June 1, 2023
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Elon Musk's $5.7B donation sparks questions about giving

Elon Musk’s $5.7B donation sparks questions about giving

In November, in response to a regulatory filling, the Tesla CEO donated to charity about 5 million shares of firm inventory, price $5.7 billion. Because the submitting with the Securities and Trade Fee was made public Monday, Tesla hasn’t responded to a request for remark. Nor has Musk talked about the donation on Twitter, his favourite communications discussion board.

But that hasn’t quelled debates out and in of philanthropy, about transparency, tax deductions and congressional laws, together with hypothesis about the place precisely the cash was donated. Some consultants say Musk probably donated his shares to his donor-advised fund, or DAF for brief. DAFs are primarily charitable funding accounts through which donors can declare a tax deduction upfront however aren’t legally required to distribute the cash.

Specialists say that may be essentially the most advantageous technique for Musk, presently the world’s richest man with an approximate web price of greater than $220 billion. A DAF donation would permit him to say a tax deduction of as a lot as 30% of his 2021 adjusted gross revenue, as a substitute of 20% if he had donated it as a substitute to his basis. Musk may additionally deduct the truthful market worth of the inventory, as a substitute of its unique worth.

“He can do whatever he wants with his money — anyone can,” mentioned John Arnold, a billionaire philanthropist who co-founded the Laura and John Arnold Basis and Arnold Ventures along with his spouse, Laura. “But if he’s getting a subsidy from society through this tax deduction, then there’s a responsibility that goes with it.”

Whether or not or not Musk donated his Tesla shares to a DAF, Arnold mentioned, the likelihood that he did highlights a questionable tax loophole for a lot of rich Individuals.

“Society is giving them this tax deduction, this subsidy to encourage more resources to get to communities,” Arnold mentioned. “But the way that the tax law is structured today, it doesn’t necessitate that that happens. You can get the tax deduction today, and there’s no requirement for that money ever to get to the community. You can give money to a donor advised fund and keep it in a tax-free investment account forever.”

Arnold and others who need to handle that loophole have fashioned a coalition, the Initiative to Speed up Charitable Giving, that seeks to tighten necessities for DAFs and different monetary autos utilized by the rich.

This month, a bipartisan group of lawmakers proposed a invoice within the Home of Representatives that may restrict how lengthy donations can stay in a DAF untaxed. Related bipartisan laws was launched final yr within the U.S. Senate.

Many DAF proponents oppose the modifications, arguing that DAFs, with a mean payout fee of round 20%, are distributing cash quicker and extra robustly than many personal foundations, whose common distribution is mostly solely barely above the 5% yearly required by regulation, in response to the Stanford Regulation College Coverage Lab on Donor Suggested Funds.

If Musk did place Tesla shares in a DAF, the tax regulation’s intent backfired, Arnold mentioned. The neighborhood obtained neither the tax income generated by Musk’s revenue on the shares or the philanthropic profit that the tax deduction was meant to create.

DAFs additionally permit for anonymity. Benjamin Soskis, a historian of philanthropy and a senior researcher on the City Institute, instructed that Musk’s donation reveals norms could also be tipping in direction of a scarcity of disclosure about the place massive presents are touchdown.

“When you’re giving away that much money, it is by definition a matter of public interest where it’s going to,” Soskis mentioned.

Usually, Musk’s strategy to donations has differed from that of many different rich donors, who are sometimes accused of publicizing their presents as a solution to burnish their reputations.

A few month earlier than donating his inventory, the notoriously provocative Musk engaged in a Twitter combat with the pinnacle of the United Nations World Meals Programme, who had urged billionaires to donate $6 billion on a “one time basis” to assist finish hunger.

Musk mentioned he would promote $6 billion of Tesla inventory and donate the proceeds to the company if it may present how the cash would resolve world starvation. David Beasley, the group’s government director, mentioned this week that it had but to obtain a donation from the Tesla CEO.

Soskis, of the City Institute, has instructed that there is room for Musk to be extra clear about his presents whereas nonetheless signaling his “contempt” for “elite public opinion,” because the Tesla CEO steadily does.

At instances, Musk does present transparency about his donations. Final yr, he gave $50 million to St. Jude’s Youngsters’s Analysis Hospital. He additionally donated about $30 million to quite a lot of public faculties and nonprofits in south Texas, the place SpaceX builds its rockets.

His personal basis’s newest IRS submitting reveals he donated 11,000 Tesla shares to the charity in 2019. From July that yr to June 2020, the inspiration distributed $23.6 million in grants. A few of that went on to working charities, however a big chunk — $20.7 million — went to Constancy Charitable, a grantmaker that sponsors DAFs.

Some who’ve labored with Musk clarify his type of philanthropy by saying he is not centered on wanting good.

Marcius Extavour, vice chairman of local weather and vitality at XPrize, which manages Musk’s $100 million prize for carbon elimination, says Musk needed the venture to be centered on discovering impactful options and didn’t need it to make use of his picture in all places. That is in distinction to another donors, who, Extavour asserts, appear extra involved about invites to talking engagements and different occasions.

“It’s been fairly good to work with the Musk Basis as a donor who will not be.. nitpicking on how we describe this or how we describe that,” Extavour said. “Or making sure they get the shine or the limelight.”

Steve Greanias, common supervisor of fundraising options for the fundraising platform GiveSmart, says that like most individuals working in philanthropy, he’s curious about the place Musk’s cash went and the way it was or shall be used. But he doesn’t suppose it’s essentially everybody’s enterprise to know. His personal platform, which serves about 8,000 nonprofits and has processed about $800 million in donations, accepts nameless donations.

“If you have this kind of money and you want to do good with it and you don’t feel the need to be recognized for it, that’s OK,” Greanias mentioned. “That’s between you and the organization. As long as your relationship’s OK with them, it shouldn’t matter if the world wants to know where money came from.”


The Related Press receives assist from the Lilly Endowment for protection of philanthropy and nonprofits. The AP is solely liable for all content material. For all of AP’s philanthropy protection, go to https://apnews.com/hub/philanthropy.

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