The news that former New York mayor and billionaire businessman Michael Bloomberg plans to eventually give his $12 billion company, Bloomberg LP, to Bloomberg Philanthropies to support his charitable giving has sparked excitement about a new infusion of funds for charities as well as speculation that the move signifies a new and controversial trend, as more billionaires donate their companies to nonprofits.
Bloomberg’s move follows that taken by Patagonia founder Yvon Chouinard, who last year transferred all of his ownership of the then-$3 billion outdoor-clothing retailer to two entities, Patagonia Purpose Trust and Holdfast Collective, a separate organization focused on environmental causes. And last summer it was revealed that Barre Seid in 2021 gave his $1.6 billion electrical-products manufacturer, Tripp Lite, to Marble Freedom Trust, an organization run by the conservative activist Leonard Leo. Holdfast Collective and Marble Freedom Trust are 501(c)(4) organizations, so both donors structured the transfers of their companies in ways that benefit advocacy groups.
What sets Bloomberg’s donation apart, however, is the value of his company: If he transferred it today, it would be one of the largest donations of this era, said Brian Galle, a law professor at Georgetown University who specializes in nonprofits and foundations. It could make Bloomberg’s already powerful company and philanthropic priorities much more influential.
“[Bloomberg LP] is an institution that’s a core First Amendment player in the country, leading in a couple of major media industries like business reporting,” said Galle. “They are a major media company that already has the power to shape how we perceive the world and what we think we ought to do about it, so it’s like if Fox News were given to a charity.”
Bloomberg, whose net worth stands at about $95 billion, according to Forbes, has given a total of more than $14 billion to charity over the years, both personally and through his Bloomberg Philanthropies. He has donated extensively to arts and culture groups, environmental causes, public health programs, and efforts that focus on improving city governments around the world. He has also given huge sums to education, including a $1.8 billion gift to Johns Hopkins University, his alma mater. He has appeared on the Chronicle’s annual Philanthropy 50 list of the biggest donors — always in the top 10 —18 times over nearly two decades.
Neither Michael Bloomberg nor representatives from his company or Bloomberg Philanthropies would comment on the news, first reported by the Financial Times, other than to confirm the report’s accuracy, so for now there is little understanding of how Bloomberg plans to structure the transfer of his company to support his charitable work.
New Charitable Structures
It is also unclear what kind of a tax benefit he will get, but, said Galle, depending on how he structures the donation, the estate-tax savings could end up in the tens of billions.
What is clear is that the donation signals that the tradition of wealthy philanthropists creating family foundations to handle their giving is a model that is becoming less and less satisfying to America’s superrich, said Galle, Instead, he added, more wealthy donors are turning to new charitable structures that allow them to avoid estate taxes.
“The estate tax was designed to prevent ongoing control by family dynasties of their businesses after the first generation is gone, but the estate tax has become so toothless and the traditional private foundation rules so old and inflexible that these mega-rich donors are continuing to control their businesses for four generations and escaping the estate tax and not making use of the traditional philanthropy system,” said Galle.
He noted that in 1969 lawmakers passed landmark tax regulations designed to clamp down on abuses of philanthropy by the wealthy. But, he says, “the structure that we thought we had in 1969 just isn’t there anymore, in part because philanthropy law wasn’t flexible enough but also because a major driver of what made people use philanthropy law was the desire to avoid the estate tax, and they don’t need that anymore. They’ve got 50 ways to dodge the estate tax, and so we’re seeing very large donors being much more creative with their institutional structures.”
Foundations Are Still Popular
Although wealthy donors have a range of options now and can choose to give through many kinds of giving vehicles, Grace Chiang Nicolette, of the Center for Effective Philanthropy, said she is not seeing a decline in rich philanthropists who want to set up foundations.
She said that planning for the future can be particularly complex and extremely personal for aging philanthropists who own big companies. They have to consider the wishes of their families, their own philanthropic and business legacies, and the causes they care about.
“Donors who choose the route that Bloomberg and Chouinard have taken decide to use impact as an overarching North Star for that big transition, and though this kind of thing isn’t new, I think the high-profile nature of these donors’ decision may highlight this option more for other donors who are approaching similar transitions,” said Nicolette.
Daniel Hemel, a law professor at New York University who studies taxation and nonprofits, says that while the approach Bloomberg, Chouinard, and Seid have taken is not the ideal way to ensure charitable gifts do the most for society, at least Bloomberg has made philanthropy an important part of his life and has been a consistent and prolific donor of big gifts to nonprofits that do important work.
“Is Bloomberg leaving Bloomberg LP to a Bloomberg-created charity and Bloomberg-designed trust a great leap forward for the democratization of wealth? No. But we should be happy that Bloomberg is deciding to leave the vast majority of his wealth to charity rather than to fund yachts for generations of children and grandkids,” said Hemel. “Most of the things that Bloomberg Philanthropies does strike me as pretty good, like supporting science museums and universities and the arts and public health. That’s a lot better than what a lot of other billionaires are doing with their money. I’d rather he decide to use his vast fortune to fund museums rather than, say, destroy Twitter.”
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