America's Foundations: Who's Giving What

Philanthropy is the engine that powers much of the nonprofit sector. The Philanthropy & Grantmaking category (NTEE T) includes 104,351 organizations holding a combined $1.48 trillion in assets and generating $136.7 billion in annual revenue. These are the foundations, donor-advised funds, and giving vehicles that move money from donors to causes — and increasingly, they are the subject of intense debate about whether that money moves fast enough.

The Three Types of Philanthropic Vehicles

The philanthropy category contains three fundamentally different types of organizations, each with distinct legal structures, tax rules, and giving patterns.

Private Foundations

Private foundations are the classic philanthropic vehicle. Funded by a single individual, family, or corporation, they are required to distribute at least 5% of their net investment assets annually in "qualifying distributions" — grants, program-related investments, or reasonable administrative expenses. The largest include:

• Bill & Melinda Gates Foundation — $78.7B in assets (Seattle, WA). The Gates Foundation Trust, which funds the foundation, holds an additional $153B, bringing the total Gates philanthropic endowment to approximately $231.7 billion — by far the largest philanthropic fortune in history
• Lilly Endowment — $79.9B in assets (Indianapolis, IN). Funded by the Lilly pharmaceutical fortune, it's the second-largest foundation by assets and focuses primarily on religion, education, and community development in Indiana
• Ford Foundation — $17.5B in assets (New York, NY). One of the most influential foundations in history, focused on inequality and social justice globally
• Robert Wood Johnson Foundation — $13.4B in assets (Princeton, NJ). The nation's largest health-focused philanthropy
• J. Paul Getty Trust — $13.0B in assets (Los Angeles, CA). Focused on visual arts and cultural heritage
• William & Flora Hewlett Foundation — $14.2B in assets (Menlo Park, CA)
• Gordon & Betty Moore Foundation — $11.5B in assets (Palo Alto, CA)
• Bloomberg Philanthropies — $12.1B in assets (New York, NY)
• Howard Hughes Medical Institute — $29.5B in assets (Chevy Chase, MD). Technically a medical research organization, but functions as one of the largest science philanthropies
• Walton Family Foundation — $7.7B in assets (Bentonville, AR). Walmart heirs' primary philanthropic vehicle

The 5% Payout Rule — and Its Controversy

The 5% minimum distribution requirement, established by the Tax Reform Act of 1969, was intended to ensure foundations don't simply accumulate wealth indefinitely. But the rule has become one of the most debated aspects of philanthropy law:

• Administrative expenses count: The 5% includes the foundation's own operating costs — staff salaries, office rent, travel, and investment management fees. Some foundations spend 1-2% on administration, meaning only 3-4% reaches grantees
• Investment returns exceed payouts: In most years, foundations' investment returns significantly exceed 5%, meaning the endowment grows despite distributions
• Perpetuity vs. spend-down: Most foundations are designed to exist in perpetuity. Critics argue this means today's social problems are being underfunded to preserve wealth for future generations
• Reform proposals: Senator Angus King and others have proposed increasing the minimum payout to 7% or requiring that administrative expenses not count toward the minimum. None have passed

Some foundations have embraced the spend-down model. The Atlantic Philanthropies (founded by Chuck Feeney) spent down its entire $8 billion endowment by 2020, closing its doors after distributing everything. The Aaron Diamond Foundation similarly spent down in the 1990s, funding groundbreaking AIDS research.

Community Foundations

Community foundations serve specific geographic regions, pooling donations from many donors to address local needs. There are approximately 800 community foundations in the United States, collectively holding over $100 billion in assets. The largest include:

• Silicon Valley Community Foundation — $12.3B in assets. Driven by gifts of tech company stock, particularly from Facebook/Meta employees after the 2012 IPO
• Tulsa Community Foundation — $4.5B in assets
• Greater Kansas City Community Foundation — $4.9B in assets
• The New York Community Trust — $3.5B in assets
• The Chicago Community Trust — $3.8B in assets
• The Cleveland Foundation — $3.1B in assets (the nation's first community foundation, established 1914)
• Oregon Community Foundation — $2.7B in assets

Community foundations play a unique role: they serve as philanthropic infrastructure for entire regions, managing donor-advised funds, scholarship programs, and pooled funds for community priorities. They often coordinate disaster relief, address local issues, and connect donors with causes. Many also host fiscal sponsorship programs that allow emerging nonprofits to receive tax-deductible donations before obtaining their own 501(c)(3) status.

Donor-Advised Funds (DAFs)

DAFs have emerged as the fastest-growing philanthropic vehicle in American history. Donors contribute to a DAF, receive an immediate tax deduction, and then recommend grants from the fund over time — with no deadline or minimum distribution.

The appeal is powerful: no need to establish a private foundation, no 5% distribution requirement, no annual 990-PF filing, professional investment management, and the ability to give anonymously. DAFs have exploded in popularity:

Fidelity Charitable alone processes $19 billion in contributions in a single year — more than the total revenue of the entire Religion category (199,983 organizations, $28.9B). It is, by revenue, the single largest nonprofit in America after Kaiser Foundation Health Plan.

The DAF Controversy

Critics argue that DAFs have created a massive loophole in the charitable giving system:

• Tax deduction without distribution: Donors claim deductions immediately but face no obligation to ever recommend grants. Money can sit indefinitely
• No minimum payout: Unlike private foundations (5% minimum), DAFs have zero distribution requirements. Some accounts remain dormant for years
• Opacity: When a DAF makes a grant, the receiving charity sees "Fidelity Charitable" as the donor, not the individual who recommended the grant. Donor anonymity is the default
• Wealth accumulation: DAF assets have been growing faster than distributions, meaning more money is sitting in accounts than flowing to charities
• Fee generation: DAF sponsors (often affiliated with financial services firms) charge investment management fees on DAF assets — creating a financial incentive to retain assets rather than distribute them

Defenders counter that DAF payout rates average 20-25% annually (far exceeding the 5% foundation minimum), that DAFs democratize philanthropy by making sophisticated giving vehicles accessible to middle-class donors, and that the flexibility of timing allows donors to give strategically during crises or when their giving can have maximum impact.

"DAFs are either the greatest innovation in American philanthropy or the greatest tax shelter — depending on whom you ask." — Ray Madoff, Boston College Law School

DAF Reform Proposals

Several legislative proposals have emerged:

• ACE Act (Accelerating Charitable Efforts): Proposed by Senators King and Grassley, would require DAFs to distribute funds within 15 years of contribution or lose the charitable deduction
• 5% minimum distribution: Applying the private foundation payout rule to DAFs
• Transparency requirements: Requiring DAF sponsors to disclose individual account-level data, including dormant accounts

Impact Investing and Program-Related Investments

A growing trend in foundation philanthropy is impact investing — using a foundation's endowment not just for financial returns but to advance its mission. Traditionally, foundations invested their endowments in conventional portfolios (stocks, bonds, real estate) and used only the 5% distribution for charitable purposes. This meant 95% of foundation assets were invested without regard to mission.

The impact investing movement challenges this by deploying endowment capital into:

• Program-related investments (PRIs): Below-market-rate loans and equity investments in mission-aligned organizations. PRIs count toward the 5% payout requirement
• Mission-related investments (MRIs): Market-rate investments in sectors aligned with the foundation's mission (e.g., a health foundation investing in biotech, an environmental foundation investing in clean energy). MRIs don't count toward the 5% but align the full endowment
• ESG screening: Excluding investments that contradict the foundation's mission (e.g., a health foundation divesting from tobacco)

The Ford Foundation made headlines in 2017 by committing $1 billion of its endowment to mission-related investments. The Heron Foundation has committed to investing 100% of its assets for mission. The McKnight Foundation, Kresge Foundation, and others have significantly increased their impact allocations.

Geographic Concentration

Philanthropic organizations are heavily concentrated in a handful of states and metropolitan areas:

• New York: Home to the Ford Foundation, Bloomberg Philanthropies, Carnegie Corporation, Open Society Foundations, and hundreds of family foundations. New York City is the undisputed capital of American philanthropy
• California: Silicon Valley's wealth has created a new generation of mega-foundations — Hewlett, Moore, Packard, Chan Zuckerberg Initiative, and the Silicon Valley Community Foundation. The San Francisco Bay Area has the highest concentration of philanthropic assets per capita
• Washington State: Home to the Gates Foundation ($231.7B trust), the largest philanthropic entity in history, plus the Bezos Day One Fund and the Paul Allen estates
• Indiana: The Lilly Endowment ($79.9B) makes Indianapolis a major philanthropic center despite the state's modest population
• Texas: Growing philanthropic hub with the Meadows Foundation, Moody Foundation, and increasing tech-wealth foundations in Austin
• Massachusetts: Boston is home to numerous foundations and the Fidelity Charitable complex

This concentration means philanthropic dollars disproportionately originate from — and often flow back to — wealthy coastal regions. Rural communities and the South tend to be underserved by foundation philanthropy, even though they often have greater need.

MacKenzie Scott's Giving Model vs. Traditional Foundations

No discussion of modern philanthropy is complete without examining MacKenzie Scott's unprecedented approach to giving. Since her divorce from Jeff Bezos in 2019, Scott has donated over $16 billion to more than 1,600 organizations — making her the fastest large-scale philanthropist in history.

Scott's approach breaks nearly every convention of traditional foundation philanthropy:

• Speed: Traditional foundations take years to develop strategies, hire staff, and begin grantmaking. Scott began distributing billions within months
• Unrestricted giving: Most of Scott's grants are unrestricted — organizations can use the money however they see fit. Traditional foundations typically fund specific programs with detailed reporting requirements
• No application process: Scott's team identifies organizations through research rather than soliciting proposals. This eliminates the enormous grant-writing burden that consumes small nonprofit resources
• Trust-based: Scott's model trusts organizations to know their own needs. Traditional philanthropy often imposes external priorities
• No foundation: Scott gives directly rather than through a perpetual foundation. She has said she intends to give away the majority of her wealth during her lifetime
• Equity focus: Scott has disproportionately funded organizations led by people of color, serving low-income communities, and working in historically underfunded areas

"We are attempting to give away a fortune that was enabled by systems in need of change. Calling attention to the systems and the organizations trying to change them is what I'm trying to do." — MacKenzie Scott

Scott's model has sparked intense debate. Supporters call it a revolution in philanthropy — fast, trusting, equitable, and oriented toward systemic change. Critics worry about the concentration of power in a single individual's giving decisions, the lack of transparency (Scott doesn't maintain a public database of grants), and the sustainability of organizations that receive one-time mega-gifts without ongoing funding commitments.

Foundation Giving Patterns

The major foundations shape the nonprofit landscape through their grantmaking priorities:

• Gates Foundation: Global health (malaria, polio, vaccines), U.S. education reform, poverty alleviation. The largest private foundation grantmaker by annual distributions
• Ford Foundation: Inequality, social justice, democratic governance, creativity. In 2020, Ford made headlines by issuing $1 billion in social bonds to accelerate grantmaking during the pandemic
• Robert Wood Johnson Foundation: Health equity, healthy communities, health system transformation
• Lilly Endowment: Religion, education, and community development — primarily in Indiana
• Bloomberg Philanthropies: Public health, environment, education, government innovation, arts

Foundation grants flow disproportionately to large, established organizations with professional development staff and track records. This creates a challenge for smaller nonprofits that lack the capacity to compete for major foundation funding. Studies show that foundations overwhelmingly fund organizations with budgets over $5 million, leaving the vast majority of nonprofits (those under $1 million) largely unfunded by institutional philanthropy.

The Wealth Concentration

The philanthropy category illustrates extreme wealth concentration:

• The top 20 foundations and DAF sponsors hold over $500 billion in assets — a third of the entire category's total
• The top 100 hold over $800 billion — more than half
• The remaining 104,000+ organizations share the other half
• The median private foundation has assets of approximately $1-2 million
• Over 80% of private foundations have no paid staff — they are managed by family members or board volunteers

This means the philanthropy category is really two worlds: a handful of mega-foundations and DAF sponsors managing billions, and tens of thousands of small family foundations giving away a few hundred thousand dollars per year. Both serve important purposes, but the policy debates are primarily driven by the giants.

Looking Ahead

Philanthropy is at an inflection point. Several forces are reshaping the sector simultaneously:

• DAF growth: Donor-advised funds continue to grow faster than any other philanthropic vehicle, raising fundamental questions about distribution speed and transparency
• Tech wealth: The next generation of mega-foundations will be funded by tech fortunes — the Chan Zuckerberg Initiative ($100B+ pledged), the Bezos estates, and others not yet created
• Spend-down movement: More foundations are considering time-limited existence rather than perpetuity
• Trust-based philanthropy: Following Scott's model, more funders are shifting to unrestricted, multi-year grants
• Racial equity focus: The post-2020 reckoning has pushed philanthropy to examine who receives funding and who makes decisions
• Legislative pressure: DAF reform, payout rate increases, and charitable deduction changes are all actively debated in Congress

With $1.48 trillion in assets, the philanthropy category has enormous capacity to drive change. The question — increasingly asked by policymakers, grantees, and the public — is how quickly and effectively that capital reaches the communities that need it. The answer will define American philanthropy for the next generation.