Funders, Nonprofit Leaders Ask Congress to Mandate Higher Payout Rate

Funders, Nonprofit Leaders Ask Congress to Mandate Higher Payout Rate

To help address the impact of the COVID-19 pandemic on the nonprofit sector, a group of philanthropic and nonprofit leaders is asking Congress to increase the mandatory payout rate for private foundations and donor-advised funds (DAFs) to 10 percent.

In a letter addressed to House Speaker Nancy Pelosi (D-CA), Senate minority leader Chuck Schumer (D-NY), and the chairs and ranking members of the House Ways and Means Committee and Senate Finance Committee, nearly three hundred philanthropists, foundation leaders, and nonprofit executives called on Congress to double the mandatory 5 percent payout rate for foundations for the next three years and to impose the same rate on DAFs, which currently are not subject to a mandatory distribution requirement. By including such "emergency charitable stimulus" legislation in the next coronavirus relief package, the letter states, Congress could "inject more than $200 billion into the economy over the next three years, according to estimates by the Institute for Policy Studies — all without spending a dollar of taxpayer money."

Without a higher mandated rate, the letter argues, foundations "will cut their grantmaking correspondingly — as they did in the years after the 2009 recession — forcing many nonprofit organizations they fund to reduce budgets, lay off staff, and cut back on their charitable work." Such actions would devastate the nonprofit sector, which employs some twelve million people, and exacerbate the broader economic fallout from COVID-19. 

Organized by the Charity Reform Initiative at the Institute for Policy Studies, Patriotic Millionaires, and the Wallace Global Fund — which has pledged to spend 20 percent of its $100 million endowment in 2020 in support of COVID-19 relief and systemic change efforts — the proposed higher payout would not include donations to donor-advised funds, impact and program-related investments, and overhead that exceeds 0.5 percent of foundation assets toward the higher rate.

Signatories to the letter include Aileen Getty Foundation founder and president Aileen Getty; George Gund Foundation board president Catherine Gund; five members of the Mary Reynolds Babcock Foundation board and leadership team; philanthropist Abigail Disney; and Nonprofit AF writer and former nonprofit executive Vu Le.

"America is in an unprecedented crisis," the letter concludes. "The world of philanthropy must step up and do more, faster. Congress must insist on it."

"This is not a time for the philanthropic community to pull back," said Stephen Prince, vice chair of Patriotic Millionaires, a group of high-net-worth Americans, business leaders, and investors that promotes the adoption of public policies aimed at advancing equal political representation, a guaranteed living wage for all working citizens, and a more equitable tax system. "We don't want charitable giving to drop off a cliff in 2021 and 2022. Our tax code has provided wealthy people with these huge loopholes over the past forty-five years. In these troubling times, we need to rise to the occasion and double down on our giving back."

"We Support an Emergency Charity Stimulus Bill to Mandate Increased Payouts for Private Foundations and Donor-Advised Funds." Institute for Policy Studies, Patriotic Millionaires, and Wallace Global Fund Letter to Congress 05/19/2020. "Philanthropists, Foundation Leaders Call on Congress to Inject $200B from Their Endowments into Economy." Institute for Policy Studies, Wallace Global Fund, and Patriotic Millionaires Press 05/19/2020.