Careful What You Wish For: House GOP Pushes Philanthropy Reform to Punish Liberal Donors

Careful What You Wish For: House GOP Pushes Philanthropy Reform to Punish Liberal Donors

After decades of little to no change to the laws governing philanthropic giving, Congress has finally worked up an appetite for reform. The only problem: It’s all in service of partisan politics. 

Since the House Ways and Means Committee’s request for information on the “political activities” of tax-exempt charitable organizations last August, members of Congress have spent the better part of a year rattling the philanthropy establishment by repeatedly signaling their intentions to investigate what they characterize as the improper use of 501(c)(3) funding.

“Congress may need to consider closing growing loopholes that allow the use of tax-exempt status to influence American elections,” that initial letter read. “Additionally, we are concerned about the political activities that 501(c)(3) organizations may be engaging in, the relationships between 501(c)(3) and 501(c)(4) organizations, and the role of super PACS in this financial ecosystem.”

Now, as of last month, a raft of new bills are on the table to begin delivering on what the Ways and Means Committee portentously called a “potential need for legislative action.” Their purported aim: more transparency and stiffer guardrails around how tax-exempt money moves to politics-adjacent causes.

Is this what good-faith philanthropy reform advocates have long hoped for? Are we headed for a new era of transparency in philanthropy, an era of common-sense, fair-shake improvements to a creaky regulatory apparatus that underwent its last major update circa 1969

In a word, no. This supposed drive for reform isn’t actually about making charitable giving less opaque and charitable regulations less dysfunctional. It’s about putting the fear of God and the IRS into funders that Republican politicians view as backing the woke left.

This was clear from the get-go. That initial request for information went out of its way to name-check progressive-aligned funders and intermediaries like the Wyss Foundation, the New Venture Fund and the Sixteen-Thirty Fund. It also leaned heavily into allegations, popular among right-wing, follow-the-money types, that Mark Zuckerberg and Priscilla Chan’s provision of over 400 million “Zuckerbucks” to aid election administration in 2020 was intentionally tailored to aid Democratic races. 

Since October 7, 2023, the GOP’s self-styled nonprofit watchdogs have also made the most of a potent new avenue for attack: going after supposed donors to the pro-Palestinian protest movement, foreign and domestic. Several of the new proposed bills, like the Foreign Grant Reporting Act (H.R.8290) and the American Donor Privacy and Foreign Funding Transparency Act (H.R.8293), are aimed specifically at exposing and stemming what the House GOP sees as “anti-American” donations. (Another bill, actually called the “End Zuckerbucks Act,” is even more on-the-nose.)

Last month, alongside its new proposed bills, the House GOP doubled down by launching a probe into “the sources of funding and financing for groups who are organizing, leading and participating in pro-Hamas, antisemitic, anti-Israel and anti-American protests with illegal encampments on American college campuses.” 

Gesturing at “malign influence” and “national security implications,” Committee on Oversight and Accountability Chairman James Comer (R-KY) and Committee on Education and the Workforce Chairwoman Virginia Foxx (R-NC) sent a missive to the Treasury Department requesting any Suspicious Activity Reports connected to a lengthy list of nonprofit groups and philanthropic funders. On the list are major names in philanthropy: Open Society Foundations, the Rockefeller Brothers Fund, the Libra Foundation, the Tides Foundation, Solidaire — even the Gates Foundation.

You don’t need to like what those grantmakers back, or agree with the protests they are accused of materially supporting (though at least some have denied that), to know that this sets a troubling precedent. Seeking to weaponize the power of the state to attack the funding of people saying things you don’t like isn’t a great look for self-styled defenders of free speech. Nor does it sit right when the very same legislators have, in the past, balked at what they said were attempts to do something similar to organizations in their own camp.

But beyond all the hyper-partisanship here, the sad upshot is that this is making the philanthropy reform we do need less likely to happen. And that’s true whether or not these probes and proposals end up getting anywhere.

The philanthropy establishment has already been pushing back. The new spate of bills — specifically H.R. 8290 and H.R. 8293 — “would reduce charitable giving, create undue burden for many charitable organizations, and require new mandatory public disclosure that could mean real danger for individuals and communities in the U.S. and around the world,” read a joint May 28 letter signed by the Council on Foundations, Independent Sector, the National Council of Nonprofits and United Philanthropy Forum. 

As we’ve written before, major sector groups have traditionally led the charge against any serious attempts to rewrite philanthropy’s ground rules, which, in recent years, amounted only to one proposed new law: the Accelerating Charitable Efforts (ACE) Act. It’s unsurprising to see those interests lining up against this new thrust for reform. What’s different this time is that they have firmer ground to stand on: They’re rightly opposing what amounts to a targeted crusade against donors the GOP doesn’t like.

The irony is that despite their hyper-partisan intent, the House GOP’s proposals flag some real issues in need of attention from lawmakers. The American Donor Privacy and Foreign Funding Transparency Act, for instance, gestures at the sector’s weak and easily bypassed transparency requirements, while the End Zuckerbucks Act, ridiculous name aside, calls out some legitimate concerns like billionaire donor sway and the vast legal gray areas around 501(c)(3) giving for “civic engagement.” (DAF reform doesn’t get as much love, likely because there’s no political gain in going after DAFs themselves — which both sides use — only in going after their more progressive-leaning sponsors.)

Despite all that, the House’s current reform push doesn’t do the cause of wider philanthropy reform any favors. And that’s because even assuming America’s democratic institutions survive a potential Trump redux, the GOP’s partisan crusade is confirming the philanthropy establishment’s worst fears — that a draconian congressional witch hunt will be the result when sector infighting and critiques of the status quo get too loud. It’s bolstering the establishment’s case against any and all major reforms, and lessening the chances that good-faith reform proposals will ever become reality. 

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