Phil Knight’s Billion Dollar Philanthropy: Generosity or Self-Service?
Knight did not sign the Gates-Buffett Make a donation, but he has said on several occasions that he plans to give most of his fortune During its lifetime. And he sometimes accompanied these words with deeds: according to the the Chronicle‘s database in large charitable donations, Knight has given more than $ 2.4 billion directly to charity in the past 10 years alone. Most of that money went to his two alma maters, Stanford University and the University of Oregon, which received around $ 1.7 billion between them.
Knight’s direct donations weren’t always without controversy, such as when he allegedly threatened to withhold donations to the University of Oregon until staffing decisions in the sports program has caught on, or until the university cancels its membership in a sweatshop surveillance organization that Nike didn’t like. But it’s the donations from Knight’s foundation that perhaps reflect his philanthropic image the least.
Donations from the Foundation and its benefits
In recent years, the bulk of Knight’s donations have gone to his private foundation, the Chevalier Foundation, of which he is president and his wife and son are directors. Knight gave $ 1.9 billion to his foundation over the five years from 2014 to 2018, more than double the amount he gave directly to charity during that time.
Almost all of Knight’s recent donations to his foundation have come in the form of valued shares of Nike’s stock. By donating shares instead of cash, Knight was able to save hundreds of millions in capital gains taxes that he would have had to pay had he sold the shares instead.
2018, the most recent year for which the foundation tax returns are available, is a good example. That year, Knight donated $ 1.6 billion to the Knight Foundation, almost all of which was in Nike stock. The cost of that stock was reported on the tax return at $ 33 million, meaning that if he had sold the stock, he would have realized a capital gain of over $ 1.5 billion. If, as is very likely, Knight’s shares were held long enough and his income was high enough that the shares were subject to a 20% rate capital gains tax rate, that means that by donating the stock, he avoided at least $ 300 million in capital gains taxes that he would have had to pay had he sold the stock instead.
Add to that the fact that Knight was reportedly allowed to deduct up to 60 percent of his $ 1.6 billion donation from his income taxes in 2018, and it looks like his philanthropic donations saved him a fair amount of tax.
Knight made no donations to his foundation in 2019, but according to SEC filings, in 2020, he donated more than $ 900 million worth of Nike stock to “a charity of which the registrant and his wife are directors,” a description that could only fit the Knight Foundation. . Knight again avoided paying capital gains on this donation of shares. And since the IRS has suspended the cap on charitable deductions during the pandemic, Knight could also have deducted the full value of his nearly $ 1 billion donation from his income taxes.
What charities and the taxpayer get out of it all
It’s an understatement to say that dollars donated by the Knight Foundation to charities have not kept pace with the inflow of dollars – or the tax breaks Knight has received from his donations.
Each year, private foundations are obligatory pay at least 5 percent of their assets in the form of grants. But in the five years from 2014 to 2018, the average Knight Foundation payout was only 2.1%. Even in 2018, the year Knight invested $ 1.6 billion in his foundation, he only paid 2.2%.
Knight only scored a 2 out of 5 on the recent Forbes philanthropy rankings of the richest Americans. It may have disappointed him, but these rankings appropriately only count “outside” money going to active nonprofits, not private foundations. The only way the public perceives a return from the tax breaks they subsidize is through genuine charity: the proceeds go to charities that actually work for the public good. The public saw little real charity in return for the hundreds of millions of charitable grants they gave to Phil Knight. And it raises questions as to whether Knight’s philanthropy is more geared towards serving the nonprofit sector or his own financial interests.