This is the VOA Special English Economics Report.
As we told you last week, the United States has about seventy thousand foundations for charitable giving. They
are required to give away at least five percent of their total holdings each
Most foundations are formed by wealthy individuals. People who put their
wealth into foundations can become known for their social good works. At the
same time, gifts to charity can bring tax savings.
Fifty percent of the value of a gift to a public charity can be used to
reduce taxes. For private foundations, that percentage is smaller -- thirty
percent -- but still a lot.
Not surprisingly, strong foundation growth takes place during strong economic
growth. For example, foundations grew quickly during the nineteen forties and
fifties. A growing economy and changes in tax laws also led to sharp growth
during the eighties.
The economic expansion of the middle and late nineties resulted in record
foundation growth. In two thousand, as the stock market reached its highest
level, so did the number of new foundations. More than six thousand that year
Researcher Steven Laurence says foundation growth has shown surprising
staying power since then, even as economic growth slowed. He says new
foundations continued to appear at a rate of about two percent in two thousand
four. Mr. Laurence is the top researcher at a group that studies such things,
the Foundation Center.
But foundations can also run out of money and close. This happens at an
average rate of one percent a year.
Many of the rules that govern foundations come from the Tax Reform Act of
nineteen sixty-nine. Congress established a number of differences between public
charities and private foundations. The new law defined all individual, corporate
and operating foundations as private. That meant greater restrictions and
different financial reporting rules than for community foundations.
At the time, some people thought the changes in the law would mean the end of
private foundations. The number of public charities grew in the nineteen
seventies. In some years, the holdings of private foundations even shrunk.
Today public charities represent just one percent of all foundations. But
they are responsible for almost one-tenth of all foundation giving.
And that's the VOA Special English Economics Report, written by Mario Ritter.
Next week, listen for the third and final part of our series on foundations.
Part one can be found at voaspecialenglish.com. I'm Steve Ember.