Cre8tive Philanthropy


Investment and innovation in the for-profit social impact community.

Foundation Flat Tax Proposed

Last month Rep. Chuck Schumer, D-N.Y, proposed a 1.39% flat tax on all foundation investment earnings. The offset would be a lower age, from 70 1/2 to 59 1/2,  for the provision that allows $100,000 tax-free transfers from IRA’s to charitable causes. Additionally, private foundations would now qualify for the tax free transfer, whereas they are currently unqualified.

Private foundations are currently subject to up to a 2% tax on investment earnings but are provided exemptions if their charitable giving reaches certain qualifying amounts. The flat tax would require a tax be paid regardless of their donation levels.

The key question: would this legislation suppress the amount of money going to non-foundation charitable causes? If foundations don’t have an incentive (through tax policy) to give at higher levels, will they? Is the proposed flat tax a tax on wealthy citizens’ private foundations or a tax on charities? What is the likely outcome? How will such a policy impact behavior?


Filed under: Charitable Tax Laws, Foundations, Giving, Philanthropy

Hedge Funds Get in on Impact

From the Hedge Funds Review: A group of foundations is inviting investment managers to nominate themselves to be part of an index of fund managers delivering social and environmental value in addition to financial returns.

Filed under: Foundations, Impact Investing

Activists criticize Gates Foundation securities holdings

As someone who provides impact investment research and consulting services, this blog post on The Chronicle of Philanthropy is fascinating. Investments made by philanthropic organizations are generally more public, and therefore, more open to criticism. Explicitly, this post speaks to the ethical question of whether or not the foundation’s agriculture work in Africa will be used to help create markets for Monsanto’s GM crops. (More details between the relationship between the foundation and Monsanto but that almost smells of self dealing and conflict of interest.)However, there is an underlying tone: Why is a “good” foundation  investing in a “bad” company?

Since charitable and philanthropic organizations are sometimes perceived as ethical beacons, it is assumed their actions will reflect this commitment to “good” and “right” that serve to improve society and the world. Perhaps that is why foundation investment in a questionable company can cause uproar. Foundation assets are, by their nature, linked to their purpose – the money is there to serve that purpose regardless if it is corpus or grant.

For that reason, charitable and philanthropic organizations should be aware of what their investment say about their commitment to their purpose; not for the public’s sake, but for genuine belief in their mission and goals. Every foundation investment does not need to be socially responsible, but there should be a “negative” screening of investments that are out of alignment with the foundation’s core purpose.

Filed under: Challenges, Foundations, Philanthropy

GIIN Investor Spotlight: W.K. Kellogg Foundation

The Global Impact Investing Network (GIIN) interviews Tom Reis, Director of Mission Driven Investing at W.K. Kellog Foundation for their regular Investor Spotlight segment. He provides insight into their mission for impact investment, investment criteria, and implementation of their strategy. He also addresses the challenges and their limitations within the impact investment sector. A recommended read for impact investment ideas and take-aways.

Filed under: Foundations, Impact Investing

Buffet-Gates Pledge: Changing Philanthropy?

The philanthropic and charitable online communities are abuzz with “The Pledge”, as perhaps they should be. An opinion post on the Chronicle of Philanthropy by Pablo Eisenberg raises excellent questions and addresses potential unintended consequences of “The Pledge”. The ultimate AND question: how can “The Pledge” increase giving AND deliver high social impact?

Filed under: Challenges, Foundations, Giving, Philanthropy

University Foundations… just giant academic Hedge Funds?

Communities of well-endowed universities, such as Princeton, are starting to look at these wealthy universities with no-so-rosey colored glasses. Such educational institutions are not often required to pay local or property taxes yet, as the citizens see it, they have investment pools in the billions (even after the losses of the past few years). Some in the Princeton community accuse the university of being a hedge fund with an academic arm. This is a dangerous perception, from a political, regulatory, and social viewpoint. The local, regional, and national view of major endowments and foundations impacts the perception of philanthropic funds of all types. It is important for philanthropic entities to “play fair” and be humble in their generosity – lest we ruin the reputation of philanthropy for all.

Filed under: Foundations, Giving, Philanthropy

Charitable giving holding on, but not because of foundations

Foundation giving declined nearly 9% in 2009. With volitile investment assets, this may be expected. Yet, individual giving remained flat (despite continued high unemployment and a challenging financial climate for most people) and corporate giving actually increased. Considering individual giving comprised 75% of all charitable gifts, this is good news… or at least not bad news. What is concerning is foundation grantmaking declines. As the second leading source of charitable resources, the fact that foundation giving has decreased means additional hardship for charitable organizations seeking to fund meaninful projects.

This decline in giving is unlikely due to a lack of generosity on behalf of foundation management. Foundation tax rules play a big part in the payout amount foundations give on a yearly basis. Additionally, there is a need to preserve some foundation assets. Hopefully, congress reviews and revises the excise tax rules to encourage giving in times of economic hardship – when it’s needed most. At the same time, foundations need to find “alternative” ways to give while growing their resources.

Many foundations are currently looking to PRI’s (Program Related Investments) to do just that. PRI’s are a great way to make the payout requirements, fund worthwhile programs, and retain an investment interest for foundation assets. Smaller foundations may look into forming a PRI program within their foundation as a way to successfully fullfil their mission while ensuring funds are available to charities in difficult times.

Filed under: Foundations, Giving, PRI

Foundation Excise Tax Review

Needed changes may be on the way to change the foundation rules for excise taxes. The Council on Foundations is providing key information to Congress for review. Article here.

Filed under: Charitable Tax Laws, Foundations

The Cre8tive Beginning

Some things start slow, they evolve over time and then – WHAM! – a catalyst ignites rapid change to create a new … well, thing. We all stand at a time, right now, where the “old” ways are falling away; they don’t make sense anymore or just aren’t working. Additionally, the “old-think” ways of fixing our challenges are just creating more problems. Never has there been a time when new thinking has been needed, where innovation in ways and means has been necessary.

The development of this change has been slow, but the catalyst is here. Things are getting bad. For the charitable community, things get tough in recession climates. Foundation giving is down and is likely to stay down in the short-term, state and local governments are cutting funding and grants to not-for-profits, and individual gifts and donations are down. Meanwhile, the demand for the services these charities provide is greater than ever. Many would argue that this is a temporary problem, that once the economy recovers, things will resume to the status quo. First, do we really want the status quo back? Do we want a charitable system that is good when the service demand is low  but cannot deliver when the economy kicks the bucket? Second, are we all set to the delusion that things will revert back to the way they were? Will our government magically wish away the deficits? Will housing rebound back into the stratosphere? Will our average tax rates stay even remotely the same? The abrupt answer is no. So, the charitable world is going to be under some strain unless it begins to change and find a new, economically sustainable model of survival.

For the philanthropists, family foundations, and other benefactors, times are a’ changin’. Many of these generous givers are courageously giving despite the strain and volatility their investment assets are enduring. A few have steped up to the increased demand for funds to support social benefit programs. However, the majority of foundations and “givers” have reduced their giving in line with their asset values. At a time when increased asset valuation volatility appears to be a new norm, this philosophy on giving is just not going to cut it.

So, what are the answers? How do we create more stable and sustainable charitable organizations? How can we build strong foundations who are able to support and enhance the social benefits our communities so desperately need?

The following posts will address the potential answers or (hopefully) pose the right questions to help find good solutions! Perhaps some sort of social-investment marketplace… ?

Filed under: Challenges, Foundations, Philanthropy, Uncategorized

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