Every few hundred years charitable endowments come under attack.  The Trump administration has imposed tax on the investment income of private foundations of up to 10%, up from 1.39%, as part of the “One Big Beautiful Bill Act”.  A similar bill, the Endowment Tax Fairness Act, seeks to Impose 21% tax on net income of private colleges and universities, which is equivalent to the corporate tax rate.

This moment has historical echoes, as these enormous pots of charitable money are always juicy targets in times of political upheaval.  For example, King Henry VIII of England dissolved the monasteries in the 1540s, which were effectively Catholic land endowments.  I have a personal connection to this time – a distant relative, I’m told.  Sir Thomas Pope was a major beneficiary and became a noted philanthropist.

Attacks on tax exemptions

One of the common historical features of charities and endowments – and charitable trusts before them – is that they are tax exempt.  Endowments offer stable, long-term funding for charitable purposes.  They are an important part of the charitable funding mix and benefit from a stable legal and policy environment. This stability helps create donor trust.

This privileged tax status is more fragile than we think.  Tax exemption arises from a political consensus that these charities and the pools of charitable capitals exist for public benefit.  But public benefit is a flexible, transient term.  The definition is both social and political – and it changes as values and priorities shift.

Attacks on endowments are fueled by a convergence of factors.  Politically, there may be a compelling mix of partisan politics, revenge, or desire for ideological wealth redistribution. Practically, endowments become targets when the definition of “public good” changes.

Our time may be ripe for change.  Private foundation and elite university assets have grown enormously over the past 25 years.  In Canada, foundation assets have grown over 400% in under 20 years to over $120 billion.  At the same time, government finances are strained and deficits growing. Put together, the consensus supporting the tax-exempt status of charities and endowments could shift.

Canada v. U.S.

Canadian charities and endowments have been tax-exempt since the introduction of income tax in 1917.  That doesn’t mean they are fully tax exempt.  They are subject to partial GST and HST, as well as property tax in some municipalities and provinces.  Canada’s parliament has debated endowments over time.  Think about the disbursement quota (the mandatory payout rate for foundations), which has bobbed up and down over the year.  In the early 1980s there was parliamentary debate about private foundations and spending requirements. Some critics questioned the very existence of these entities.

Wright Patman

In the US the history is, of course, more complicated.  In the 1960s, major charitable foundations and university endowments became the target of a populist Texas Congressman, Wright Patman.  His 8-year campaign against foundations influenced the charitable provisions in the Tax Reform Act of 1969, including the 1.4% tax on foundation investment income.

Unlike the current populist politicians, Patman’s focus was economic inequity, unfair competition and undue private benefit.  He dryly observed that “down in Houston there are some neighborhoods so rich that every flea has its own dog.  The Rockefellers are like that.  Everyone has their own foundation.”  This was well before the era of donor advised funds and growth of mega private foundations.  Patman’s suspicions that private wealth and privilege outweigh public good are very much present today. Especially in our age of mega-rich tech oligarchs and the so-called politics of plunder.

Dissolution of the Monasteries

One of history’s biggest assaults on charities and endowment was carried out by Henry VIII, when he dumped Catholicism over a divorce spat with the Pope.  The resulting dissolution of the monasteries between 1536 and 1541.  The goals: break the Church, tax the land, reward your friends, remake society.

The historian George W. Bernard reports that “The dissolution of the monasteries in the late 1530s was one of the most revolutionary events in English history. There were nearly 900 religious houses in England, around 260 for monks, 300 for regular canons, 142 nunneries and 183 friaries; some 12,000 people in total, 4,000 monks, 3,000 canons, 3,000 friars and 2,000 nuns. If the adult male population was 500,000, that meant that one adult man in fifty was in religious orders.”  And the land – all tax-exempt endowments – was seized and sold.

My Family’s Tudor Oligarch

That where my putative ancestor Sir Thomas Pope (c.1507 – 1559) comes into the story.  The son of yeoman farmer, he rose to be clerk of the Star Chamber, Warden of the Mint (1534–1536), Clerk of the Crown in Chancery and Treasurer of the Court of Augmentations.   Then he became in charge of the sale of confiscated religious properties.  He evidently had a talent for audacious self-dealing.  He acquired 30 church properties that stretched for 18 miles across Hertfordshire.

Pope founded Trinity College, Oxford in 1555, which gets him a rosy historical footnote.  Unfortunately it was not the cleanest act in the history of philanthropy.  The site had been Durham College run by the Benedictine order.  The Crown seized the old college in 1545.  It was sold to a middleman in 1553 and bought by Pope, who funded and built Trinity College, which survives to this day.  University-level education was a great innovation at the time – much more valued by Tudor England than unproductive religious orders with loyalty to Rome.

Good changes with time

We may think endowments are perpetual but that’s a fragile social construct.  The social licence for endowments – and tax-exempt charities – comes from public benefits they provide.  Thomas Pope is my own personal reminder that endowments aren’t permanent, and that philanthropy has always been a complicated and imperfect thing.