Recent legislation meant to promote transparency in giving by foreign philanthropists will boost the charitable world’s credibility.
The below column originally appeared in The Chronicle of Philanthropy on August 14, 2024.
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Are foreign donors using their charitable money to influence academic priorities, public policy, and elections? Based on legislation introduced in Congress over the past 18 months, the answer would seem to be yes.
Most recently, foreign donors have been accused of backing pro-Palestinian protests on U.S. college campuses and meddling in American politics and policymaking through their support of organizations engaged in lobbying and election-adjacent activities.
But how big a problem is this really? After all, most foreign giving is uncontroversial and even welcomed by cultural, educational, and policy institutions. How can policy proposals to address the issue strike an appropriate balance?
To answer those questions, let’s first consider the events that sparked the recent spate of legislation.
In many ways, this is not a new issue. In 2014, a New York Times investigation showed how Norway and other countries use their largess to hold sway over the agendas of large think tanks. Revelations that the Brookings Institution had accepted millions of dollars from Qatar led to the resignation two years ago of its then-President John Allen and accusations that he had tried to influence American policy on behalf of that country. Allen was eventually exonerated of those charges, but such incidents created a heightened sensitivity in the think tank community about foreign funding.
Attention has since expanded to academia. The Chinese government was investigated for trying to influence university research and academic freedom, particularly through the funding of Confucius Institutes throughout the United States. And Qatar and other Gulf countries have been accused of fueling antisemitism at universities such as Columbia, Cornell, and Yale through their large donations. Current law requires universities to report to the Department of Education contributions exceeding $250,000 a year from a foreign source, but that doesn’t always happen.
Swiss billionaire Hansjörg Wyss is the poster boy for foreign donations in support of U.S. policies and politics. Wyss has asserted his influence through his strong ties to the left-leaning philanthropy consulting firm Arabella Advisors and the Center for American Progress, as well as his foundation’s active support of national and state policies related to climate change and criminal justice reform. Testimony at House hearings in December suggested that Wyss and possibly other wealthy individuals from abroad donate to nonprofits that then move the money from 501(c)(3) organizations to 501(c)(4)s and political action groups that have more flexibility to engage in retail politics.
Legislative response
Congress has responded to these developments with legislation that would require greater transparency from nonprofits about the sources and amounts of foreign contributions.
The first, the Think Tank Transparency Act, was introduced by Republican Senator Chuck Grassley of Iowa in March 2023. It would require thank tanks and other nonprofits involved in U.S. policy to disclose their foreign donors.
In December last year, the House passed the so-called DETERRENT Act — the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act. It would force universities and other academic institutions to disclose any foreign gifts and contracts exceeding $50,000.
The House Ways and Means Committee has also approved the American Donor Privacy and Foreign Funding Transparency Act, which would require all nonprofits, not just colleges and universities, to report the source, amount, and use of money received from foreign entities.
And to address the foreign billionaire problem, the No Foreign Election Interference Act, introduced in May by the House Ways and Means Committee, would impose severe penalties on 501(c)(3) and (c)(4) organizations that receive foreign money and then transfer some or all of those donations to political action committees. This legislation is largely driven by Wyss’s big donations to Arabella and other politically adjacent organizations.
Wyss’s more than $100 million in contributions to state ballot initiatives has also generated significant interest from state legislators, including in Ohio, where the legislature passed a law in June that would prohibit foreign donors from supporting ballot initiatives in that state. Other states have enacted or are considering similar prohibitions on foreign funding of ballot initiatives.
What does all this legislative activity indicate about the need for actual reforms? Despite the heightened attention to foreign funding since October 7, there is little evidence of a direct link between such funding and university policies. But the sheer size of the contributions from China, Qatar, and other authoritarian countries suggests that administrators have a strong incentive to please these donors.
Uncertain path
Politically, the path forward is unclear. The American Donor Privacy and Foreign Funding Transparency Act, which would require nonprofits to publicly disclose the amount of donations and country where they come from, passed out of the House Ways and Means Committee on a partisan vote. In a letter to the committee, the Council on Foundations and three other nonprofit trade associations expressed concern that asking the nationality of donors would have a chilling effect on philanthropy in general and on contributions from abroad in particular.
By contrast, just one House member voted against the No Foreign Election Interference Act. It’s possible that the title of the bill itself scared off opposition. Surprisingly, the signatories of the nonprofit association letter didn’t oppose it, even though the legislation would essentially require any organization involved in advocacy, lobbying, or voter registration to check where their donors live.
So what is the right approach to foreign donors? Certainly, there are legitimate reasons for concern when those donors make special requests about organizational policies, priorities, or positions.
The involvement of foreign donors in election-adjacent and lobbying activities is an easy call. Direct foreign contributions to campaigns are prohibited, and organizations and companies working as active advocates for a foreign donor are required to file under the Foreign Agents Registration Act. However, based on cases over the last three decades, no advocacy or policy research institute has been charged under its provisions.
The proposed No Foreign Election Interference Act would be a good first step since it ensures that intermediary nonprofits such as Arabella are not used to support lobbying or politics. In essence, it would put those nonprofits on notice that there could be severe consequences if they do use charitable funds to support these activities. Based on the committee’s vote, this bill seems likely to the pass the House.
What about support to other institutions that are not directly involved in elections or policymaking? Does it make a difference if China supports American environmental groups or Qatar is providing millions of dollars to universities and other institutions? If the level of media and congressional interest reflects public concern, the answer would seem to be yes.
The American Donor Privacy and Foreign Funding Transparency Act would require all nonprofits to disclose the “total combined amount of funding received from foreign sources, the citizenship of these sources, and the total amount of donations from each country.” The names of specific donors would not be publicly disclosed.
This doesn’t seem like an onerous requirement. Donors would have to check a box if they were not American citizens and then indicate their nationality. It’s hard to imagine that one additional question would undermine the trust of donors, as some suggest.
Instead, this simple step could increase contributor confidence by letting donors know who else is funding their favorite charity. Since the 1960s, universities have operated with disclosure requirements about foreign donors. Rather than lose donor trust, higher education has set fundraising records. And, if contributions to those institutions now decline because of concerns over foreign influence, would that not be evidence for the value to donors of more disclosure?
Let’s hope that Congress continues to be vigilant about the role of foreign donors. More disclosure and more information will protect the charitable sector’s credibility, and that will only make it stronger.
