Key Dates and Events in American Philanthropic History 1815 to Present

Remembering the philosophies and actions of political and philanthropic leaders from history inspires us to continue and strengthen our philanthropic values. In the 1800s, Americans struggled with such concepts as the philanthropic duty as Americans and as human beings and the division of church and state. Later in that century, wealthy benefactors set up some of the nation's first grantmaking philanthropies. In the 1900s, tax reform made it easier to deduct funds for charitable purposes.

Definition

In the 1800s, Americans discussed and often struggled with the concepts now woven into the fabric of our daily lives. They struggled with such concepts as the philanthropic duty as Americans and as human beings, the division of church and state, the will and wishes of deceased donors, and the legal structure of foundations and endowments.

Toward the end of the 1800s, Andrew Carnegie "set the tone for the transformation in American philanthropy.telling wealthy people that they would be disgraced if they died without having donated their surplus money to social causes. Just as important, he said, the wealthy should carefully choose the causes they supported, demonstrating the financial elite's 'superior wisdom, experience, and ability'" (Billitteri 2000, 1). Along with Carnegie, wealthy benefactors such as John D. Rockefeller and Margaret Olivia Slocum Sage set up some of the nation's first grantmaking philanthropies.

In the 1900s, tax reform made it easier for individuals and corporations to deduct funds for charitable purposes thereby further fueling the philanthropic movement. Today, with foundations awarding over $30 billion dollars a year, the struggle involves the accountability and effectiveness of nonprofit organizations, foundations and corporations entrusted with great responsibilities. Along with effective management, a large challenge in this new millennium is creating and implementing innovative strategies for old social problems such as poverty and homelessness.

The following are some key dates, people, organizations and situations occurring since the year 1815, which had powerful impacts on the development of modern American philanthropy.

Historic Roots

1819: Trustees of Dartmouth College Case vs. Woodward: Incorporated Endowments

The Trustees of Dartmouth College Case vs. Woodward case often receives credit for the creation of a legal right of corporations to be free from state government control, enabling private enterprises in pursing charitable and business goals (McGrave 2003).

Dartmouth College was established in 1769 under a corporate charter from King George III of England, which was to last "forever." When the United States was formed, the agreement with the King became an agreement with the state of New Hampshire. In 1816, the New Hampshire state legislature amended (changed) the College's charter, making it a state university, enlarging the number of trustees, and revising the educational purpose of Dartmouth College. The trustees of the College protested, stating that the original charter was still valid, and sued. Daniel Webster represented Dartmouth College and argued that such amendments were contrary to the original charter and therefore could not be changed by the state (Touro Law Center).

1835: Alexis de Tocqueville- Democracy in America

In 1830, Alexis de Tocqueville, a French aristocrat, traveled to the U.S. to study America's prisons and asylums system. As a result of his journey across the country, he wrote Democracy in America , a two-volume analysis of the American people and their institutions. "Historians consider it one of the most comprehensive and insightful books ever written about the U.S" (The Alexis de Tocqueville Tour Exploring Democracy in America).

In his book, Tocqueville presented the ways in which Americans created private, voluntary organizations. "As soon as several of the inhabitants of the United States have taken up an opinion or a feeling which they wish to promote to the world they look out for mutual assistance" (Hammack 1998, 152). He described the functions, nongovernmental organizations undertook in the society: "In the United States associations are established to promote the public safety, commerce, industry, morality and religion" (Hammack 1998, 143). In other words, he performed an analysis of the system commonly referred to today as the nonprofit sector.

The fact that Americans voluntary joined together to undertake initiatives, which in Europe were performed by aristocrats, was of particular interest to Tocqueville.

1844: Supreme Court decision in Girard Case: Dead Hand of the Donor

Girard was born in France in the mid-1700s and immigrated to the United States shortly before the issuance of the Declaration of Independence. Upon his death as a widower in 1831, Girard bequeathed millions of dollars for the creation of a college to the City of Philadelphia. However, his heirs, a brother and niece, felt entitled to the millions of dollars in his estate.

This case decision in Francois Fenelon Vidal, John F. Girard, and Others, Citizens and Subjects of the Monarchy of France, and Henry Stump, Complainants and Appellants vs. The Mayor, Aldermen, and Citizens of Philadelphia, the Executors of Stephen Girard, and Others, Defendants is a classic example of the power of the deceased donor and stated wishes in estate wills.

Arguments presented in court also involved the jurisdiction and propriety of the city, as a corporation, for administration of the trust. There were also arguments as to the provision which excluded clergy from the school. In the end, the wishes of the Girard were upheld.

The Court's decision produced two produced two immediate consequences. The first being "the decision by state governments to question their financial support of institutions was no longer subject to public control," and the second being "the proliferation of denominationally controlled private colleges, each representing a unique alternative to both the state schools and its various denominational competitors" (McGrave 2003, 103.)

1867: The Peabody Education Fund Created

The Peabody Education Fund is considered to be the first modern "independent foundation of national significance" (Marts 1991, 144). This type of foundation can be characterized as an independently created fund to serve a common good and support charitable activities through the funding of a broad number of institutions. Such a fund is not connected with any particular organization (for instance a hospital, university, etc.). It is typically incorporated and its trustees are responsible for the distribution of funds (Marts 1991).

The purpose of the Fund was to "integrate ex-slaves and poor whites in the southern states," "foster regional reconciliation" and improve the system of "intellectual, moral and industrial education." The initial amount of money provided to the Fund was

$3,000,000 and much more was added later (Marts 1991,17). Civil war generals, ex-presidents and other public leaders were selected to serve as trustees of the Fund.

Some of the trustees were later involved in the formation of General Education Board established in 1902.

This Fund can be considered a model for development of "some of the large scale philanthropic initiatives of the next, far more wealthy generation philanthropist" (Clotfelter and Ehrlich 1999, 36).

The Peabody Education Fund continued to fulfill its mission until the 1910s when it merged into the Slater Fund. The Slater endowment was created in 1882 in order to support education of African-Americans. In 1937, the Slater Fund, the Jeanes Fund and the Virginia Randolph Fund combined to form the present Southern Education Fund. (Clotfelter and Ehrlich 1999)

1913: Federal Income Tax

The federal income tax had been made possible by ratification of the 16 th Amendment to the Constitution. The Revenue Act was passed in October 1913. The Act

formally started the era in which tax policy regulated philanthropic activities and charitable giving.

The 1913 Act exempted institutions "organized and operated exclusively for religious, charitable, scientific or educational purposes." Following acts added "prevention of cruelty to children and animals" (1918), literary (1921), community chest, fund or foundation (1921) and "testing for public safety" (1954) to the list of organizations exempted from paying income tax (Bremner 1988, 244).

1914: First Federated Fund Established

A federated fund, also known as united fund or community chest, is an organization that collects donations from corporations, employees, and individuals on behalf of affiliates with service provided to nonprofit organizations. A federated fund manages collected donations and allocates them to member organizations.

A community chest reduces competition between charities seeking money, promotes rational distribution of funds, and minimizes the costs by preventing duplication and gives "donors confidence in the integrity of the expenditures." But it also makes "a giving less an act of personal charity than a form of community citizenship, almost as essential as the payment of taxes." (Bremner 1988, 134) and " creates serious challenges in figuring out how to distribute the proceeds of federated campaigns and how to create donor identification with the causes and agencies being supported" ( Salamon 1999 , 30).

The idea of cooperative solicitations for charitable purposes arose in Liverpool, England in 1873 and in Denver, Colorado in1887. The idea was successfully implemented in 1900 when the "Cleveland chamber of commerce went a step further and assumed responsibility for endorsing the agencies seeking funds" (The Columbia Encyclopedia).

Thirteen years later, almost all welfare organizations in Cleveland joined to form the Cleveland Welfare Council.

The concept of community chests developed quickly; the numbers increased from 40 in 1919 to about 350 in 1929. "At the beginning, the movement had been opposed by strong agencies which had no difficulty in rising money and by those who saw in it (.) an example of business domination" (The Columbia Encyclopedia, 2001)

The National Association of Federated Founders was created in 1927 with the sanctioned name as Community Chests and Councils. Today, the organization is officially known as the United Way of America. In 1974, United Way International was formed in order to provide support to the international United Way community (United Way).

1935: Corporate Tax Deduction

In the 1917, the Income Tax Law allowed income tax payers to make deductions of charitable contributions up to 15 percent of taxable income (Bremner 1988). In 1935, the government announced heavier income and corporation taxes, but at the same time, permitted corporations to deduct philanthropic contributions up to 5 percent of taxable income (Bremner 1988). Since 1952, the maximum deduction has increased to 20 percent (Marts 1991).

1969: Tax Reform Act

Many businessmen in the 1950s established their own foundations to divert funds and avoid taxes. The Tax Reform Act of 1969 was passed as a solution to this situation. The new law mandated all private foundations to "make reasonable annual cash disbursements (ultimately amounting to at least 6 percent of the market value of the assets) even if it meant invading the foundation's capital" (Rabinowitz 1990,137).

The Tax Reform Act adopted in 1986 had a strong, unfavorable impact on philanthropy. New laws kept the income tax deduction of charitable contributions only for taxpayers who itemized their gifts. Approximately 75 percent of all taxpayers who filed short forms without itemized deductions lost their opportunity to deduct charitable gifts. The Act also lowered marginal tax rates. This decreased the tax-reducing value of charitable contributions and increased the real price of giving (Bremner 1988).

1973: Commission on Private Philanthropy and Public Needs

The Commission, called also the Filer Commission after its chairman John Filer, was created because some nonprofit leaders believed the importance of philanthropy "was not sufficiently recognized by either government or business" (Bremner 1988, 192).

The privately-supported Commission "carried out the most thorough study of the nonprofit sector conducted to that time" (Hammack 1998, 439). It utilized the help of scholars and experts in law, economics, health, education, sociology and history and worked closely with government and nonprofit leaders. The Commission collected and

analyzed data on the current states and characteristics of the nonprofit sector, its relation with government and the for-profit sector, and the impact of charitable giving on American society.

In 1975, after two years of research and debate, the Commission published the first part of its report titled, Giving in America: Toward a Stronger Voluntary Sector . The report's recommendations "called for establishment of a permanent national commission on philanthropy, expansion of corporate giving, changes in a tax law to encourage further giving and removal of restrictions on efforts to influence legislation by charitable organizations other than foundations" (Bremner 1988, 193).

2002: Sarbanes-Oxley Act

The American Competitiveness and Corporate Accountability Act of 2002, also known as the Sarbanes-Oxley Act, was signed into law on July 30, 2002. The Act was passed in response to the corporate and accounting scandals of such companies as Enron, Arthur Andersen, and others in 2001 and 2002. The purpose of the law was to rebuild public trust in America's corporate sector. The law requires publicly traded companies to comply with new governance standards that expand board members' roles in overseeing financial transactions and accounting procedures (BoardSource 2003).

The bill mainly serves as a warning to nonprofit organizations because nearly all the provisions apply only to publicly traded corporations. If the effectiveness nonprofit management and governance practices are further questioned in the future, increased regulation could also be imposed on nonprofits. Some state attorney generals are already proposing that aspects of the Sarbanes-Oxley Act be applied to nonprofit organizations (ibid.).

Importance

As new challenges of increased accountability and regulation are faced today, there is much to be learned from those that have gone before us. Lessons learned can be invaluable timesavers and provide insight for current thinking as new strategies are explored, or previously successful strategies can be revisited for guidance. Also, in remembering the philosophies and actions of political and philanthropic leaders from history reminds and inspires us of the foundation American was built upon and inspires us to continue and strengthen our philanthropic values.

Ties to the Philanthropic Sector

1949: Council on Foundations Established

In 1949, the National Committee on Foundations and Trusts for Community Welfare was founded to promote responsible and effective philanthropy. This organization was the predecessor to the Council on Foundations and was governed by a 22-member board consisting of representatives of social service agencies and community trusts. The group had no members until 1957.

In 1954, the institution was renamed the National Committee on Community Foundations. Three years later, the Committee was officially incorporated as a nonprofit organization, changed the name to the National Council on Community Foundations, Inc. and began accepting members. In 1964, the organization amended its bylaws to admit family and corporate foundations and changed the name to the Council on Foundations, Inc.

In 1999, more than 1,700 foundations were Council members (360 community, 606 private family, 225 corporate, 380 private independent, 39 operating, 70 public, 40 non-U.S. based). The organization's staff has grown to 101; the budget was $14.2 million ( Council on Foundations) .

1980: Independent Sector Created

Independent Sector (IS) was founded to bring together all elements of national philanthropic community: nonprofits, foundations, and corporate giving programs. The o rganization was created from the merger of the National Council on Philanthropy and Coalition of National Voluntary Organizations ( Council on Foundations).

Established to strengthen giving, volunteering and not-for-profit initiative in the United States, Independent Sector seeks to increase the awareness of the nonprofit sector within the academic world, national leaders and the whole American society (Independent Sector).

The organization has strengthened public policy related to nonprofit organizations, improved accountability and performed research and education on the nonprofit sector. Partly as a result of the activities of the Independent Sector, "scholarly attention to this sector has exploded, a new Nonprofit Sector Research Fund has been created, and a specialized nonprofit press has come to existence" (Salamon 1999, 164).

Key Related Ideas

Accountability refers ethical and dependable actions of an individual's actions or organization. The term is usually used in the nonprofit sector to refer to the responsibility of a nonprofit organization to inform donors of the manner in which their gifts were used by the organization.  

Ethics is a system or code of conduct based on universal moral duties and obligations for individual and organizational behavior. It deals with the ability to distinguish good from evil, right from wrong, and propriety from impropriety.

Public Trust refers to citizens' expectations of an organization and their representatives to operate in a transparent and ethical manner.

Responsibility refers to tasks clearly defined in organizational policies, designated by position.

Transparency involves sharing information and acting in an open manner. Transparency allows stakeholders to gather information that may be critical to uncovering abuses and defending their interests. Transparent systems have clear procedures for public decision-making and open channels of communication between stakeholders and officials; transparency makes a wide range of information accessible.

Important People Related to the Topic

  • John Andrew Carnegie (1835-1919): Carnegie, one of the greatest philanthropists, stated publicly that the rich have a moral obligation to give away their fortunes. In 1889, he wrote The Gospel of Wealth , asserting that all personal wealth beyond a family's necessity should be regarded as a trust fund to be he benefit of the community (Grimm 2002).

  • John D. Rockefeller (1839-1937): Rockefeller, acquiring great wealth from oil refining and railroads, was the cornerstone for perhaps America's greatest philanthropic family. Continuing today through the fifth generation, he imparted values in the responsibility to be active in efforts to promote human welfare (ibid.).

  • Julius Rosenwald (1862-1932): Rosenwald, a well-known Chicago businessman, created and was active in the Rosenwald Fund. The Fund is best known for its contributions to the education and health of African Americans (ibid.).

  • Margaret Olivia Slocum Sage (1828-1918): Sage is considered to be one of the greatest female philanthropists of her time, giving to many women's organizations. Over an eleven-year period, she donated virtually all of the $75 million dollar fortune her husband had bequeathed to her (ibid.).

Related Nonprofit Organizations

  • The Council on Foundations is a nonprofit membership association of grantmaking foundations and corporations, addressing issues important to its members and to the whole nonprofit sector. The Council helps foundation staff, trustees and board members in their grantmaking and managing activities. Services provided by Council include one-to-one technical assistance, research, publications, conferences and workshops, legal services, and more ( http://www.cof.org ).
  • Independent Sector is nonpartisan coalition of many of " the nation's leading foundations, prominent and far-reaching nonprofits of all sizes, which represent thousands of organizations and millions of volunteers, donors, and people served" ( http://www.independentsector.org ).
  • The United Way of America is a large and important actor in the area of private philanthropy, consisting of approximately 1,400 community-based, independent, separately incorporated and locally governed United Way organizations. "UWA leads the movement through public relations, national brand advertising, the NFL partnership and the management of relationships with national corporate and philanthropic partners and the federal government" (United Way of America). UWA also offers training, consultation, mediation, conferencing, national research and support services to local United Way chapters. United Way funding is considered very valuable by nonprofit grantees because it may cover operational activities ( http://national.unitedway.org ).

Related Web Sites

The HistoryChannel.com Web site, at http://www.historychannel.com, provides historical sketches on issues, people and organizations relating to philanthropy and are accessible by typing in such search words as "philanthropy" and "charity."

The PBS American Experience Web site, at http://www.pbs.org/history, has a number of historical biographies and their contributions to philanthropy such as Andrew Carnegie and The Rockefellers.

The World of Quotes Web site, at http://www.worldofquotes.com, offers a large number of historical quotes from philanthropic leaders.

Bibliography and Internet Sources

Alexis de Tocqueville Tour Exploring Democracy in America. "All About Alexis de Tocqueville." http://www.tocqueville.org/chap1.htm.

Bremner, Robert H. American Philanthropy, 2nd ed. Chicago and London: The University of Chicago Press, 1988. ISBN:0226073254.

Billitteri, Thomas. Donors Big and Small Propelled Philanthropy in the 20 th Century. Chronicle of Philanthropy . 13 January (2000). http://philanthropy.com/free/articles/v12/i06/06002901.htm.

BoardSource. "The Sarbanes-Oxley Act and Implications for Nonprofit Organizations." (2003). http://www.independentsector.org/PDFs/sarbanesoxley.pdf.

Clotfelter, Charles T. and Thomas Ehrlich, ed. Philanthropy and the Nonprofit Sector in a Changing America . Bloomington & Indianapolis: Indiana University Press, 1999. ISBN:0253214831.

Columbia Encyclopedia, Sixth Edition. " Community Chest." (2001). http://www.bartleby.com/65/co/communit-ch.html.

Council on Foundations. "Timeline History of the Council on Foundations." http://www.cof.org/Content/General/Display.cfm?contentID=126.

Grimm, Robert T. Notable American Philanthropists: Biographies of Giving and Volunteering. Greenwood Press, 2002. ISBN: 1-57356-340-4.

Hammack, David C., ed. Making the Nonprofit Cector in the United States: a Reader. Bloomington & Indianapolis: Indiana University Press, 1998. ISBN:0253214106/

Independent Sector. "About Us, Overview." http://www.independentsector.org/about/about-is.htm.

Marts, Arnaud C. Philanthropy's Role in Civilization: Its Contribution to Human Freedom . New Brunswick & London: Transaction Publishers, 1991. ISBN:0887384056.

McGrave, Friedman. Charity, Philanthropy, and Civility in American History . Cambridge University Press, 2003. ISBN: 0-521-81989-x.

Rabinowitz, Alan. Social Change Philanthropy in America . New York, Westport, Connecticut, London: Quorum Books, 1990. ISBN: 0899305369.

Salamon, Lester M. America's Nonprofit Sector: A Primer, 2nd ed . New York: The Foundation Center, 1999. ISBN:0879548010.

Touro Law Center. "Dartmouth College v. Woodward." http://www.tourolaw.edu/patch/CaseSummary.asp. Accessed 13 May 2004.

United Way of America. " United Way Mission and Vision." http://national.unitedway.org/about/summary.cfm.

This paper was developed by a student taking a Philanthropic Studies course taught at Grand Valley State University.