True Leadership in Philanthropy: When History Calls, Will We Answer?
Leadership isn't measured by the size of our endowments, but by our courage to act when the moment demands it. As we approach a potential shift in federal leadership, the philanthropic sector faces a critical moment that demands immediate and decisive action. While many foundations have embraced trust-based philanthropy and unrestricted funding models in recent years, these steps—though important—are merely the beginning of what our sector must do to protect and empower communities in need.
The looming threat of HR 9495 should serve as a wake-up call to philanthropic leaders. This legislation's potential to strip organizations of their 501(c)(3) status represents an unprecedented challenge to the nonprofit sector's ability to serve marginalized communities. The bill's broad language and vague criteria for revoking tax-exempt status could be wielded as a tool to silence organizations working with and advocating for minoritized populations.
We in philanthropy must recognize that our traditional approaches—careful deliberation, multi-year planning cycles, and risk-averse grant-making—are ill-suited to this moment. Organizations serving marginalized communities need substantial resources now to build resilience against potential regulatory challenges and strengthen their operational capacity before these changes take effect.
The stakes couldn't be higher. Community organizations are already struggling to maintain services while navigating increasingly complex political and social landscapes. Many operate on razor-thin margins, leaving them vulnerable to any disruption in funding streams or increased regulatory burden. The potential loss of 501(c)(3) status would be catastrophic not just for these organizations, but for the communities that rely on their services and advocacy.
Foundations sitting on billions in endowments must ask themselves: What are we waiting for? The traditional philanthropic model of preserving capital for future generations assumes a stable democratic framework that protects civil society. That assumption is increasingly questionable. Organizations need substantial funding before year-end to secure their operations, strengthen their governance, and build legal defense funds. Waiting until 2025 to make these critical grants could leave organizations scrambling to adapt amid a changed regulatory landscape. The time to deploy these resources is now, when they can help fortify community organizations against coming challenges and give them the breathing room to prepare thoughtfully rather than react in crisis mode.
This means moving beyond incremental increases in grant-making. Foundations should consider:
Dramatically increasing payout rates well above the required 5% minimum
Providing multi-year unrestricted funding that allows organizations to build robust operational and legal capacity
Establishing rapid response funds that can quickly address emerging threats to community organizations
Creating legal defense funds to help organizations navigate potential challenges to their tax-exempt status
Trust-based philanthropy principles remain vital—organizations closest to communities know best how to serve them. But trust must be paired with urgency and scale. Every dollar held back in endowments is a dollar unavailable to help organizations prepare for coming challenges.
The philanthropic sector often speaks of addressing root causes and systemic change. The potential erosion of nonprofit organizations' ability to serve marginalized communities represents a systemic threat that demands an immediate response. We cannot wait to see how political changes play out while holding resources in reserve.
With mere weeks left in 2024, foundations have a rapidly closing window to make transformative grants that could determine the survival of crucial community organizations. Year-end giving isn't just about meeting payout requirements—it's about giving organizations the runway they need to adapt and build resilience before potential regulatory changes take effect. Every day of delay reduces organizations' ability to prepare. Every foundation board meeting that postpones decisive action diminishes the impact we could have had. The time for bold action is now. By this time next year, it may be too late.
