Publicly announcing multi-billion-dollar gifts is a 'fundamental matter of public interest,' says one observer.
Elon Musk will happily broadcast a few choice words about U.S. senators, but he's quieter when it comes to his philanthropy. There's a good chance the public may never know which charity or charities benefited from the approximately $5.7 billion in Tesla $(TSLA)$ stock Musk donated in 2021.
While there are some public-disclosure laws in philanthropy, billionaire donors like Musk can easily keep the details of their giving under wraps, and it's legal for them to do so.
Musk -- who signed the Giving Pledge in 2012, promising to give away most of his wealth -- doesn't send out press releases announcing his donations, though he occasionally tweets about them. Tesla doesn't typically respond to press inquiries (it did not for this story), and there's no contact information listed on Musk's foundation's bare-bones website. The Tesla stock donation was revealed in an SEC filing Monday that described the donated shares as a gift "to charity," but didn't specify which one.
One possible candidate is the United Nations World Food Program. Musk got into a public Twitter spat with the WFP shortly before he donated the stock, and said he would donate $6 billion to the hunger relief agency if it could show how the money would "solve world hunger." A WFP spokesman initially told MarketWatch this week that it doesn't disclose donors, but allows donors to publicize their gifts themselves. The WFP's executive director later said that the group had not received any funds yet from Musk, and added that "I am excited to hear that Elon is engaged. This is an amazing and great first step."
At a time when billionaires are riding high and exerting growing influence over the public sphere, the lack of transparency around Musk's donation is the latest example of how elite philanthropists can evade scrutiny too easily, critics say.
"Come on. There has to be a middle-ground [between] preening, self-congratulatory mega-giving & complete non-disclosure," wrote philanthropy historian Ben Soskis on Twitter(TWTR) in response to the lack of information on Musk's stock donation. "If not, we're gonna need a pretty radical overhaul of our [regulations] relating to individual giving & anonymity."
Soskis, a senior research associate in the Center on Nonprofits and Philanthropy at the Urban Institute, added, "If you are giving a gift of over $5 [billion], you should publicly announce where the money is going to. As a fundamental matter of public interest."
How the public could find out where Musk's donation went
The recipients of Musk's donation could eventually come to light if Musk gave the stock to his private foundation and the foundation liquidated it and handed out the money as grants to nonprofits. In that case, the Musk Foundation would have to publicly list its major donors and the nonprofits that received the grants in a filing with the IRS. Foundations, which exist to hand out money for public benefit, are required to file that paperwork annually.
The most recent IRS filing for the Musk Foundation shows that Musk donated 11,000 Tesla shares to it in 2019. The foundation gave a $1 million grant to George Mason University "for COVID-19 scientific research," made several other grants to schools and other recipients, and gave a $20.7 million donation to Fidelity Charitable, where Musk appears to keep a donor-advised fund.
Why the recipients of Musk stock donation could easily stay secret
There are several other scenarios where the recipients of Musk's largesse would never be revealed. Musk may have put the money into a donor-advised fund at Fidelity Charitable. DAFs, a type of charitable giving account, function as middlemen. They hold money the donor has earmarked for charity and then distribute it to nonprofits chosen by the donor. When the nonprofits receive the money, it comes from the DAF, not the donor, and there's no paper trail connecting the donor directly to the nonprofit.
DAFs have come under fire because account holders get a tax break when they put money into a DAF, but there's no deadline for when donors must distribute the money to charities. A bill recently introduced in Congress would change some of the laws around DAFs with the aim of moving money more quickly into the hands of charities.
"The Musk donation serves as a reminder that current laws allow for donors to get a tax deduction up front without any requirement that $ ever gets to the community," wrote billionaire John Arnold, a supporter of the DAF reform legislation, on Twitter. "Money can sit in DAF accounts forever."
DAF providers say those criticisms are wrong. Fidelity Charitable released its 2022 giving report Tuesday, which showed that in 2021, its DAF account holders recommended "a record $10.3 billion in grants, 41% more dollars than pre-pandemic giving in 2019." The report also noted that "donors are recommending grants at a more rapid pace -- an average of 12.4 grants per account in 2021, compared to 7.4 a decade ago."
A spokesman for Fidelity Charitable declined to comment on Musk.
Musk could also fly under the radar with his stock donation if he put it into a charitable limited liability company, a type of giving vehicle used by philanthropists such as Meta (formerly Facebook $(FB)$) CEO Mark Zuckerberg and his wife, Priscilla Chan, and Melinda French Gates, the former wife of Microsoft $(MSFT)$ founder Bill Gates. Charitable LLCs can make grants to nonprofits and invest in for-profit ventures, but they aren't required to publicly disclose their spending.
If Musk gave the stock directly to a nonprofit, the group wouldn't be required to publicly disclose him as the donor. Nonprofits must disclose their major donors to the IRS, but they are not required to identify those donors publicly, said Gene Takagi, a lawyer specializing in nonprofit law at NEO Law Group in San Francisco.
"There are debates over the need for greater transparency, particularly with very large gifts that can shift public policy and possibly elections through permissible charity advocacy activities," Takagi siad. " In my own personal opinion, the danger of less transparency, for example in the area of campaign finance, could seriously weaken our democracy."
Others say that donors should be allowed to preserve their privacy. Keeping donor information private "enables potentially controversial or less popular causes to receive financial support from individuals without posing a public risk to donors," wrote Independent Sector, a coalition of nonprofits and foundations. Organizations shouldn't have to disclose their donors if they're involved in "issues for which donor disclosure would create a substantial likelihood of personal harm to donors," the group said.
Other billionaires have been more public about recent giving
Billionaire philanthropist MacKenzie Scott, the former wife of Amazon $(AMZN)$ founder Jeff Bezos, drew criticism in December when she announced that she had made a round of donations, but didn't want to reveal the amounts she gave or the recipients. She later changed her tune and said she'll be putting together a public database showing who's received the more than $8.5 billion she's handed out since her divorce from Bezos. Some of the organizations that have received money from Scott have also gone public.
Another SEC filing made public this week showed that Henrik Fisker, chief executive and chairman of electric-vehicle maker Fisker, Inc. $(FSR)$ donated $4 million in stock to establish a foundation in the name of him and his wife, and directed $1.9 million to a donor-advised fund. Fisker, Inc. also issued a news release outlining where the money was going.
In another recent SEC filing, Austin Russell, chief executive of self-driving software company Luminar Technologies $(LAZR)$ and considered the world's youngest self-made billionaire, disclosed that he donated 4,500,000 shares of Luminar to Central Florida Foundation, an Orlando-based community foundation. The foundation announced the $70 million gift in a press release, and the Orlando Sentinel covered the gift