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Madoff Does It Again

Professor helps assemble coalition of wealthy philanthropists and foundations to incentivize charitable giving.


BC Law Professor Ray Madoff, co-founder of BC Law’s Forum on Philanthropy and the Public Good, has teamed up with philanthropist John Arnold to create a “powerhouse coalition” and launch the “Initiative to Accelerate Charitable Giving.”

The initiative supports the development of proposals designed to get more funds to charities. Philanthropy foundations, including Ford, Hewlett, Kellogg, and Kresge, and many large philanthropists, including Kat Taylor, have supported the cause.

Madoff and partners saw an opportunity to create a more efficient process to deliver donations and resources to nonprofits. The current tax laws allow wealthy contributors to benefit from hefty donations despite the fact that many donations end up wasting away in foundations and donor advised funds (DAFs).

“We are talking about funds that have received significant tax benefits upon contribution to the DAF,” Madoff told The NonProfit Times. “It would be irresponsible to not care whether these funds ever make it for use by working charities, particularly given all of the crises that charities are now being asked to address.”

The initiative includes changes to tax laws that will create incentive for DAF holders to move money out of the funds and into nonprofit organizations; no incentive that has existed up to this point. Human nature requires incentives to combat procrastination, and as the numbers show, that holds true for charitable giving.

More than $1 trillion is held by private foundations in the US, according to several estimates. The National Philanthropic Trust estimates another $121 billion is held in DAFs. As long as the funds pay out 5 percent of the assets per year, which is often less than their investment returns, that money can sit in those foundations and funds as long as the contributors wish.

Madoff and the coalition propose a 15-year deadline on money in the vehicles in an effort to accelerate the process of delivering donations to the nonprofits in need.

Additional reform proposals include: limiting the sort of spending that counts under foundations’ 5 percent rule; offering foundations an incentive to give more by waiving a federal excise tax for those that donate in excess of 7 percent of assets in any year; and letting all taxpayers deduct donations on their taxes, and not just those who itemize their returns.

Read more in The Chronicle of Philanthropy, The NonProfit Times, and Bloomberg.