Academic journal article Public Administration Quarterly

Public and Private Dimensions of Grantmaking Foundations

Academic journal article Public Administration Quarterly

Public and Private Dimensions of Grantmaking Foundations

Article excerpt

In the United States, organized philanthropy as a formal, social institution has spawned the grantmaking foundation (Karl & Katz, 1987; Prewitt, 2006b). Since the 1970s, the number of U.S. foundations has increased over 200 percent; as of 2009, 76,545 foundations were registered with the federal government (The Foundation Center, 2012). Aggregate foundation assets are estimated at $646.1 billion (Lawrence, 2012), including those of some of the largest foundations such as the Rockefeller Foundation, the Carnegie Corporation of New York, the Ford Foundation, and the Bill and Melinda Gates Foundation. Their size and function provide grantmaking foundations a unique role in the nonprofit sector (Faber & McCarthy, 2005).

Characteristic of the United States, 99 percent of foundations are popularly classified as "private," including independent and corporate foundations, while the other one percent are "public" foundations, including community foundations or public trusts (The Foundation Center, 2012). The characterization of grantmaking foundations on a single dimension of public versus private is the core subject of this paper. We describe the single dimension definition as a hegemonic view that conditions how grantmaking foundations function and engage local communities. We contend that this hegemony reinforces the treatment of grantmaking foundations as primarily private organizations, which influences both the way that foundations operate and the expectations that stakeholders have for them. Following a description of grantmaking foundations in the U.S., we argue that contested conceptions of public and private complicate the expected relationships between grantmaking foundations, government, and the communities they serve.


Grantmaking foundations are formed through "the transfer of property from a donor to an independent institution whose obligation it is to use such property, and any proceeds derived from it, for a specific purpose or purposes over an often undetermined period of time" (Anheier & Toepler, 1999, p. 3). Foundations are typically designed and intended to operate in perpetuity with substantial endowments (Prewitt, 2006a). Their collective purposes generally focus on various missions regarding "the intent to make the world a better place...less poverty, war, sickness, illiteracy, violence, parochialism, hunger; and conversely, more freedom, art, understanding, opportunity, security, education, [and] health" (Prewitt, 2006b, p. 366). Through the commitment of financial resources, foundation missions have most often "supported nonprofit organizations, or have purchased services from or subsidized the supply of services by nonprofit and governmental agencies that provide healthcare, social welfare, educational, cultural, and religious services" (Hammack, 2006, p. 49).

Founding philanthropists commit their financial resources to advance some collective purpose, and in return receive a tax advantage. According to the U.S. Tax Reform Act of 1969, foundations are either "public" or "private" depending on where they fall on the criteria spelled out in two tests: purpose-mission and public support (Heydemann & Toepler, 2006). A foundation is "public" (rather, called a "public charity" in section 501 of the U.S. Internal Revenue Code) if it provides a community benefit and relies on contributions from an assortment of donors. A foundation is by default "private" if it fails the public support test by relying on asset dividends or contributions from few or single donors (Grønbjerg, 2006; Roelofs, 2003).

Foundations are further differentiated in the Internal Revenue Code by regulatory requirements established from their "public" or "private" status. Public charities, including community foundations, have a federal tax-exempt status that includes no tax bill on income. Private foundations, including independent and corporate foundations, on the other hand, pay a small excise tax on investment income and are required to pay out at least five percent of all assets each year through a combination of grants, donations, and administrative spending. …

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