UCLA School of Law

For-Profit Philanthropy criticizes recent developments in philanthropy, arguing that they demonstrate “the unraveling of a pact between elites and the public that fueled half a century of philanthropic achievement.” My review recognizes the achievement of this book, in particular the breadth of its examination, but, of course, also critiques it. The authors argue that recent philanthropic activity by wealthy elites betrays the grand bargain of the 1969 Tax Reform Act that set out the rules for private foundations. I believe this thesis claims somewhat too much. In my view, it does not sufficiently weigh the value of donor privacy and by ignoring other philanthropic vehicles blessed by tax law, both before and after the 1969 Tax Reform Act. For example, Reiser and Dean offer a lengthy treatment of philanthropic LLCs. They lament that these LLCs do not face the same requirements regarding transparency and accountability as do private foundations. I find this comparison misplaced. As the author’s acknowledge, philanthropic LLCs are tax nothings. For income tax purposes, any transfer is treated as coming directly from the donors’ pocketbook. Thus, I believe that the appropriate comparison for a philanthropic LLC is not to a private foundation but to donors who give directly from their resources to operating charitable and other exempt organizations. Our tax law and other laws have not denied secrecy or demanded public accountability from those giving directly, without the use of intermediary entities. As reforms, the authors endorse private ordering and some small changes to the private foundations rules as well as broad systematic reform, such as a return to steeply progressive income tax rates and enactment of a wealth tax. I suggest instead a different change to our tax law – encouraging charitable giving beyond the wealthy members of society who are the focus of the book. As others have suggested, such reforms could take the form of a floor on charitable giving or replacing the deduction with a credit.