or new law against abusive foundations.

Some of these menu items might cause more wealthy donors to create non-exempt limited-liability companies as their giving vehicles; the appeal of such LLCs is that they allow donors to back out of any “bargain with the state” over tax status and related requirements. Even the most aggressive of the items, of course, wouldn’t eliminate philanthropy—nor are they meant to. But they would change the way in which the taxpayer-filled government fisc is used to incentivize it.

Within the conservative movement, some legal theorists would likely argue that many of these reforms create (or worsen) “unconstitutional conditions” on exemption or deductibility, as opposed to what would be considered “mere refusals to subsidize” particular activity by others.

Will and should

Progressives and populist conservatives may be “unlikely bedfellows” but they have an opportunity, still hypothetical but more plausible than at any other point in recent memory, to make common cause on behalf of charity as traditionally and originally understood in American law. Philanthropy is among several major, once-reliable American institutions toward which both wings of our political spectrum now have deep, resentful, and growing distrust. Such a progressives-populist alliance, perhaps joined by some moderate centrists, could make a credible attempt to revive, restore, and rebuild charitable philanthropy in the United States. Whether they do so or not, however, in the coming years, Big Philanthropy likely will find itself where it has been in the past—before changes were imposed on its structure against its well-funded and well-argued will: on the defensive.



1 The FoundationMark 15, in order, are: the Bill & Melinda Gates Foundation, the Lilly Endowment, the Ford Foundation, the William & Flora Hewlett Foundation, the Robert Wood Johnson Foundation, the David & Lucile Packard Foundation, the Bloomberg Family Foundation, the Gordon and Betty Moore Foundation, the Leona M. and Harry B. Helmsley Charitable Trust, the Andrew W. Mellon Foundation, the John D. and Catherine T. MacArthur Foundation, the W. K. Kellogg Foundation, the Conrad N. Hilton Foundation, the Rockefeller Foundation, and the Walton Family Foundation.

2 26 USC §501(c)(3)

3 26 USC §501(c)(3)

4 Vivek Ramaswamy, Woke, Inc.: Inside Corporate America’s Social Justice Scam (New York: Center Street, 2021), 73.

5 Robert Reich, Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better (Princeton, NJ: Princeton University Press, 2018), 137.

6 Edgar Villanueva, Decolonizing Wealth: Indigenous Wisdom to Heal Divides and Restore Balance (Oakland, CA: Berrett-Koehler, 2018), 3.

7 Maribel Morey, White Philanthropy: Carnegie Corporation’s An American Dilemma and the Making of a White World Order (Chapel Hill, NC: Unversity of North Carolina Press, 2021).

8 Anand Giridharadas, Winners Take All: The Elite Charade of Changing the World (New York: Knopf, 2018), 4–5.

9 David Callahan, The Givers: Wealth, Power, and Philanthropy in a New Gilded Age (New York: Knopf, 2017), 297.

10 Michael E. Hartmann and Michael Watson, The Flow of Funding to Conservative and Liberal Political Campaigns, Independent Groups, and Traditional Public Policy Organizations Before and After Citizens United, Capital Research Center, February 2018. It is important to note that not all of the groups’ revenue would necessarily come from private foundations alone; it would also include contributions from corporations and individuals.

11 Shane Devine and Michael Watson, Political and Policy-Oriented Giving After Citizens United: An Update to CRC’s 2017 Analysis, Capital Research Center, December 2020.

12 Molly Ball, “The Secret History of the Shadow Campaign That Saved the 2020 Election,” Time, February 4, 2021.

13 Sasha Issenberg, The Victory Lab: The Secret Science of Winning Campaigns (New York: Crown, 2012), 305.

14 Staff of the Joint Committee on Internal Revenue Taxation, General Explanation of the Tax Reform Act of 1969, H.R. 13270, 91st Congress, Public Law 91-172 (Washington, DC: U. S. Government Printing Office), 48.

15 J. D. Vance, interviewed by Tucker Carlson, Tucker Carlson Tonight, September 22, 2021. See Ian Schwartz, “J. D. Vance on Ford Foundation: ‘We Are Actively Subsidizing the People Who Are Destroying This Country,’” RealClearPolitics, September 28, 2021.

16Conservative Author and Venture Capitalist J. D. Vance: Eliminate All Special Tax Privileges for Foundations,” The Giving Review, May 20, 2021.

17 Lloyd Hitoshi Mayer, “When Soft Law Meets Hard Politics: Taming the Wild West of Nonprofit Political Involvement,” Notre Dame Journal of Legislation 45, no. 2 (2018): 195.

18 See Andrew Hayashi and Justin Hopkins, “A Charitable-Giving Tax Credit Could Shift the Balance of Philanthropic Power Away From the Wealthy,” Chronicle of Philanthropy, February 23, 2022.

19 Jennifer Bird-Pollan, “Taxing the Ivory Tower: Evaluating the Excise Tax on University Endowments,” Pepperdine Law Review 48, no. 4 (July 2021): 1055,.

20 Bird-Pollan, “Taxing the Ivory Tower,” 1079–80.

21 Philip Hackney, “The 1969 Tax Reform Act and Charities: Fifty Years Later,” Pittsburgh Tax Review 17, no. 2 (September 2020), 245.

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