Tax-Exempt Foundations: Privileges and Policies

March 20, 1963

Report Outline
Role of Foundations in American Life
Tax Aspects of Growth of Foundations
Suspicion and Criticism of Foundations

Role of Foundations in American Life

Patman's Study of Tax-Exempt Foundations

The Role of tax-exempt foundations in American life is under congressional scrutiny for the third time in a dozen years. Rep. Wright Patman (D Texas), until 1963 chairman of the House Small Business Committee, recently issued another in a series of interim reports on what has been largely a one-man study of the impact of foundations and charitable trusts on the nation's economy. Patman has accused foundations of wholesale tax law violations and abuse of the privilege of tax exemption. Public hearings before a subcommittee of the House Small Business Committee are expected to be held during the coming summer.

Patman's interim reports, the first of which appeared last July and the most recent on Jan. 6, stress the size and power of foundations, their great number and huge assets, and the control over corporations—notably big corporations—which they are alleged to exercise through stock ownership. The possible effect that such control may have on small business is of special concern to Patman. The information he has gathered is believed to include the most comprehensive financial data ever made public on foundation operations.

The former chairman of the Small Business Committee has been criticized for the interpretation he has put on certain statistics, and he has been accused of over-emphasizing seemingly unfavorable aspects of foundation activity. His critics concede, however, that he has turned up information which deserves careful study to determine whether it involves abuse of the tax-exemption privilege accorded to most foundations. The Foundation News, bulletin of the Foundation Library Center in New York City, observed last November that Patman's requests for official information had “helped alert Treasury authorities to possible and actual abuses, and have also helped liberalize Treasury rules as to public access to information.”

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