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Boisi Center for Religion and American Public Life

Promoting a Closer Alignment Between Philanthropy and the Public Good

Boisi Center for Religion and American Public Life

On February 9, Boston College Law School professor Ray Madoff led a discussion on the intersection of charity and taxes, exploring the benefits to the American public good. An expert in philanthropy policy, estate taxes and comparative inheritance law, Madoff began her talk by discussing the history of some of the largest philanthropic institutions in America. She said these organizations benefited from federal tax deduction policies, which in turn, may short the American net common good due to the loss of substantial amounts of tax dollars. 

The rise of donor-advised funds (or DAFs) further contributes to the disconnect between philanthropy and the public good, according to Madoff. DAFs are relatively new investment vehicles, run by banks and investment firms for companies or individuals to donate money to charities. Instead of giving directly to charities, donors are able to give to DAFs, which then invest the money and collect fees on investment performance until the money is ultimately distributed to charity. One of Madoff’s major concerns about DAFs is that donors are able to claim full and immediate tax benefits upon giving to a DAF, but the money donated may not be distributed to charities for many years. 

Madoff also noted that private foundations benefit from favorable philanthropic tax policies. For instance, private foundations are only required to spend 5 percent of the value of their annual total worth each year to be considered a philanthropic organization, and this spending may include staff salaries. DAFs are not required by law to spend anything at all. 

Madoff referred to these issues as “perpetuity over charity” – the political tendencies to keep philanthropic foundations alive rather than to increase funding to charities. Consequently, many corporations and private foundations benefit more from charitable tax deductions than what the public receives in philanthropy.