How Much Foundations Give Away

LETTERS TO THE EDITOR

To the Editor:

In its annual survey of foundations (“Slow Growth at the Biggest Foundations,” March 23), The Chronicle calculates annual payout on year-end assets instead of average assets for the year (which is what is required by the Internal Revenue Service).

As a result, foundations that have strong asset growth for the year are portrayed by The Chronicle as having a much lower payout rate than what was actually true for the year.

IRS rules not only require that you average your assets to calculate payout, they also give you until the close of the following tax year to satisfy your payout. Alternatively, excess distributions in one year can be carried forward. Thus, assigning a payout number to a particular moment in time may not be entirely accurate, and thus misleading to the reader. For example, under the law, you could have any of these four payout patterns:

Assuming a relatively flat asset balance, all four will have paid out exactly the same amount over the three years but would be reflected differently in the Chronicle report.

We’d like to ask The Chronicle to reconsider the way it portrays foundation payouts.

Roy Clason
Vice President for Strategic Communications
Council on Foundations
Washington

Editor’s note: As noted in the article explaining how the survey was conducted, The Chronicle‘s figures were not designed to show whether the foundations met the federal rules on distributing their assets to charitable causes, but are intended to give a snapshot of the percentage of assets donated in the past year.