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Charitable Giving has Been Hijacked and We are Losing Millions of Donors

Posted May 15, 2024 02:28 PM
501 Commons encourages nonprofits to engage in GiveBIG, GivingTuesday, and the year-round Washington Gives program to reconnect with donors amid declining year-end giving trends. We're seeing the largest drop in donors, including those who donate less than $500 (which comprises 80% of donors).

Giving days such as GiveBIG counter these trends, since they attract thousands of new donors around the community. Every year, we regularly send 20,000+ emails to encourage nonprofits to join the GiveBIG campaign (the first Tuesday and Wednesday of May) and GivingTuesday (the first Tuesday after Thanksgiving) so we can collectively "make some noise" and capture the attention of these donors. Through targeted emails, advertising, and social media, we hope to mobilize donors to give directly to the causes they care about.

However, the reason we do this is due to a troubling trend: More than 40% of charitable donations are now going to foundations (14%) and donor-advised funds (27%). Why does this matter?

  • It's not just donors' money. Every dollar a billionaire donates results in $0.74 in lost taxes that could be going to community services, housing, education, etc.
  • A rapid increase in funds to intermediaries has led to a $300 billion loss to nonprofits in five years.
  • Foundations are only required to spend 5% of their holdings annually.
  • DAFs, with total holdings of $229 billion, have no disbursement requirements.

Researchers recently discovered that the data on payout rates from the industry-aligned National Philanthropic Trust includes hundreds of thousands of workplace-giving accounts that do not work like DAFs and generally disperse all assets within a year. If these accounts are removed, DAF funds will distribute only 16% of the billions they are holding.

Did you know that philanthropy groups, community foundations, and other organizations that offer DAFs spent $11 million from 2018 to 2023 to block the passage of the 2021 Accelerating Charitable Efforts Act? The ACE Act is designed to increase disbursement from DAFs to nonprofits.

We believe that Congress should not only regulate the industry to require higher payouts from foundations and DAFs, but that charity donations for the very wealthy should cost the federal government less. recently launched a petition asking Congress to regulate charitable donation intermediaries. Please consider signing it!