Former Congressman to Fight Foundation Bill

By Elizabeth Schwinn, Ian Wilhelm, Grant Williams,
and Brad Wolverton

In a sign of growing concern among foundations about a controversial legislative proposal that could force them to increase their annual contributions to charity, a group of 18 large funds has hired an influential former member of the House of Representatives to lobby against the measure in Congress.

The Foundation Executives Group — which represents such organizations as the Carnegie Corporation and the Ford Foundation — has retained the Washington law firm Akin, Gump, Strauss, Hauer & Feld, and a senior adviser to the firm, former Rep. Bill Paxon, a Republican House leader in the 1990s, to persuade members of Congress to drop the measure.

The provision on foundation spending is part of the Charitable Giving Act, or HR 7. It would change the federal tax code to require grant makers to exclude salaries, rent, and other administrative expenses from the calculation of the amount the government requires grant makers to provide to charities each year. Foundations say that the result of such a change — more money going to grants — could force them to fire employees, reduce grants to small charities, and even eventually close down because they would have to pay out more money than they would earn as investment income on their assets (The Chronicle, May 29).

“We’re finding that many members of Congress do not have a detailed knowledge of the difference between types of foundations, the way different foundations operate, and how administrative expenses are incurred, so we’re listening to their concerns,” said Mr. Paxon. “And then we are sharing with them data and background on foundations, because it’s important that Congress make decisions based on facts, not on conjecture or anecdotal evidence.”

Added Mr. Paxon: “Nobody’s going to argue that there aren’t some examples of foundations that haven’t done their job the way they should. But what we’re pointing out is that the overwhelming majority of foundations are operated efficiently and effectively, and we want to make sure that the baby is not thrown out with the bath water here.”

Paul Brest, president of the William and Flora Hewlett Foundation, said his organization joined others in retaining Mr. Paxon, even though the Council on Foundations, a membership organization of more than 2,000 grant-making foundations and giving programs, was already lobbying against the House provision.

Mr. Brest declined to say how much his foundation is paying to retain the law firm. He said Hewlett would account for the cost as an administrative expense and include it in its mandatory-payout calculation.

“We have tremendous respect for the Council and are certainly coordinating with it,” said Mr. Brest. But he said his foundation felt it needed its “own voice.”

Getting Mr. Paxon involved, said Alex Wilde, a spokesman for the Ford Foundation, was important because “we felt it would be useful to have a number of different people with different kinds of expertise defending our work.”

Ellen Dadisman, vice president of government relations for the Council on Foundations, said that her organization is talking with Mr. Paxon and that the two have a “very compatible” approach to working with Congress.

Since the legislation was introduced last month, foundation executives have written more than 500 letters to members of Congress urging them to kill the payout provision, said Ms. Dadisman.

“The more we register on the radar of the House Ways and Means Committee [which has jurisdiction over the bill], the better chance we feel we have of getting this provision removed.”

At the same time, Ms. Dadisman added, the Council needs to “be realistic” and must be prepared to consider compromises, such as limits on the kinds of administrative expenses that would qualify toward the payout calculation, if lawmakers are unwilling to scrap the provision.