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Hello, 

This week foundation and nonprofit leaders made their annual pilgrimage to Capitol Hill. We check in on their legislative priorities during a session of Congress that has often been hostile to them. Plus, trust-based philanthropy goes on trial in a case involving the Winthrop Rockefeller Foundation.

— Alex Daniels, Senior Editor, Foundations

Foundation Leaders Stress Philanthropy's Impact During Capitol Hill Visit

This week 400 or so foundation and nonprofit leaders made their annual pilgrimage to Congress. While they still touted specific bills like they have in the past, this time they were more determined to make a general case about the benefits of philanthropic independence.

The push is part of a “long play,” said Matthew L. Evans, director of public policy at the United Philanthropy Forum, a network of regional and issue-based organizations that support philanthropy, which organized the Hill visits. The group wants to assert the importance of philanthropy generally at a time when it is under attack from many in the Capitol and to let lawmakers know about its positive impact in communities nationwide.

“This is really a broader education effort,” Evans told me between meetings with legislators and Hill staffers. “Since last year, we’ve seen a convergence of threats at every level when it comes to a fundamental misunderstanding of the sector by some in government.” 

Over the past year, nonprofits have been under attack from the federal government. A series of executive orders from President Trump has deemed certain practices, like DEI, “illegal.” The White House created an interagency task force to investigate fraud among nonprofits and state and local governments and suggested that philanthropy supports political violence.

On the Hill, GOP lawmakers on the House Ways and Means Committee have targeted progressive foundations, saying they are too involved in the political process. In both chambers of Congress, lawmakers have filed legislation to require more disclosure in federal tax filings on fiscal sponsorship. And after failing last year, lawmakers have reintroduced the so-called nonprofit killer bill, which critics say would give the administration sole discretion, without due process, for determining whether a tax-exempt organization was assisting terrorists.

Last year charitable groups successfully beat back attempts to raise the foundation excise tax. The House passed a measure, later stripped out in the Senate, that would have raised the tax on foundation investment gains from 1.39 percent to 10 percent for the largest foundations. They also scored a key victory when Congress allowed Americans who don’t itemize their taxes to deduct charitable gifts from their taxable income, Evans said.

Evans hopes that expanding the newly re-formed  Congressional Philanthropy Caucus will dispel misconceptions and help lawmakers better understand how philanthropy works and the good it does in their communities.

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Trust-Based Philanthropy Lands in Court

Trust-based philanthropy, an increasingly popular grant making practice in which foundations cede some of their decision-making authority to grantees, is at the center of a leadership battle at the Winthrop Rockefeller Foundation. 

There isn’t a strict definition of what constitutes trust-based philanthropy, but foundations using the framework generally provide their grantees with multi-year general operating support and do not require as much follow-on reporting.

Winthrop Rockefeller Foundation trustees aligned with Lisenne Rockefeller, the daughter-in-law of the foundation’s founder, the late Arkansas Gov. Winthrop Rockefeller, have sued another set of board members. Her group claims that the other trustees illegally installed a new CEO and are engaged in “reckless” conduct by using the trust-based framework. By giving general operating support grants, Lisenne Rockefeller’s group argues in filings with an Arkansas court, the foundation is not holding grantees accountable.

The trustees who are being sued maintain that the approach is an effective way to reduce red tape yet still maintain accountability and is used by many foundations.

Critics of trust-based philanthropy, including Naomi Riley, a senior fellow at the American Enterprise Institute, told me that when grant makers go that route, “the mission of the foundation is not being carried out by the board members, who have really outsourced their responsibility to the recipients of their grants.”

But fans of the approach counter that it gives grantees, who have real-life experience with the problems foundations are seeking to solve, more freedom to use grant money as they see fit and in ways that are potentially more effective.

The problem, said Marcus Hunter, professor of social sciences at University of California at Los Angeles, is that boards at many wealthy foundations are simply not used to ceding control.

“Trust-based philanthropy redistributes not just money but also decision-making power,” Hunter said. “And that shift can feel destabilizing to institutions and people in them accustomed to gatekeeping.”

Riley predicts that we’ll see more lawsuits over trust-based philanthropy in the years to come.

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