Donor Intent and the Failure of the Honor System
| Publication year | 2012 |
| Pages | 12 |
Vol. 25, No. 4. 12. Donor Intent and the Failure of the Honor System
Volume 25 No. 4
July/Aug 2012
INTRODUCTION
The private sector of philanthropy is facing huge challenges today, at a time unfortunately when government resources to assist those in need are shrinking. The assets of charitable foundations in the USA declined by 28% in 2008 according to a study by The Chronicle of Philanthropy. See Daniel J. Popeo, Op-Ed., Freedom of Philanthropy?, n.y. times, Feb. 23, 2009, available at http://acreform.com/files/pdf/Freedom_of_Philanthropy.pdf. This was the biggest drop of the past four decades. The loss to the nonprofit organizations they fund and to society was actually much greater due to the multiplying effect of the charitable dollar. A study by The Philanthropic Collaborative calculated that the $43 billion foundations distributed in 2007 generated identifiable social and economic benefits of $368 billion. See id.
The decline in the value of assets of American charitable foundations is only part of the picture. Recently released IRS figures show that charitable giving declined some 20% in 2008-09. See Editorial, Protecting Charitable giving, deseret news, June 26, 2011.
Charities have come under fire in the eyes of Americans who count the most - those who contribute. Those Americans who contribute include 65% of all households with family incomes below $100,000. A 2007 survey showed that 59% of over 3000 respondents were more concerned than they had been a decade earlier that their charitable donations were not getting to the people who need it the most; 46% said they are more worried today about charity fraud or theft of funds or services. See William Robertson, Donor Intent Revisited, the Washington times, September 28, 2008, available at http://www.washingtontimes.com/news/2008/ sep/28/donor-intent-revisited/?page=1.
A front-burner issue is that the charitable deduction in the tax code has been under fire from President Obama and members of Congress who are looking to find ways to shrink the nation's growing deficit. See Lisa Chiu and Suzanne Perry, Charitable Deduction Could Be Under Threat in Coming Deficit-Panel Talks, the ChroniCle of higher education, Aug. 2, 2011, available at http://chronicle.com/article/Charitable-Deduction-Could-Be/128480/. Among those submitting testimony against the possible impairment of the charitable deduction was Elder Dallin H. Oaks representing Utah's largest, and one of America's largest, charities, the Church of Jesus Christ of Latter-day Saints. Quoting from his testimony: "Some also assert that reductions in the charitable deduction would not cause charitable organizations to suffer financial losses from decreased private gifts since the government would make up some of these losses by additional appropriations." Testimony Submitted by Elder Dallin H. Oaks, Senate Finance Committee Hearing, Oct. 18, 2011, available at http://www.finance.senate.gov/ imo/media/doc/Oaks%20Testimony1.pdf. He then concludes: "[M]ost Americans would not have us relinquish the freedom and diversity of our vigorous private sector of charities in exchange for the assurance that the government would select and manage their functions." Id.
Donor Intent in Jeopardy
Many scholars believe a more serious threat to the health of charitable giving than the tax code is the widespread and growing disregard for donor intent by recipient charities. One law professor begins a leading law review article on the subject:
The cat is out of the bag: Donors are fast discovering what was once a well-kept secret in the philanthropic sector - that a gift to public charity...
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