Tuesday, September 13, 2011
This proposal would require a § 501(c)(3) charitable organization to spend or distribute a gift, both as to principal and interest, over the 50 years following receipt of the gift. The goal of the rule is to increase the good that comes from charitable deductions and reduce the administrative burden. Within broad definitions of charity, the worthiness of a charity is defined more by process than by detailed substantive rules — a donor can be presumed to be trying to do the most good with his money. The world changes over time, however, and after 50 years it is different. The 50-year payout requirement would strengthen the tie between the wisdom of the donor and the most pressing needs of the times.
The requirement would also diminish the problems from charitable boards that are accountable on substance to nobody but themselves. A board without competition, recent donations, or meaningful substantive accountability should lose its special claim to control the money over time. A charity with continuing support, however, would not go out of business. The accounting would treat the earliest gifts as given out first, so that an active charity with both new contributions and high expenditures would have long since distributed its old funds.