It may be years, if ever, before taxpayers can see where the donation went. Musk’s foundation discloses donations to a wide range of causes but reserves most big checks for Fidelity Charitable and Vanguard Charitable. The defamation trial involving movie star Johnny Depp and his ex-wife Amber Heard offered a rare glimpse into the money leaving Musk’s accounts. Depp’s lawyers tried to undermine Heard’s credibility by suggesting the actor, who’d dated Musk, hadn’t followed through on a $3.5 million pledge to the American Civil Liberties Union. The group’s general counsel testified that Musk made several gifts, including $500,000 in Heard’s name and $5 million more in his own name to the ACLU, both from a Vanguard Charitable fund.
A bipartisan group of lawmakers, frustrated by the pace of charitable giving, is pushing legislation that includes a 15-year limit on tax-deductible dollars in the funds. “Charitable dollars ought to be doing the good they were intended for, not sitting stagnant to provide tax advantages for some and management fees for others,” Republican Senator Chuck Grassley of Iowa said while introducing a bill last year with Maine’s Angus King, an independent who caucuses with Democrats. Another group of lawmakers from both parties introduced the bill in the House of Representatives in February. This year the Biden administration floated a narrower change. It would prevent foundations from using DAFs to satisfy the 5% rule, unless they can show the money reaches charities by the end of the following year.
A Washington crackdown could require a cross-section of the US’s top 0.1% to change their giving strategies. The Cawood family of Georgia, which made money selling self-help books and anti-aging creams, routes about $4 million annually from its foundation to the National Christian Foundation, a fund sponsor; the Colorado-based co-founder of vacation rental site Vrbo sends almost all of his Find Us Faithful Foundation’s grants there, too. Others pouring money from their foundations into DAFs include an early WhatsApp engineer, the CEO of genetic testing company 23andMe, the billionaire co-founder of staffing firm Allegis Group Inc., and some heirs to the Pritzker fortune.
The transfers can be an efficient way to donate. Nwamaka Agbo, CEO of Regan Pritzker’s Kataly Foundation, says the built-in infrastructure of the funds speeds up giving. Of the $58 million Kataly sent to DAFs in 2020, $40 million of it was distributed to nonprofits that year, a foundation spokesperson says.
Fidelity Charitable towers over the industry, overtaking the Bill & Melinda Gates Foundation in 2019 as the country’s largest grantmaker. It gave out more than $10 billion in contributions that donors recommended in 2021. So it’s not surprising that Fidelity CEO Abigail Johnson, the granddaughter of the company’s founder, has a private foundation that sends all its grants to Fidelity Charitable. The foundation’s recent tax filings show that those donations have been disbursed, and its 2019 return lists recipients. A spokesperson for Johnson says her foundation’s DAF gifts “leverage the scale and expertise” of Fidelity Charitable’s technology and grant-making teams.
Bloomberg found about 1,300 donations, totaling $1.3 billion, from foundations to Fidelity Charitable. That was more than twice as much as the next-biggest sponsors—the National Philanthropic Trust, Schwab Charitable, and Vanguard Charitable. In all, the review revealed about 7,300 grants from private foundations to more than three dozen major sponsors of the funds. They added up to $4.2 billion. That amount is “likely to be an understatement,” because of limitations in the data, says Brian Mittendorf, an Ohio State University accounting professor who studies nonprofits and reviewed Bloomberg’s findings. The tally doesn’t include hundreds of millions of dollars in donations to big community foundations, such as the Chicago Community Trust and the Silicon Valley Community Foundation, which have become major sponsors of DAFs. Nor does it include records from the tens of thousands of foundations that filed their returns on paper, making them harder to analyze.
Once assets move into a charitable gift fund, donors are rarely willing to disclose the ultimate destination of their money. “I think this is very nosy,” says Allison Simon, former president of the Stemmons Foundation, when asked about its 2020 liquidation, which sent $16.2 million to a DAF at Schwab. That money still goes to the same list of charities the foundation used to support, which included the opera and an exotic animal sanctuary in Texas, she says. But she bridles when asked for more details, including the pace of giving—something now hidden from public records. “Everything was done very legally,” Simon says.
With clever planning, wealthy donors can shroud their tax-deductible philanthropy in total anonymity. Consider the Green Fern Foundation, Guilder Foundation, and Kaena Foundation, a trio of $100 million-plus foundations with the same law office address in Minneapolis. Since 2015 they’ve collectively sent $62 million to Fidelity Charitable, making up more than 98% of their grants. The money funding all this comes from opaque trusts based in South Dakota.
On its filings, the three foundations list the same tax lawyer, Sonny Miller. When asked to speak with the people behind the foundations, Sarah Francomano, a spokesperson working with Miller’s firm, laughs. It was unlikely that would happen, she says, because, after all, they want to be anonymous.
Miller says his clients often prefer secrecy for purely modest reasons: “Most of the donors I work with would love to see in the news more about the good work charity is doing and less about who gave to what charity.”
This article was provided by Bloomberg News.