The number of private tax-advantaged foundations and the amount of assets contained in them has reached nearly $2 trillion, even as the Trump administration considers imposing new taxes on them.
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Foundation assets have grown from approximately $653 billion to $1.8 trillion in assets from 2010 to 2025, according to research from FoundationMark, a market intelligence and benchmarking firm which presented at a PKF O’Connor Davies event in New York on Wednesday.
The number of foundations has grown steadily at about 1.5% per year for over 15 years. There are 23,000 more foundations now than in 2010, but approximately 3,000 to 4,000 foundations close each year. On average, there’s a net addition of around 1,000 to 2,000 foundations per year. However 86 (or 8%) of foundations that had over $100 million in assets in 2015 have disappeared in the past decade.
PKF O’Connor Davies was recently named the market share leader among accounting firms serving private foundations in excess of $25 million in assets in the Northeast by FoundationMark.
“Right now, we’re working with about six foundations that are in the process of sunsetting,” said Thomas Blaney, a partner and director of philanthropic and private foundation services at PKF O’Connor Davies, during the event. “But many times people change their minds on sunsetting. … In my 30-something years of doing this, probably about 50% of foundations that decide to sunset end up not sunsetting.”
Foundations pay out $118 billion in charitable disbursements per year, and foundation giving has increased $42 billion since 2010. Giving growth has averaged about 7% per year over the past 15 years, keeping track with asset growth. But foundations’ returns have not kept pace with their asset allocation. Alternative assets can cost far more than reported. Private equity and venture capital did not meaningfully outperform the public markets over the past decade. Large foundations use more sophisticated accounting and investment structures.
“Foundations actually take in somewhere between $60 and $90 billion a year,” said FoundationMark CEO John Seitz. “Oftentimes it’s a bequest or something like that, and it’s not as market driven as people would think. Sometimes people think the stock market’s done great. We’re probably going to get a bunch of incoming contributions, and that doesn’t pan out very well.”
FoundationMark estimates $135 billion flowed out of foundations, including $103 billion (76%) to grants, $14.5 billion (11%) to charitable operating expenses, $9.5 billion (7%) to investment expenses, and $8 billion (6%) to taxes and other expenses.
Without incoming contributions and investment gains, most foundations would run out of money in 14 years at the current outflow level.
“It’s super important to have your investment teams working, understanding the opportunities out there, and also to see what your peers are doing and who’s doing a better job managing their money,” said Seitz. “I might want to talk to that foundation, or I might want to talk to our investment manager and understand why we’re not performing as well.”
The traditional model for nonprofits was always 60% in stocks and 40% in bonds, but over the past 10 years, capital appreciation foundations have done much better than capital preservation foundations.
Private foundations pay a 1.39% tax on a net investment income, Blaney noted, but many foundations invest in private equity alternative investments and utilize blocker corporations to avoid unrelated business income taxes. Only about 4,000 to 5,000 foundations out of 120,000 have to file a Form 990-T, Exempt Organization Business Income Tax Return.
“When you file a 990-T, you’re paying tax at corporate rates, so it’s a much higher tax per se,” said Blaney. “When you generate a 990-T, it’s usually when you’re in some type of limited partnership, and within the limited partnership, there’s some type of debt financing in there that would trigger the 990-T.”
“When you’re talking about private foundations, what allocation are they giving to private markets?” said Helen Rexwinkel, a partner in PKF O’Connor Davies’ operational risk services practice. “Is it venture capital? Is it private equity? Is it real estate? Is it infrastructure? Are they looking at co-investments, direct investments? How is it actually allocated? That really does drive the returns.”
“These are long-term investments,” Rexwinkel continued. “Often they’re put in a portfolio for diversification reasons. Some of them are in their portfolio because they’re mission driven. Getting into a direct investment or a venture capital investment is often aligned to drive mission alignment. To say the private markets haven’t performed as well as public markets, particularly over the last few years, I don’t think is a fair reflection of the market in general.”
Last year, during the debate over the One Big Beautiful Bill Act, private foundations faced the threat of an increase in the net investment income tax, but that provision was ultimately dropped from the final legislation.
Last month, the IRS announced plans to revamp the Form 990 to require more disclosure about their sources of funding and fiscal sponsorship arrangements. An official in attendance at the event noted that Form 990 reform has been talked about more and more over the last several months and has come up in the context of scrutiny of certain types of organizations and their missions and where their dollars are going and who knows about it, but is percolating among both the administration and tax writers in Congress. However, it’s unclear whether the changes will affect the Form 990-PF filed by private foundations.
