Bill Gates Doubles Down

It’s a bridge to a new generation of philanthropy….yesterday’s big Buffett to Gates gift is causing a lot of chatter in educircles. It’s good news, obviously, but also raises some obvious and subtle questions. One of the most interesting subtle ones is whether current tax code provisions regulating philanthropy really work with this new generation of “super foundations.” In order to prevent philanthropic endowments from becoming unchecked sources of wealth into perpetuity, the tax code sensibly requires foundations to spend five percent of their endowments annually. There is a long history of Congressional oversight on the issue.

But, while there is some flexibility, it’s legitimate to ask whether it’s really wise to force foundations to spend five percent every year. Does this lead to rushed spending or ill-planned gifts? Well, it’s no secret that at the end of the year some foundations have to rush money out the door. And there is an enormous difference between a small or mid-sized foundation doing this and one of the super foundations such as a Gates (disc. an ES donor) or Ford or Walton in terms of the real dollars involved.

Not saying that the payout requirements should be lowered as a net matter (and in this particular instance Mr. Buffett attached requirements to his gift) but as a larger issue it’s worth thinking about restructuring the rules in this new environment to allow for more planning. Perhaps a staggered system to take into account foundation size. Some foundation program officers say this would help, others say that it would merely lead to some last minute giving on a different timeline.

Bonus Reading: For a good look at education philanthropy today it’s hard to beat Rick Hess’ With the Best of Intentions.

Leave a Reply

Your email address will not be published.