According to a regulatory filing, the Tesla CEO donated about 5 million shares stock company stock to charity in November. This was worth $5.7 billion. Tesla has not responded to a request to comment since Monday’s filing with the Securities and Exchange Commission. Musk has not mentioned the donation on Twitter (his favorite communication forum), either.
However, this hasn’t stopped debates within and outside of Philanthropy about transparency, tax deductions, congressional legislation, and speculation about the exact location of the money. Experts believe Musk donated his shares to his donor advised fund, also known as DAF. DAFs are charitable investment accounts that allow donors to claim a tax deduction upfront, but they are not legally required to distribute the funds.
Experts believe that Musk’s best strategy would be to donate his DAF. He is currently the richest man in the world with a net worth of over $220 billion. Musk could claim a 30% tax deduction for his 2021 adjusted gross earnings, as opposed to 20% if he had given it to his foundation. Musk could also claim the stock’s fair market value instead of its original price.
John Arnold, a billionaire philanthropist, said that he can do anything with his money, as can anyone,” and that Arnold and Laura, his wife, Laura, co-founded Arnold Ventures and the Laura and John Arnold Foundation. “But if he gets a subsidy through society via this tax deduction, then that comes with a responsibility.”
Arnold stated that regardless of whether Musk gave his Tesla shares to DAFs, Arnold said the possibility that he did highlight a tax loophole for wealthy Americans.
Arnold stated that society is providing them with a tax deduction and a subsidy to help more resources reach communities. The tax law as it is today doesn’t require that this happens. The tax deduction is available today. There’s no need for the money to reach the community. You can give money in any amount to a donor advised fund, and it will remain tax-free forever.
Arnold and others want to close that loophole. They have formed the Initiative to Accelerate Charitable Giving. This coalition seeks to tighten DAF requirements and other financial instruments used by the wealthy.
A bipartisan group of legislators proposed a bill in Congress this month that would limit the time donations could remain untaxed in a DAF. Similar bipartisan legislation was also introduced in the U.S. Senate last year.
Many DAF supporters oppose the changes. They argue that DAFs with an average payout rate around 20% are distributing money quicker and more robustly to many private foundations, whose distribution is generally slightly higher than the 5% required by law according to the Stanford Law School policy Lab on Donor-Advised Funds.
Arnold stated that if Musk placed Tesla shares in DAFs, it would have reverted to the intent of tax law. The tax deduction was not intended to generate tax revenue, but the community did not receive the philanthropic benefits or tax revenue Musk generated from the shares.
DAFs allow anonymity. Benjamin Soskis, a historian and senior researcher at Urban Institute, suggests that Musk’s donation may indicate that norms are shifting towards less disclosure of large gifts.
Soskis stated, “When you give away that much money it is by definition a matter in the public interest where it goes to.”
Musk’s approach has been different from many wealthy donors who are accused of promoting their gifts to boost their reputations.
Musk, a notoriously provocative person, engaged in a Twitter battle with the head U.N. World Food Programme. He had asked billionaires to donate $6Billion on a “one-time basis” to end hunger.
Musk stated that he would sell $6Billion of Tesla stock to fund the agency, if the agency could demonstrate how it would solve hunger around the world. David Beasley is the executive director of the organization. He said this week that the company has yet to receive a donation form Tesla CEO.
Soskis of the Urban Institute suggested that Musk could be more transparent about his gifts, while still signaling his “contempt for elite public opinion,” which is what the Tesla CEO often does.
Musk is not always transparent about his donations. He donated $50 million to St. Jude’s Children’s Research Hospital last year. In addition, he donated $30 million to several South Texas nonprofits and public schools where SpaceX makes its rockets.
According to his latest IRS filing, he gave 11,000 Tesla shares in 2019 to charity. The foundation distributed $23.6million in grants between July of that year and June 2020. While some of the funds went directly to charities, $20.7 million went to Fidelity Charitable. This grantmaker sponsors DAFs.
Musk’s style of philanthropy is explained by those who have had the opportunity to work with him.
Marcius Extavour is vice president of climate, energy and sustainability at XPrize. He manages Musk’s $100 million prize for carbon reduction. Musk said that he wanted the project to focus on finding effective solutions, and not use his image everywhere. Extavour claims that this contrasts with other donors who are more concerned about inviting speakers to speak at events.
Extavour stated, “It’s been quite nice to work alongside the Musk Foundation as an donor who isn’t.. nitpicking about how we describe this” Extavour said, “Or making sure that they get the spotlight or the spotlight.”
Steve Greanias is the general manager of fundraising solutions at GiveSmart. He says that he, like many people in philanthropy are curious about Musk’s money and how it will be used. He doesn’t believe it is necessary for everyone to know. His platform accepts anonymous donations. It serves approximately 8,000 nonprofits, and has processed over $800 million in donations.
Greanias stated, “If you have this amount of money and you feel that you are doing good with it, then that’s okay.” That’s between the organization and you. It doesn’t really matter what your relationship is with them.
