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An estimated $1.7 trillion in donations, ostensibly earmarked for philanthropy, are currently languishing in private foundations and donor-advised funds—while charities like Feeding America and Habitat for Humanity are under-resourced.
Thanks to outdated charity tax laws, the U.S. is missing out on hundreds of billions of dollars that could flow toward housing and food security, health research, education, advocacy, and other crucial nonprofit efforts aimed at uplifting the common good—but simple reforms could unlock some of the extreme wealth that is currently "warehoused" in private foundations and donor-advised funds.
This is according to a new Institute for Policy Studies analysis that shows charitable groups currently hold an estimated $1.7 trillion in donations that are "ostensibly earmarked for philanthropy," but are able to "languish in go-between funds" while working charities remain under-resourced.
The foundations and donor-advised funds (DAFs) are able to collect tax breaks while sitting on billions of dollars thanks to provisions in the Tax Reform Act of 1969 that haven't been updated in decades, wrote IPS associate fellow Helen Flannery and associate director of charity reform initiatives Bella DeVaan at Inequality.org, a project of the organization.
"Initially, in the Tax Reform Act of 1969, private foundations were mandated to give away 6 percent of their wealth or the annual net growth from their investments: Whichever was higher," wrote Flannery and DeVaan. "Foundations' tax benefits wouldn't provide license for funds to just grow forever and ever, and they were to be consistently responsive to shifting economic reality. A decade of revisions to payout requirements reflected those principles and eventually created our flat 5% mandate. But that 5% is overdue for re-evaluation, and our elected representatives have fallen asleep at the wheel."
"It's worth imagining a future in which billions more flow towards life-saving medical cures, food security, housing access, and environmental protection through organizations that are already woven into our social fabric."
While the nation's largest foundations give charitable donations at a rate of about 5%, "their gains in the market have averaged 9% over the last five years," they explained.
In other words, said Flannery and DeVaan, the funds "are growing faster than the rate at which they give" while donations to working charities like Habitat for Humanity, United Way, and Feeding America fall behind.
The wealth of DAFs has skyrocketed by 411% in the last decade, with the funds stockpiling an estimated $230 billion in assets in 2023.
IPS noted that billions of dollars in DAF gifts have been directed as dark money contributions—whose donors "might well have second thoughts" if tax laws were reformed to require both boosted payouts and more transparency.
In its policy brief, IPS proposes reforms that would:
"It's worth imagining a future in which billions more flow towards life-saving medical cures, food security, housing access, and environmental protection through organizations that are already woven into our social fabric," wrote Flannery and DeVaan, "or organizations that could and should be with strengthened access to funding."
IPS released the analysis as legislators prepare to overhaul the tax code in 2025.
"We're hopeful that this can be a watershed moment for charity reform akin to 1969," wrote Flannery and DeVaan, along with IPS program director Chuck Collins.
Over the last five years the Servant Foundation has become the main identifiable source of funding for Alliance Defending Freedom, described as an anti-LGBTIQ hate group by the Southern Poverty Law Center.
A U.S. nonprofit that aired two ads during Sunday’s Super Bowl attempting to rebrand Jesus for Gen Z is also the main funder of a designated hate group opposing abortion and LGBTIQ rights, openDemocracy can reveal.
The Servant Foundation has plunged millions of dollars into its “He Gets Us” ads, which paint Jesus as an “influencer” who was “cancelled” for standing up for his beliefs. The controversial adverts were shown at the Super Bowl for the second year running and have been plastered across billboards in the United States over the last year.
But analysis of financial accounts by openDemocracy shows over the last five years the Servant Foundation has also grown to become the main identifiable source of funding for Alliance Defending Freedom (ADF), described as an anti-LGBTIQ hate group by the Southern Poverty Law Center (SPLC)—an allegation it denies.
In total Servant gave the group $65.9 million from 2018 to 2021—an average of more than $16 million a year. As a result, ADF’s grant income rose from $55 million in 2017 to $96.8 million in 2021.
Servant’s boom coincides with its split from the National Christian Foundation (NCF), of which it was an affiliate from its launch in 2000 through to 2017. During this time, it would hand out an average $1.3 million a year and receive around $4 million. But after the split with NCF, Servant pocketed more than $1 billion in contributions—a large chunk of which actually came from the NCF.
NCF and Servant Foundation are among 12 DAF operators that from 2017 to 2020 gave $272 million to 36 American groups that work to restrict the rights of women and LGBTIQ people in the U.S. and abroad.
The NCF is considered the biggest U.S. charity for Christian causes and has been accused of channeling millions of dollars to hate groups. Almost immediately after the split with Servant, it gave the group $307 million, followed by another $11 million in 2019. It also received more than $222 million from Servant between 2018 and 2021, showing a mutual flow of money that, according to experts, “adds a layer of secrecy” to donations they make on behalf of clients.
This type of money transfer from one donor-advised fund (DAF) operator to another grew by 409% between 2015 and 2019, and hit $1 billion only in 2019, according to an analysis by the Institute for Policy Studies published in 2021. That study only focused on the biggest commercial DAF operatorsthose nonprofit branches of financial companies, thus excluding DAF operators like Servant and NCF.
“Wealthy people give to intermediaries, such as private foundations and DAF operators, which in 2021 received almost a third of all donations,” Chuck Collins, director for the Program on Inequality and the Common Good at the Institute for Policy Studies, told openDemocracy. “When these donor-controlled intermediaries pass money back and forth, they can add layers of secrecy so the public doesn’t know where the funds are ending up.”
Stephanie Peng, research manager with the National Committee for Responsive Philanthropy (NCRP), which supports marginalized communities, told openDemocracy: “Anonymity is really dangerous, because you don’t know who is really behind all that money; who is controlling massive, massive amounts of money; and necessarily where that funding is going.”
The Servant Foundation was set up in Kansas by evangelical lawyer Bill High. Its partnership with the NCF included the NCF performing “accounting and other back-room tasks” for Servant. High ended the relationship in 2017, reportedly to offer lower fees to clients, and also changed Servant’s public-facing name to The Signatry.
Servant made headlines with its Super Bowl ads, which were part of the $300 million He Gets Us campaign hoping to fuel conservative evangelical goals.
NCF and Servant Foundation are among 12 DAF operators that from 2017 to 2020 gave $272 million to 36 American groups that work to restrict the rights of women and LGBTIQ people in the U.S. and abroad, an openDemocracy investigation revealed earlier this year. Servant donated a fifth of that sum and the NCF almost a half.
By the time Servant split from the NCF, High had forged a crucial relationship with David Green, until then a substantial client of NCF whose retail giant Hobby Lobby plays a prominent role in battles against sexual and reproductive rights.
In 2014, Hobby Lobby won a big case when the Supreme Court ruled that corporations could deny contraception coverage under their workers’ health insurance policies, if doing so would violate their “sincerely held religious beliefs.” The NCF had given millions of dollars to the law groups litigating this case—ADF and the Becket Fund for Religious Liberty, a law firm that has represented the Greens since 2012.
High, who retired as Servant CEO in January, and Green have co-authored several books about Christian charitable giving. Green also appeared in a 2020 promotional video for Servant.
Among other beneficiaries of money channeled through Servant are at least seven U.S. organizations well-known for their attacks against equal rights: ADF, the Fellowship Foundation, Focus on the Family, American Center for Law and Justice, Family Research Council, Heartbeat International, and the Heritage Foundation.
Analysis of donation flows suggests cash from Green that once moved through the NCF could now be getting channeled through Servant. Since 2018, Servant has given big money to two groups focused on international evangelism and distribution of Christian literature that are also listed on the Hobby Lobby donation webpage. They rank second and third in money received from Servant from 2018 to 2021—Every Home for Christ ($181 million) and OneHope ($107 million). Meanwhile, the NCF, which had given $47 million to Every Home for Christ and $25 million to OneHope in 2017, has drastically reduced its contributions to these organizations since then. Green was also reportedly a major donor for the He Gets Us campaign. Both Hobby Lobby and Green did not respond to questions about whether they had stopped donating cash via the NCF and instead donated it via Servant.
The Museum of the Bible, founded by the Green family in 2017 at a cost of $500 million—and marred by scandals for buying looted and smuggled archaeological artifacts and exhibiting “modern forgeries” of Dead Sea Scroll fragments—is another big grantee of the Servant Foundation. It was given more than $3.2 million between 2018 and 2021 and before that had received hundreds of millions from the NCF since 2013.
Among other beneficiaries of money channeled through Servant are at least seven U.S. organizations well-known for their attacks against equal rights: ADF, the Fellowship Foundation, Focus on the Family, American Center for Law and Justice, Family Research Council, Heartbeat International, and the Heritage Foundation.
ADF won a Supreme Court case this year that allows businesses to discriminate against gay couples on free speech grounds, and was one of the groups that masterminded the strategy to overturn the constitutionally protected right to abortion in the U.S. It has defended the sterilization of trans people in Europe and fought the decriminalization of gay sex in Belize. It also launched efforts to ban transgender students’ access to bathrooms and locker rooms consistent with their gender identity.
Also a SPLC-designated hate group, Family Research Council makes false claims about LGBTIQ people, and has been involved in funding and promoting harmful conversion therapies against LGBTIQ people, as well as opposing U.S. local bans to these activities.
The exchange of money between DAF operators as Servant and NCF is a model extending internationally.
In 2021, openDemocracyrevealed how Focus on the Family, another organization funded by Servant, had platforms for the provision of conversion therapies in the U.S. and Costa Rica.
openDemocracy requested interviews with all the organizations and individuals named in this investigation. Only the NCF answered through a short written statement signed by its communications vice president, Steve Chapman.
“The NCF does not develop or implement strategies about which charities or causes to support [and] does not rely on third-party designations or labels in our grantmaking process,” Chapman said. “All grants are initiated by the recommendations of our givers.”
In the statement, the DAF operator claimed to serve “over 25,000 givers that use Giving Funds [donor-advised funds] to individually support their favorite causes and charities,” and to have given more than $14 billion since 1982 to more than 70,000 charities that “are providing clean water to the thirsty, rescuing victims of human trafficking, translating the Bible into new languages, and much more.”
The exchange of money between DAF operators as Servant and NCF is a model extending internationally. The NCF, for example, partnered with TrustBridge Global, a charitable giving vehicle that declares itself as the first truly global DAF operator. Registered in 2016 in Florida and Switzerland, its CEO is a former NCF employee. TrustBridge has set up affiliate foundations around the world and claims to have 70,000 nonprofits vetted to receive DAFs. The list includes the ADF branch in the U.K. TrustBridge has also received millions of dollars from Servant.
Servant presents itself as a “global community” that has given $4 billion in “transformational grants for nonprofits around the world,” and supports projects in Africa, Asia, and Latin America. The fund also claims to have given $2 million in 150 grants for emergency relief in Ukraine, and over $1 million “for supporting missionaries around the globe, fueling the spread of the gospel in at least 43 countries,” especially in Africa.
Its website says it gave out over $470 million in grants in 2021, while receiving $899 million in contributions. As a DAF operator, it is able to accept other assets beyond cash, such as property, cryptocurrency, stocks, and mutual funds, as well as life insurance payouts.
“We want donors to be accountable to who they’re giving money to.”
When clients “give” assets other than money to these funds, they can write off the total amount the gifts are worth. This way, donors can bypass capital gains taxes from these gifts, which they would have to pay if they converted them into cash holdings.
Some DAF operators even have estate-planning options to bypass estate taxes and continue charitable giving after a donor dies.
For the NCRP, this is troubling.
“We want donors to be accountable to who they’re giving money to. So if donors are putting all of this money into a DAF, but that money sits there for years and years, and there are no beneficiaries, if the donor made a commitment and that commitment doesn’t make its way down to the recipient organisation, then that’s a problem,” NCRP’s Stephanie Peng said.
Legislative efforts to establish “reasonable timeframes” for paying out assets have so far failed.
High, Servant’s founder, has argued against any effort to make DAFs more accountable. “A hallmark of American charity has always been a right to privacy. We should not take away that privacy right. On the contrary, donor-advised funds have done much to democratize giving, as witnessed by their rapid rise,” he wrote in a Forbes article.
His foundation continues to court new donors. Its website even has a calculator for prospective customers to see how much in taxes they could save by donating.
Because DAFs have no payout requirement, the money often fails to move in a timely way to charities addressing urgent needs.
Last year, we wrote about how donor-advised funds, or DAFs, had become the top recipients of charitable giving in the United States. At the time, we were astounded to discover that DAF sponsors made up 6 of the top 10 and 9 of the top 20 most successful public-charity fundraisers in the country.
We’ve updated the data for 2021—the most recent year for which complete data is available—and the picture has only gotten more stark. Donor-advised fund sponsors now make up 7 of the top 10 and 11 of the top 20 public charities in the United States.
Public charities are nonprofits that rely on a broad base of donors for their revenue —as opposed to private foundations, which are usually created and supported by just one or two major donors.
In contrast to private foundations, DAF sponsors qualify as public charities, and so receive the same preferential tax treatment as working charities.
As we have reported before, DAFs are growing explosively. The assets held in U.S. DAFs have grown by 513% over the past 10 years—rocketing from $38 billion in 2011 to $234 billion in 2021.
And DAFs now rake in 22% of all U.S. individual charitable giving.
Donors can claim substantial charitable tax benefits for their contributions to DAFs, but, because DAFs have no payout requirement, the money often fails to move in a timely way to charities addressing urgent needs.
Through the charitable tax deduction, taxpayers subsidize contributions to DAFs by up to 74 cents on the dollar.
Of particular concern are DAF sponsors that are affiliated with for-profit Wall Street financial corporations. As we have documented, these commercial DAFs provide enormous publicly subsidized tax benefits to their high-rolling contributors while actively encouraging the warehousing of charitable wealth.
And commercial DAFs have been growing explosively. The Fidelity Charitable Gift Fund, for example, has been the most successful charitable fundraiser in the country for the past six years.
In 2021, Fidelity extended its lead by pulling in $15 billion—more than $11 billion more than the top working nonprofit, Feeding America.
We counted the Silicon Valley Community Foundation and the Chicago Community Trust as DAF sponsors because contributions to DAFs made up 93% and 97%, respectively, of their total incoming contributions in 2021.
Some of the operating nonprofits on this list—such as the United Way and Stanford University—sponsor DAF programs as well, but we did not categorize them as sponsors because their DAF programs are relatively tiny compared to their other fundraising.
It is also worth noting that DAFs may have actually done even better relative to working charities than our ranking shows. In previous years, the Chronicle of Philanthropy has made it easy for everyone to evaluate cash contributions by publishing well-researched lists of top-earning non-DAF “cause-driven” charities, but they did not do that in 2021.
So we compiled our current rankings by pulling contribution information from the tax returns of the largest DAF sponsors in the U.S., and then combining that with lists of donations to operating charities from two separate sources: Bloomberg’s ranking of the top-fundraising nonprofit universities and Forbes’ list of the top-fundraising non-university charities.
The Chronicle’s lists only included cash donations, however, while Forbes’ list includes both cash and noncash donations—and that can inflate revenue numbers, particularly for relief organizations. If Forbes’ list had only included cash donations to Feeding America, for example, they would have slipped out of the top 20.
Through the charitable tax deduction, taxpayers subsidize contributions to DAFs by up to 74 cents on the dollar.
This gives us all an interest in making sure that the money stored in DAFs is actually used for the greater good, rather than serving as a tax avoidance vehicle for the wealthy or lining the pockets of commercial money managers.
It’s time to move the money out of DAFs—and we’ve outlined a number of reforms that would make this happen.