#131 Sep/Oct 2003

Shelter Shorts

Foundation Follies I Foundation executives lobbied hard to kill an amendment in the Charitable Giving Act of 2003 that would have forced foundations to spend more of their assets on […]

Foundation Follies I

Foundation executives lobbied hard to kill an amendment in the Charitable Giving Act of 2003 that would have forced foundations to spend more of their assets on charity each year. And they won.

Foundations have long counted their administrative costs toward the average 5 percent of assets that they must spend each year on charity. But the new amendment, Sec. 105 of the act, would have put an end to the practice – and would have made as much as $4 billion available for grantmaking. (See Shelterforce #130.) Rep. Bill Thomas (R-CA) introduced the compromise legislation that killed the proposal, but made sure the new law retained a provision that the foundations liked: a reduction in the tax they pay on investment income.

The Thomas compromise does attempt to reign in some foundation excesses. For example, foundation executives can no longer charge airplane seats that are not coach-fare toward the 5 percent minimum. And compensation above $100,000 to officers, directors and others can no longer be charged toward the 5 percent payout.

But Rick Cohen, executive director of the National Committee for Responsive Philanthropy, blasted the compromise. “Unfortunately the new version of Sec. 105 is likely to open more loopholes for abuse than it closes…[It will] tempt foundations to disguise even more of their overhead as if it were charitable spending…and encourage foundations to spend more money on categorizing their expenses and less on charitable grants. The upshot will be less foundation accountability and less grant money for charity instead of more. What a bad idea.” (NY Times, 9/9/03 and www.ncrp.org.)

Foundation Follies II

A study of more than 200 foundations revealed that in a single year these charitable institutions spent nearly $45 million on “trustee fees,” most of which went to their boards of directors, not to nonprofit organizations in need. In addition the study found that, despite these astronomical payments, most trustees spend little time on foundation business.

Foundation Trustee Fees: Uses and Abuses was published by the Center for Public and Nonprofit Leadership at the Georgetown Public Policy Institute. The study calls for limiting trustee fees to no more than $8,000 per trustee annually, a prohibition on counting trustee fees toward the annual payout (see Foundation Follies I above) and greater monitoring of the nonprofit sector by the IRS and state attorneys general, funded in part by the excise-tax that private foundations pay.

The study, by Christine Ahn, Pablo Eisenberg and Channapha Khamvongsa, is available at www.ncrp.org/final_trustee_fee_pdfx.pdf or by contacting the center at 202-362-0256.

This Land is His Land

Bryce Thompson IV is one of New Jersey’s most successful land speculators and has been ubiquitous at state auctions of preserved farmland. Thompson told one New Jersey newspaper that it’s nothing more than a hobby for him. “I get a kick out of it…Some people buy stamps, some people have art.”

Members of the local farming community are not amused. Thompson bids up the price of land, and they suspect he plans to build estates posing as “farmhouses” on the property. And they point to the fact that Thompson has already complained to state officials about limits on the size of the house one can build on a preserved farm. He also doesn’t like the rule that requires a real farmer to live in any new home built on the property. (Newark Star-Ledger, 8/19/03)


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