Changes at Pew: Columnist’s Response

To the Editor:

Rebecca Rimel’s letter (“Change in Pew’s Structure Is in the Public Interest,” January 8) in response to my opinion article (“Pew’s Shift to Charity Status Goes Against What Is Best for the Public,” December 11) deserves some comment. Ms. Rimel contends that the IRS’s decision to grant the Pew Charitable Trusts public-charity status was based on the law because the foundation met the “public support” test. She further claims that I was wrong in stating that the decision was based on a legal technicality.

That the IRS’s decision was based on its interpretation of the law doesn’t gainsay the fact that it amounts to what I called legal gimmickry.

In its nature, board, and operations, Pew currently is no more a public charity than its other large foundation colleagues like Ford, Rockefeller, and Carnegie. The only difference is that Pew was created from seven trusts formed by Pew family members, not by a solitary funding source.

I did err when I said that two or three trusts held by family members under one umbrella might qualify as a public charity. Under the public-support test, at least five such trusts are needed for the group to qualify as a public charity.

Ms. Rimel asserts that Pew family members will be a minority on the Trusts’ board by the end of 2004, implying that the family will no longer be in control of the public charity. That is not accurate. The new foundation will be a membership corporation consisting of nine founding members, six of whom are members of the Pew family, according to an article by Don Kramer in the Septem-ber 2003 edition of Nonprofit Issues. This arrangement, he says, will allow “ultimate control to be kept within the Pew family.” These founding members will serve on the foundation Board of Directors and will elect nonmember directors, but they will also have the power to remove these directors. This governance structure does not meet the test that a public-charity board should be broadly representative of the public.

When I called Pew to ask questions about board membership and other issues, the communications director told me she could not answer any questions about Pew’s conversion to a public charity because Ms. Rimel was taking all those questions. I tried several times to reach Ms. Rimel, but she did not return my calls.

Ms. Rimel also notes that Pew has promised to sustain its current 5.25-percent payout rate. That does not invalidate my observation that, as a public charity, Pew will no longer be required to distribute a minimum amount of its net assets for charitable purposes. What Ms. Rimel failed to mention was that slightly less than 4 percent of Pew’s payout in 2001 appears to have gone to nonprofit organizations, according to the foundation’s informational tax return. The rest was spent on administrative costs.

Pablo Eisenberg
Senior Fellow
Georgetown University Public Policy Institute
Washington