Five prominent private foundations announced on June 11, 2020 that they would increase their grant making by more than US$1.7 billion over the next three years “to help stabilize and sustain a nonprofit sector facing devastating economic effects due to the global pandemic and the epidemic of social injustice.” We asked legal scholar Daniel Hemel, to help readers understand this move.

1. What’s going on?

Federal law requires private foundations to spend a portion of their endowments, typically at least 5%, on charitable endeavors each year. Many of the largest private foundations keep close to that 5% floor. But the Ford Foundation, the John D. and Catherine T. MacArthur Foundation, the Andrew W. Mellon Foundation, the W.K. Kellogg Foundation and the Doris Duke Charitable Foundation – jointly announced that they would raise their payout rates substantially above that floor for the next two to three years. Ford, the largest of the five, says its payout will rise to more than 10% of its endowment in 2020 and 2021. That announcement followed an earlier pledge by more than 700 foundations to relax grant restrictions so that the charities they support have greater flexibility to respond to challenges created by the COVID-19 pandemic.

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