Wealthiest (nonprofits) keep getting bigger


Don Keelan

Pablo Eisenberg, writing in the Aug. 14 issue of the Chronicle of Philanthropy made a profound statement: "We can soon expect a wave of philanthropic colossi that will allot billions of tax-subsidized dollars each year without the benefit of public discussion, citizen input, or the political process. If the past is a barometer of the future, it’s hard to imagine the new mammoth foundations or tomorrow’s wealthiest donors will do to fight poverty, help small nonprofits or watchdog groups, or expand efforts to encourage citizen participation in our democracy. After all, the biggest 10 gifts made so far this year have gone mostly to colleges and hospitals. Harvard, Dartmouth, and the University of Notre Dame are among the largest beneficiaries. Benioff Children’s Hospital in San Francisco and Memorial Sloan Kettering Cancer Center also have received gifts of more than $75-million. America’s multimillionaires neglect the institutions that serve poor and working-class students, community colleges, public universities, and smaller non-elite institutions ... "

To those who may not know Pablo Eisenberg , one of the country’s leading consultant to the nonprofit world. Presently, he is a senior fellow at The Center for Public and Nonprofit Leadership at the Georgetown Public Policy Institute.

In his essay for the Chronicle, Eisenberg makes the case that billions of dollars are being channeled into major nonprofit foundations -- such as, Buffett, Walton, Gates, Broad and Lumina (there are scores of others). He goes on to note that these billion dollar behemoths are controlled mostly by family and close friends without any public oversight.

However, his most significant point is that foundations and philanthropists are ignoring the small institutions. He writes,"At best, some millionaires and billionaires give money to tinker at the edges of today’s system but are unwilling to provide the dollars or advocacy voice that would lead to real change."

Eisenberg believes that the gap is widening dramatically between the wealthiest nonprofits (the one percenters) and all others. Furthermore, what can be taken from his remarks is that social, anti-poverty and less influential educational institutions are down at the bottom when gifting is being considered. What Eisenberg doesn’t address is why such huge funding is not directed to the smaller agencies?

Working with Vermont nonprofit organizations advancement directors (fundraisers) I have heard time and time again, three universal problems in their attempt to raise funds: there are just too many nonprofits going after the same donors; there well may exists "donor fatigue"; and even more profound, being asked the question by their donors -- are you making any progress in eliminating the social ills and poverty that you have been working at for decades? Could it be that these points are the reasons sizeable funds are not being directed here but instead to the mega-foundations and wealthy institutions?

When a wealthy donor provides $75 million to a college, hospital or to an arts center/museum, I don’t believe that the donor is in any way callous towards the mission of social and anti-poverty agencies. What a donor might believe is that such institutions are funded by the state and federal government and his/her funds can be better utilized elsewhere.

Of course the more cynical may advance that the donor is just fed up with social and poverty causes -- they have been around too long and have little in the way of progress to show -- if anything -- they are expanding.

If Eisenberg is correct in his findings, that so few control so much wealth in the nonprofit world, maybe it is time something should be done by taking a page from the U.S. Tax Code.

In the Tax Code there is a provision that applies to corporations that have accumulated large amounts of earnings and have not distributed them to their stockholders (dividends) or have no plans in place to utilize such earnings. If such is the case they face an onerous tax penalty of 20 percent -- referred to as The Accumulated Earnings Tax.

Is it possible that the time has come to place upon nonprofits an Accumulated Excess Asset Tax? It would be applied to those assets that have not been designated to causes but are only being accumulated by the nonprofit (foundation) to gain influence, prestige and control.

Decades ago, when Congress created the nonprofit entity provisions in the U.S. Tax Code, I don’t believe it had ever envisioned that a handful of nonprofits would amass assets in the hundreds of billions of dollars.

Pablo Eisenberg has issued a warning and it would be wise for the wealthiest of nonprofits to heed. Otherwise, Congress will surely act in a way that will be most uncomfortable. And for starters, maybe the giants of the nonprofit industry would go about adopting a smaller nonprofit, that is in the trenches, fighting the social and poverty issues?

Don Keelan writes a bi-weekly column and lives in Arlington.


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