7 min read

Given the growing number of harsh progressive, populist, and just plain rule-of-law critiques about so much of unelected, unaccountable, and tax-favored establishment philanthropy, there may be a desire on the part of policymakers to aggressively examine some or all of it again.

With varying levels of intensity, there have long been harsh critiques of tax-incentivized and -preferred philanthropy in America—including, among other things its anti-democratic nature, its “warehousing” of assets, its use of those assets for self-interested purposes on the part of donors, and its politicization of the actual charity that’s supposed to be incentivized and preferred.

These critiques have come from across the ideological spectrum and been offered by journalists, commentators, analysts, and foundation and other nonprofit professionals—and, sometimes, policymakers in the U.S. Congress. These policymakers, of course, are in a position to alter some practices of philanthropy by merely asking questions about it, as well as to outright alter the underlying legal structure of nonprofitdom if and when they might think warranted after hearing the answers (or not) to those questions.

Progressive and populist, and academic and popular, critiques of grantmaking certainly seem to be on the rise of late. These is an increasing intensity to them. Congressional curiosity, it sure seems safe to say, may soon be back, too. It may thus be worth looking at some past, and potential future, leaders of Congressional investigations of Big Philanthropy.

Resolutions and referrals, foundations and fists

In 1951, picking a non-random point at which to begin the historical refresher, U.S. Rep. Eugene E. Cox, a Democrat of Georgia, introduced a resolution in the House of Representatives to conduct an investigation of tax-exempt philanthropy, including grantmaking foundations. It was referred to the Rules Committee and never presented to the full House.

The conservative Cox was apparently kind of a fighter, however. Two years prior, then 69 years old, he got in a fist fight on the House floor with 83-year-old fellow Democrat Rep. Adoph J. Sabath of Illinois, during debate over a national housing bill.

In 1952, Cox took another swing in the effort to investigate philanthropy, introducing his resolution again. The Rules Committee reported it out in March, and it was debated on the House floor in April. It passed, 194-158. One hundred Democrats and 94 Republicans approved the measure, which created the U.S. House Select Committee to Investigate Tax-Exempt Foundations and Comparable Organizations.

Cox died in December 1952, though, before the committee issue its report. It did so in January 1953, but the 15-page product was widely considered to be unimpressively shallow, given Cox’s death and too short a time period to complete the necessary work.

A start-over

The November 1952 elections, which saw Gen. Dwight D. Eisenhower elected President, had also shifted party control of the next Congress from Democrats to Republicans. Later in 1953—referring to the work of the Cox Committee as “unfinished business”—Rep. B. Carroll Reece, a Republican of Tennessee, introduced a resolution to basically start over and conduct a new, more-thorough investigation. The Rules Committee reported out Reece’s resolution, which was considered by the full House in July.

It passed, 209-163. One hundred forty Republicans and 69 Democrats voted for the investigation. The probe was again conducted by a House Select Committee to Investigate Tax-Exempt Foundations and Comparable Organizations, chaired by Purple Heart recipient Reece, which released its findings in 1954.

The Reece Committee’s “main contribution was to expose instances in which the promotion of political ends, favored perhaps by foundation managers, had been disguised as charitable or educational activity,” according to its general counsel René A. Wormser’s 1958 book Foundations: Their Power and Influence. “Political activity of this kind endangers the future of the foundation as an institution.

“The often stormy hearings of the Reece Committee stimulated a widespread reexamination of the goals and methods of the major foundations,” Wormser continues. “In the resulting public discussion, even some of the most stalwart supporters of the criticized foundations were obliged to admit certain deficiencies; indeed some major changes in personnel and in operating principles ensued.”

“Every flea”

As part of that reexamination, beginning in 1955—when Democrats regained control of Congress—the U.S. House Select Committee on Small Business investigated tax-exempt, charitable foundations. Since chaired by crusading New Deal Democrat Wright Patman of Texas, it was and is known as the Patman Committee.

“Down in Houston,” the populist Patman once said, “there are some neighborhoods so rich that every flea has his own dog. The Rockefellers are like that. Every one of them has his own foundation.”

The Patman Committee issued a report in two lengthy installments in late 1962 and 1963. Warning of “possible exploitation of the people’s respect and admiration for charitable acts and gifts,” it aggressively recommended a moratorium on the granting of tax-exemption for foundations.

Later in the 1960s, Congress both investigated and legislated. Among other things, the Tax Reform Act of 1969—still the basic structural framework of nonprofit law in America—defines that which is legally considered a tax-preferred private foundation and puts conditions on that tax preference, including limiting the kind of political involvement that gave rise to such worry about them and their tax status in the preceding years.

Congress was controlled by Democrats when the law was passed and this structure was created. In August 1969, it passed in the House, 395-30—with 219 Democrats and 176 Republicans voting for it. In December, it passed in the Senate, 69-22—with support from 51 Democrats and 18 Republicans. It was signed by Republican President Richard M. Nixon on December 30.

“In recent years, private foundations had become increasingly active in political and legislative activities,” according to the General Explanation of the Tax Reform Act of 1969, prepared by the staff of Congress’ Joint Committee on Internal Revenue Taxation. “In several instances called to Congress’ attention, funds were spent in a ways clearly designed to favor certain candidates. In some cases, this was done by financing registration campaigns in certain areas.”

As the staff explanation summarizes it, “Congress determined that a tax should be imposed upon expenditures by private foundations for activities that should not be carried on by exempt organizations (such as lobbying, electioneering, and ‘grass roots’ campaigning) ….”

“Tax-free foundations were brought under much closer Federal scrutiny,” according to Nixon’s signing statement, “although Congress wisely rejected provisions that would have hampered legitimate activities of the voluntary sector. At the same time, we must recognize that congressional consideration of this matter reflected a deep and wholly legitimate concern about the role of foundations in our national life.”

On its path to passage in Congress, the Tax Reform Act and those matters it investigated and tried to address had been considered by the Senate Finance Committee, chaired by Sen. Russell B. Long of Louisiana, and the House Ways and Means Committee, chaired by Arkansas Rep. Wilbur Mills. “PowerfulWaysandMeansCommittee” has long been used as essentially one word in Washington and, at the time, Mills was often called “the most powerful man in Washington.”

Cox, Reece, Patman, Long, and Mills were all of strong personality, influentially and effectively wielded in policy development and enactment. They may have a worthy successor or two, and in this same policy context.

Potential, pushup-practicing president pro tempore from the prairie

Both house of Congress are now controlled by Democrats. The current Senate Finance Committee chair is Oregon Sen. Ron Wyden, under the leadership of whom the committee has shown no real interest in examining much goings-on in establishment philanthropy. The current House Ways and Means Committee chair is Massachusetts Rep. Richard Neal, under whose leadership the committee has shown little interest in looking at Big Philanthropy, as well.

Many believe control of Congress may shift after the 2022 elections, as it did in the 1952 elections just before the Reece Committee’s creation kick-started Congressional curiosity about the country’s philanthropic activity. Were this to occur, of course, either house or both houses of Congress could perhaps create an independent or “select-committee” mechanism to do another, Reece-like investigation, which could be led and staffed by those most interested in and qualified to do so.

Among the existing standing committees, the Senate Finance Committee’s current ranking member is, and therefore at least one of its potential future chairmen may be, Sen. Mike Crapo of Idaho. He’s shown minimal inquisitiveness about big grantmaking in America, at least to date. In 2009, he was one of seven Senators to join the Senate Philanthropy Caucus—put together the previous year along with a partner effort in the House, as a news release from Crapo’s office put it, “to inform fellow Senators and Representatives about the important role that foundations play across the country.” The caucuses’ creation was urged by the Council on Foundations.

Longtime previous Finance Committee chair Sen. Charles Grassley of Iowa has shown an inclination to ask tough questions about the nonprofit sector, including those who give to support it. Most recently, for example, Grassley is co-sponsor of a pending bill to increase giving through tax-exempt donor-advised funds and by tax-exempt foundations.

Were the respected Grassley to win re-election this coming November, he would again become the Senate’s president pro tempore—the highest-ranking member by seniority of the majority party—and likely (re-)chair the Judiciary Committee. He still serves on the Finance Committee and almost certainly would continue to do so, with a very strong voice in setting its future agenda, and hearing schedule.

There have been no floor fist fights from the 88-year-old in the past, at least not of which I’m aware, though he has been willing to engage in public pushup challenges for fun, and maybe to make a Midwestern point.

“There’s a fair amount of prairie populist in” Grassley, his onetime tax-policy aide and advisor Dean Zerbe told The Giving Review in a 2020 conversation, which was and may again be shown “in his charitable oversight. If you really think about what the core of him looking at the charities was and is about, it’s what are the charities doing that’s charitable? What are they doing to justify this very-significant tax break that they get? How’s that going?”

(Such queries would definitely suitably be made by a hypothetical Select Committee Chair Grassley, as well.)

Others

In the House, its Ways and Means Committee’s current Republican Leaders is Texas Rep. Kevin Brady, who is retiring after this Congress. Brady’s departure would open up what is at least for now considered to be a three-way race to be the top Republican on the committee. Again hypothetically, if each of them win re-election themselves and Republicans gain control of the House, one of them might be serving as chair.

The three are U.S. Reps. Vern Buchanan of Florida, Adrian Smith of Nebraska, and Jason Smith of Missouri—all Ways and Means members now. Buchanan and Adrian Smith each have more seniority than Jason Smith, but seniority would not be the only factor for the GOP Steering Committee and then the full party conference in deciding upon whom should be chair.

Earlier this month, Jason Smith announced that he would not run for the soon-to-be-open Missouri Senate seat, opting instead to seek re-election to another term in the House. He explicitly said he would bid to be the top Ways and Means Republican. He is the ranking Republican on the House Budget Committee right now.

Both Jason Smith and Adrian Smith have in the past strongly lamented what they thought to be unfair Internal Revenue Service treatment of Tea Party groups applying for certain nonprofit status.

Buchanan—with a net worth reportedly exceeding $150 million, generated from auto dealerships and other businesses—is one of the wealthiest members of Congress. He is a former board member of the U.S. Chamber of Commerce, and served on its executive committee. He and his wife have their own family foundation.

“Unfinished business”

Given the growing number of harsh progressive, populist, and just plain rule-of-law critiques about so much of unelected, unaccountable, and tax-favored establishment philanthropy, there may be a desire on the part of policymakers in Congress to aggressively examine some or all of it again.

In the next Congress, Grassley, Crapo, Jason Smith, Adrian Smith, and/or Buchanan, among others, may be in a position to return to what could certainly be considered “unfinished business”—as Reece called it in ’53—and lead such an investigation.


1 thought on “Leaders of aggressive Congressional investigations of philanthropy—past, and potential future?”

  1. Todd E Smekens says:

    Philanthrocapitalism is an issue worth pursuing.

    When an individual or family can use their wealth to manipulate local, regional, or national governments, media, via institutions, and control of people, we have a democracy problem.

    This problem has prevailed in the USA since its inception. A fool would think otherwise. Much of our wealth was built on the backs of slaves, which have been passed down from one generation to another so they can rule via oligarchy (silver spoons).

    The political class in the USA are primarily frauds or rubber stamps controlled by the oligarchy. I find the media’s use of “Putin and the oligarchy surrounding him” as amusing language considering the media and political class and higher institutions are controlled by the oligarchy. The most prominent law firms work for the oligarchies in every major city—even the smaller towns.

Leave a Reply

Your email address will not be published. Required fields are marked *