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ProPublica: Donating Valuables Through Private Foundations Generates Millions In Tax Deductions But Little Public Benefit

Paul Caron
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ProPublica, How the Ultrawealthy Use Private Foundations to Bank Millions in Tax Deductions While Giving the Public Little in Return:

ProPublica (2023)For the ultrawealthy, donating valuables like artwork, real estate and stocks to their own charitable foundation is an alluring way to cut their tax bills. In exchange for generous tax breaks, they are supposed to use the assets to serve the public: Art might be put on display where people can see it, or stock sold to fund programs to fight child poverty. Across the U.S., such foundations hold over $1 trillion in assets.

But a ProPublica investigation reveals that some foundation donors have obtained millions of dollars in tax deductions without holding up their end of the bargain, and sometimes they personally benefit from donations that are supposed to be a boon to the public. A tech billionaire used his charitable foundation to buy his girlfriend’s house, then stayed there with her while he was going through a divorce. A real estate mogul keeps his nonprofit art museum in his guesthouse and told ProPublica that he hadn’t shown it to a member of the public since before the pandemic. And a venture capitalist couple’s foundation bought the multimillion dollar house next to their own without ever opening the property to the public.

Unlike public charities, private foundations are typically funded by a single donor or family, who retain a high degree of control long after receiving a tax break for ostensibly giving their possessions away. “This is the classic problem with private foundations: Substantial contributors can see it as their thing,” said Philip Hackney, a law professor at the University of Pittsburgh and former IRS attorney. “There’s generally not a coalition who cares, other than the family, so there’s nothing to ensure that the assets are used for a particular purpose,” he added.

Prior TaxProf Blog coverage:

About the Author

Paul Caron Avatar
Paul Caron
Paul Caron was named Duane and Kelly Roberts Dean of Pepperdine University School of Law on June 1, 2017. Dean Caron joined the Pepperdine faculty in 2013 after serving as the Dorothy and Leonard Straus Distinguished Visiting Professor of Law in the spring semesters of 2010 through 2013. He served as Associate Dean for Research and Faculty Development at Pepperdine in 2015-2017. Before coming to Pepperdine, he was Associate Dean of Faculty and Charles Hartsock Professor of Law at the University of Cincinnati College of Law.
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