No Transparency, No Clue

I live in New Hampshire, where presidential candidates more or less take up residence for the year before our primary. They’re all around us now. Trust me. Come December I will half expect to find N.J. Gov. Chris Christie shoveling snow from our front steps. (He’s very good with storms, they say.)

So yes, my neighbors and I are a bit jaded about seeing presidential candidates – but we also take our role as early voters seriously. I try to meet every candidate in my party, not to mention a few from the other side. And part of my research includes looking at each candidate’s charitable giving, a natural interest of mine. How much does each candidate donate, and to whom? I think it’s important to know. Charitable giving is a reflection of the candidate’s values.

Which leads me to a recent story by Olivia Nuzzi in the Daily Beast. (Full disclosure: I spoke with Nuzzi as she did her research, and I’m quoted within the story.) Nuzzi looked into longstanding claims by Republican candidate Carly Fiorina that she is the chair of an entity called “The Fiorina Foundation.” Nuzzi discovered that, in fact, there’s no such thing as the Fiorina Foundation. Rather, Ms. Fiorina is apparently referring to a donor-advised fund (DAF) she and her husband established at Ayco Charitable Foundation, a DAF-sponsoring organization affiliated with Goldman Sachs.

Those reading Nuzzi’s article who are unfamiliar with charitable giving vehicles jumped to the conclusion that this is an outrageous misrepresentation by Fiorina. There’s no such entity as the Fiorina Foundation, they say – and, yes, they’re technically right. But given that donor-advised funds largely function like private foundations, I’m not particularly upset by what Fiorina had been saying, seeing her words as an unfortunate, but not egregious, act of misrepresentation.

Others have drawn from the article that Fiorina is a hypocrite, because many grants from Ayco (though presumably not from Fiorina’s donor-advised fund) have gone to Planned Parenthood, an organization that Fiorina has disparaged and pledged to defund. Here, the criticism is even less warranted. These critics don’t understand how donor-advised funds work – that each fund is effectively controlled by its donors, and it’s unfair to expect Donor A to have any influence over what Donor B does with her fund.

But the story does point out the utter lack of transparency around donor-advised funds. We don’t know how much Carly Fiorina has in her fund, nor do we know how much she has distributed, or to whom. In fact, we don’t know if she’s distributed a single dollar – and, given that federal law governing donor-advised funds doesn’t require any distribution whatsoever, she may still be waiting to make her first grant. We just don’t know.

Because of the Supreme Court’s 2010 ruling in the Citizens United case, the public has already lost the ability to know which massive donors are underwriting the various candidates. Now, as more politicians and public figures do their charitable giving through donor-advised funds, we are losing track of the candidates’ philanthropy as well.

Traditionally, we’ve learned about politicians’ charitable giving from their personal tax returns. Tax returns have revealed, for example, that the Obamas are quite generous and partial toward charities that support veterans; others, meanwhile, are strikingly ungenerous. Extremely wealthy politicians, like former New York City mayor Michael Bloomberg, do the bulk of their giving through private foundations, whose tax returns (including each and every grant) are open for public review.

But donor-advised funds, unlike private foundations, are housed at what are technically public charities. Public charities are allowed to keep the names and activities of their largest donors private. The notion is that there are trustees overseeing these institutions who will keep the public’s interest at heart, and that, unlike private foundations, the donors don’t retain unreasonable control. Strange as it may seem, donor-advised fund sponsors like Ayco and Fidelity Charitable have the same public charity status as a Boys and Girls Club or a soup kitchen. That means that DAF donors can have complete anonymity – even though they have almost complete discretion on how their funds operate.

So all we know about Carly Fiorina’s philanthropy is that she apparently has a donor-advised fund. We don’t know how much she contributed to the DAF. We also don’t know how much she’s given away, or to whom.

Nor, for that matter, do we know that information for the 200,000+ other Americans who have donor-advised funds and maintain control over the $54 billion or so these funds contain. We, as taxpayers, through the charitable deduction, have subsidized the donations that created these funds. We have further subsidized these funds by not taxing their capital appreciation.

You would think we should have the right to know what’s going on with those funds, and to ensure that the money is actually going out to good causes. But we don’t, even when the person controlling the fund is running for president of the United States.

Copyright Alan Cantor 2015. All rights reserved.