FINAL REPORT OF THE SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS AND OTHER ORGANIZATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00682R000300080045-5
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 39
• Document Creation Date: December 15, 2016
• Document Release Date: February 4, 2004
• Sequence Number: 45
• Publication Date: January 1, 1953
• Content Type: REPORT

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UNION CALENDAR NO. 801
82nd Congress, 2d Session House Report No. 2514
SELECT COMMITTEE TQ INVESTIGATE FOUNDATIONS
FINAL. REPORT
Of The
SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS AND
OTHER ORGANIZATIONS
(Pursuant to H. Res. 561, 82nd Congress)
JANUARY 1, 1953 - Committed to the Committee of the Whole House
on the State of the Union_an4 ordered to be printed.
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SELECT COMMITTEE TO INVESTIGATE AND STUDY
EDUCATIONAL AND PHILANTHROPIC AND OTHER
COMPARABLE ORGANIZATIONS WHICH ARE EXEMPT
FROM FEDERAL INCOME TAXATION
BROOKS HAYS, ARKANSAS
ACTING CHAIRMAN
DONALD L. O'TOOLE, NEW YORK
AIME J. FORAND, RHODE ISLAND
RICHARD M. SIMPSON, PA,
ANGIER L. GOODWIN, MASS.
B. CARROLL REECE, TENN.
HAROLD M. KEELE, GENERAL COUNSEL
THOMAS J. FEENEY, STAFF DIRECTOR
EDWARD C. KENNELLY, ATTORNEY
JOSEPH C. KIGER, DIRECTOR OF RESEARCH
MARY E. SEARIGHT, CLERK
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LETTER OF TRANSMITTAL
HOUSE OF REPRESENTATIVES
WASHINGTON, D. C. JANUARY 1, 1953
. ZION . RALPH R. ROBERTS
Clerk of the House of Representatives
Washington, D. C.
Dear Mr. Clerk:
I submit herewith the final report of the Select Committee
to Investigate Foundations and Other Organizations.
Brooks Hays, Ark. - Acting C airman
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82nd Congress
2d Session
UNION CALENDAR NO. 803
Report No. 2514
HOUSE OF REPRESENTATIVES
SELECT COMMITTEE TO INVESTIGATE AND
STUDY EDUCATIONAL AND PHILANTHROPIC
AND OTHER COMPARABLE ORGANIZATIONS
WHICH ARE EXEMPT FROM FEDERAL INCOME
TAXATION
January 1, 1953 - Committed to the Committee of the Whole House
on the State of the Union and ordered to be printed.
MR. HAYS, of Arkansas, Acting Chairman for the Select Committee
to Investigate and Study Educational and Philanthropic and Other
Comparable Organizations which are Exempt from Federal Income
Taxation, submitted the following report.
(Pursuant to H. Res. 561, 82nd Congress)
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COMMITTEE REPORT
Report of the Select Committee created by H. Reso-
lution 561, 82nd Congress, 2nd Session to investigate and
study educational. and philanthropic foundations and other
comparable organizations which are e*empt from Federal
income taxation.
The Committee was saddened by the death,
on December 241 1952 of its Chairman, Hon.
E. E. Cox of Georgia. While he did not have
the opportunity of examining this report in
its final form, the draft of the first half
of the report was read to him by the Counsel
for the Committee on the evening of December
22nd and he approved it. The draft submitted
to Mr. Cox, in manuscript, was adopted by the
Committee almost unchanged and is incorporated
in this report in practically the identical
form in which' it was submitted to the Chairman.
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This Committee was created and its powers and duties
were defined by H. Res. 561, 82nd Congress, 2nd Session,
adopted April 4, 1952. By the terms of the resolution the
Committee was "authorized and directed to conduct a full
and complete investigation and study of educational and
philanthropic foundations and other comparable organiza-
tions which are exempt from Federal income taxation to
determine which such foundations and organizations are
using their resources for purposes other than the purposes
for which they were established and especially to determine
which such foundations and organizations are using their
resources for un-American and subversive activities or
for purposes not in the Interest or tradition of the
United States" and to report not later than January 1,
1953 to the House of Representatives, or to the Clerk of
the House if the House be not then in session, the results
of its investigation and study together with such recom-
mendations as it deems advisable.
The sum of seventy-five thousand dollars was appro-
priated for the use of the Committee by H. Res. 638, 82nd
Congress, 2nd Session on July 2,. 1952. Of this sum approx-
imately twenty-five thousand dollars. will be returned
unexpended.
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In the course of its investigation the Committee has
(1) sent questionnaires to more than fifteen hundred organi-
zations; (2) interviewed personally more than two hundred
persons deemed to possess pertinent information; (3) commun-
icated by letter or telephone with approximately two hundred
additional persons, many of whom have established themselves
in positions of achievement and competence; (4) heard the
testimony of some two score persons; (5) received the pre-
pared statements of approximately fifty other persons deemed
to have some knowledge of the subject; (6) studied and ana-
lyzed thousands of pages of answers of foundations submitted
in response to the questionnaires; (7) studied the available
literature on foundations. The Committee's findings and
recommendations are based upon a consideration of the infor-
mation and data assembled in the manner and by the methods
stated.
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FINDINGS AND CONCLUSIONS
1. NUPMER OF FOUNDATIONS T11EIR AGGREGATE CAPITAL AND INCOME.
The Committee was unable to arrive at any definite figures
relative to the number of foundations, their aggregate resources,
income aid expenditures. The 1950 Cumulative List of Organiza-
tions published by the Bureau of Internal Revenue lists more than
thirty thousand tax-exempt organizations. The number of these
which can be classed as foundations varies'according to the defi-
nition of a foundation. Estimates ranged as high as thirty-two
thousand five hundred under the broadest possible definition. For
those organizations having a permanent endowment of $50,000 or
more and embarked upon a program of philanthropic giving the
estimate was slightly more than a thousand with total assets of
approximately $2,600,000,000 and expenditures of approximately
$133,000,000 in 1950, Informed sources estimate the number of
foundations having assets of ten million dollars to be between
sixty and one hundred. This estimate excluded colleges, univer-
sities and religious organizations. The Committee was unable to
obtain an Executive Order, which would have permitted an exam-
ination of the returns. required of tax-exempt organizations.
A constructive effort which promises to throw much light on
these questions is now being made by the American Foundations
Information Service, the results of which will be published in
1953.
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It must be borne in mind that foundations range in size
from the giants, such as the Ford and Rockefeller Foundations
with assets of half a billion and three hundred million,
respectively, to those with no, or practically no, permanent
endowment but with incomes from annual or sporadic contribu-
tions of a few hundreds or a few thousands of dollars. The
Committee knows of no manner in which even a reasonably accurate
estimate of the aggregate assets, annual income and expenditures
of foundations can be obtained at the present time without (i)
an executive order permitting an examination of returns now
filed with the Bureau of Internal Revenue, pursuant to the pro-
visions of the tax laws, or (2) examination of these returns in
the offices of the various directors of Internal Revenue where
the returns are filed. The Committee has received estimates
which it considers reliable to the effect that all foundation
expenditures aggregate only 3 cents of the annual American phil-
anthropic dollar.
2. RATE OF GROWTH OF FOUNDATIONS.
Despite the fact that there are notable foundations in
foreign countries it may be said that modern foundations are con-
fined largely to the United States and that they are the products
of the last fifty years.` While there has been a tremendous growth
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in the numbers of small foundations in the past ten years it is
unlikely that existing tax levies will permit the creation by
individuals or families of large foundations (in the sense that
the Ford, Rockefeller and Carnegie foundations are large) after
the next ten or fifteen years. The small foundations which have
mushroomed in the last decade are largely vehicles for the distri-
bution of permissible tax-deductible philanthropies of modestly
well-to-do individuals and families. There is a significant
groundswell in the area of corporation giving with promise of
the establishment of considerable numbers of sizable foundations
to be established in the future by business corporations. Another
significant development is to be found in the Community Trusts
or Foundations such as those in New York, Cleveland, Boston and
Chicago.
3. THE ROLE OF THE FOUNDATIONS IN MODERN SOCIETY.
Foundations are almost as old as civilization. They were
understood and used by the Egyptians, the Greeks and the Romans.
In one form or another they have played an important part in the
development of.the civilization of Western Europe. They have had
their ups and downs. They have been regulated, abolished,
re-established. They remain today an important and vital force
in American life and their influence is felt in Europe, Asia and
South America. While the important part they play and have played
in palliative measures - that-is in relieving existing areas of
suffer iWpro loo 41e 20 t a?Ql4p-F 9,'h0 i Qit%V OQAQ[04 t
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significant function has been displayed in supplying the risk
or venture capital expended in advancing the frontiers of know-
ledge. The large foundations are peculiarly well suited to
play this role and it is doubtful if any other agency could
perform their part as well as they have performed and are per-
forming it. With trained professional staffs drawing upon the
knowledge gained through decades of experience, with the ability to
attract and hold men of great competence both in their governing
boards and their staffs, with large sums of money to back their
judgment and with complete freedom to spend the money on calculated
risks, they are able to do that which neither government nor indivi-
duals, nor even small. foundations, could or probably should attempt.
The record of their accomplishments gives ample proof of their value
to civilization.
While the impact of the foundations upon modern society can
not be accurately gauged., it is safe to say that they have ren-
dered great and significant services in many fields. Their con-
tributions in the field of medicine and public health are too
well known to require enumeration. The results of their campaigns
against hookworm and yellow fever have been repeatedly told and
extolled until they have become almost legendary. Less well
understood but of great importance is the part played by founda-
tions in raising the level of. education in our colleges and uni-
versities, and, most strikingly, of elevating medical education
in this country to a position of world eminence, In the field
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of the natural sciences, their contribution has teen equally signi-
ficant. In these days when an awareness of the needs for national
security is uppermost in our minds we can not fail to acknowledge
our debt to the foundations for the assistance and support they
have given to all branches of the natural. sciences. Of recent
years the foundations have given increasing support to the social
sciences. This area of endeavor might be designated as the study
of man's relationship to man. While the field has often proved
controversial it is entirely possible that in a time when man's
mastery over the physical sciences threatens him with possible
extermination the eventual reward from the pursuit of the social
sciences may prove even more important than the accomplishments
in the physical sciences.
But these are not the only fields in which the foundations
have given support and aid. They have pressed forward in the
fields of international relations, public administration and govern-
ment, the humanities, race relations, the arts., adult education,
recreation and economics.
4. PRESENT AND FUTURE NEED OF FOUNDATIONS.
We have referred briefly to the past accomplishments of foun-
dations and the importance of their role in modern-day life. It
appears that the present need for foundations is even greater than
it has been in the past and that there is great likelihood that the
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need will prove an increasing one in the future. Despite the
vast sums being poured by government into the various fields
formerly occupied by foundations and into fields in which the
foundations and government are co-tenants or at least co-adven-
turers, the need for the basic research so largely supplied and
supported by the foundations continues to increase. Every new
headland of human knowledge which is won opens up new vistas
to be explored. As each mountain peak'of discovery is scaled,
vast new areas are laid open to exploration. Aside from the
pressing needs of national, security there are ever widening and
lengthening avenues of knowledge that require research and study
of the type and kind best furnished or assisted by foundations.
The foundation, once considered a boon to society, now seems to
be a vital and essential factor in our progress.
On all points thus far raised there has been such a mass
of provable data and such a unanimity of opinion among informed
persons that the Committee has no hesitancy in presenting its
statements without qualification or reservation except where
reservations were specified. It now approaches problems on
which widely divergent views are held by responsible and informed
persons. On some points the Committee has little doubt - on
others considerable.
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5. CRITICISMS OF FOUNDATIONS.
The Committee has striven to give careful attention
to the major criticisms levelled at foundations'. These
criticisms have come from persons, groups and organizations
of widely different backgrounds and from all parts of the
country. While some few complaints have been motivated
by personal grudges or fanciful imaginings, the great pro-
portion of them have come from well-meaning and sincere
individuals or organizations whose integrity, loyalty and
patriotism cannot be questioned. The Committee has earnestly
endeavored to give sympathetic consideration to every com-
munication, written or oral, to follow every lead which
offered even slight promise of revelation, to acknowledge
all letters and telegrams and to answer those where answers
could be given. These complaints and criticisms, viewed
broadly, raise the following questions:
1. Have foundation funds been diverted from
the purposes established by the founders?
2. To what extent have foundations been infil-
trated by Communists and Communist sympa-
thizers?
Have foundation funds been channeled into
the hands of subversive individuals and
organizations, and, if so, to what extent?
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4. Have foundations supported or assisted persons,
organizations and projects which, if not subver-
sive in the extreme sense of that word, tend to
weaken or discredit the capitalistic system as
it exists in the United States and to favor
Marxist socialism?
5. Are trustees of foundations absentee landlords
who have delegated their duties and responsi-
bilities to paid employees of the foundations?
6. Do foundations tend to be controlled by inter-
locking directorates composed primarily of
individuals residing in the North and Middle-
Atlantic states?
Through their power to grant and withhold
funds have foundations tended to shift the
center of gravity of colleges and other insti-
tutions to a point outside the institutions
themselves?
8. Have foundations favored internationalism?
To what extent are foundations spending American
money in foreign countries?
10. Do foundations recognize that they are in the
nature of public trusts and are therefore
accountable to the public or do they clothe
their activities in secrecy and resent and
repulse efforts to learn about them and their
activities?
11. Are foundations being used as a device by which
the control of great corporations are kept within
the family of the foundation's founder or creator?
12. To what extent are foundations being used as .a
device for tax avoidance and tax evasion?
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In dealing with these questions the Committee recog-
nizes all too clearly that which must be apparent to any
intelligent observer, namely, that it was allotted insuf-
ficient time for the magnitude of its task.
Four successive Royal Commissions sat over a period
of eighteen years while engaged in the task of investigating
and reporting on 28,880 charitable trusts existing in England
well over a century ago. This Committee was given a similar
task and directed to complete its work in the less than six
months remaining after funds were appropriated for the work.
It is obvious that the Committee could not investigate
thousands of organizations within the limitations of the
time allotted. Expediency compelled focusing attention on
a small segment of the whole. Individual attention was
given to a.small number of the largest foundations, but
even here investigation could not be made with the thorough-
ness the Committee desired. For example, the Rockefeller
Foundation alone has made almost thirty thousand grants
approximately six thousand of which were in the form of
scholarships awarded to individuals. The Committee has
endeavored to make as thorough a survey as time permitted.
Its findings and conclusions must, under the circumstances,
be general rather than specific, It has endeavored to bring
into this inquiry such information as it could assemble and
to apply to this information,, incomplete though it is, its
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best judgment. With these observations the Committee will
attempt to deal with the following major questions raised by
criticisms received:
1. Have foundation funds been diverted from
the purposes established by the founders?
So far as we can ascertain there is little basis for
the belief expressed in some quarters that foundation funds
are being diverted from their intended use. There have
been instances of such diversion but we'believe that the
criticism is unwarranted in the main. It has been sug-
gested that the smaller foundations, particularly those
established to receive the allowable annual deductions of
an individual or family and having no endowment other than
that accumulated from yearly contribution from the individ-
ual donor or his family, have sometimes been used to take
care of members of the family or of family pensioners by
placing them on the payroll as employees or by granting to
needy relatives scholarships; if done by outright gift of
the individual creating the foundations, these would not be
deductible contributions. That this is possible must be
conceded. That it is a widespread practice is doubted.
Nevertheless it is a possible abuse which should be guarded
against. The Committee believes that public accounting
would go far towards eliminating such abuses.
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To what extent have foundations been infiltrated
by Communists and Communist sympathizers?
3. Have foundation funds been channeled into the
hands of subversive individuals and organizations,
and, if so, to what extent?
Questions 2 and 3 will be considered together. There can
be no reasonable doubt concerning the efforts of the Communist
Party both to infiltrate the foundations and to make use, so far
as it was possible, of foundation grants to finance Communist
causes and Communist sympathizers. The Committee is satisfied
that as long as twenty years ago Moscow decided upon a program of
infiltrating cultural and educational groups and organizations in
this country, including the foundations. The American Communist
Party, following the program laid down in Moscow, went so far as to
create a subcommission of the Agit-Prop (Agitation-Propoganda) or
Cultural Commission which gave specific attention to foundations.
The aims were to capture the foundations where possible, and where
this proved impossible, to infiltrate them for the purposes (1) of
diverting their funds directly into Communist hands, and (2) pro-
curing financial assistance for projects and individuals favorable
to Communism while diverting assistance from projects and indivi-
duals unfavorable to Communism. A few small foundations became
the captives of the Communist Party. Here and there a foundation
board included a Communist or a Communist sympathizer. occasion-
ally a Communist managed to secure a position on the staff of a
foundation. or a staff member was drawn into the Communist orbit.
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Ou? investigation, hurried by lack of time, indicates that very
few actual Communists or Communist sympathizers obtained posi-
tions of influence in .the foundations. However, there are some
unhappy instances where the Committee is convinced infiltration
occurred. There remains the ugly unalterable fact that Alger
Hiss became the president of the Carnegie Endowment for Interna-
tional Peace. And this despite the fact that his nomination and
election came about through the efforts of men of proven loyalty
and broad experience in public affairs.
So far as the Committee can learn, during his term as Presi-
dent'of. the Carnegie Endowment, Hiss took no official action to
further the Communist cause.
There is also the indisputable fact that Frederick Vanderbilt
Field became the secretary of the American Council of the Insti-
tute of Pacific Relations. The whole unhappy story of the I.P.R.
which was largely supported by foundation funds has been so fully
revealed by the investigation of the McCarran Committee that there
is no need to make further reference to it here.
There have been other less dramatic incidents, few in number
but startling in their implications. That the Communists
succeeded in obtaining from the foundations financial aid and
assistance for numerous members and sympathizers seems conclusive
to the Committee. In the aggregate, the number of such grants and
the amounts involved are alarming. Proportionately, when viewed in
the light of the total grants made, they are surprisingly small.
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Despite the fact that in all but a very few cases these
unfortunate grants were made prior to the time that the individual
grantees were exposed by duly constituted government agencies, the
responsibility for proper selection rests upon the foundations,
not the government. The foundations should be alert to the dan-
gers of this situation as a result of this experience. We are
impressed with the fact, however, that most of these malodorous
individuals were selected. under political conditions very different
from those that now exist and the deg signs were taken in a politi-
cal and emotional climate very different from the present.
There are certain other aspects to be considered which, if
not a defense to the charge of laxity on the part of foundations,
offer, at least, an understandable explanation of what occurred.
It has been pointed out that the foundations operate on the fron-
tiers of knowledge. Those foundations granting fellowships are
seeking intellectuality of the highest order. It has been said
in these hearings that there is no necessary correlation between
political sagacity and scientific eminence, and it also has been
said that there is a correlation between academic eminence and
political naivete. Irrespective of whether these generalizations
can be taken literally it may safely be said that many individuals
of unusual talent, particularly artists, poets, novelists, play-
wrights, and musicians, are often non-conformists. That this is
apt to be the case is illustrated by the record of The John Simon
Guggenheim Memorial Foundation. The Guggenheim Foundation restricts
itself ftpprdt [1 tqrR4$M 2W4dt bl tc I% Q RQQQ Q> A45 its
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obviously renders it more vulnerable than those foundations which
make all or a part of their grants to institutions or organiza-
tions, for these latter are more easily catalogued than the indi-
vidual, and with greater accuracy.
This greater vulnerability is attested by an examination of
the Guggenheim grants. Admittedly this foundation has done an
outstanding job in its selection of fellows. Literally scores of
Its more than two thousand fellows have made outstanding records,
including three Nobel Prize winners. Yet despite this notable
record, 40 of its fellows have received unfavorable mention by
established governmental agencies and 41 additional Guggenheim
fellows have received 10 or more citations; this is sufficient to
render them, in the Committee's opinion, extremely bad risks.
The foundations, for the most part, have made no secret of
their mistakes, and have stated frankly that in recent years they
have recognized the Increasing need to be constantly alert to avoid
giving unintended aid to subversives.
The Committee believes that on balance the record of the
foundations is good. It believes that there was infiltration and
that judgments were made which, in the light of hindsight, were
mistakes, but it also believes that many of these mistakes were
made without the knowledge of facts which, while later obtainable,
could not have been readily ascertained at the time decisions were
taken. It further believes that the foundations are aware of the
ever present danger and are exerting and will continue to exert
to say
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the foundations are blameless, the Committee believes they were
guilty principally of indulging the same gullibility which
infected far too many of our loyal and patriotic citizens and that
the mistakes they made are unlikely to be repeated. The Committee
does not want to imply that errors of judgment constitute malfea-
sance.
The Committee feels that it should warn foundations against
what it considers to be evidence of a willingness to disregard
danger signals as exemplified in the testimony of one witness
given before the Committee during the hearings. Intellectual
assurance, if pushed too far, may become intellectual arrogance with
all the dangers it entails.
t. Have foundations supported or assisted persons,
organizations and projects which, if not sub- '
versive in the extreme sense of the word, tend to
weaken or discredit the capitalistic system as it
exists in the United States and to favorMarxist
socialism?
This is the criticism most frequently made against founda-
tions and it is the one urged with the greatest vehemence. If, for
the purpose of this report, we treat the term "subversive" as
synonymous with "Communism" or "Communistic", or as applicable to
the apparatus of Communism, we can differentiate with greater exact-
itude between that which is definitely subversive and that which
represents merely a criticism of the existing order or the advocacy
of a change in the economic-political-social order by constitutional
methods.. Hereafter we shall treat the term "subversive" as charac-
terizingA ov l a;Zel 2bfd/0 k1 sL 1&D6U.0( 0 454eeply
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inimical to this country, its traditions and its way of life. In
the preceding paragraphs we have discussed the efforts of the
Communists to capture, infiltrate and influence foundations, and
have indicated our view of the measure of success or failure their
efforts met. We now pass to the question of whether the founda-
tions have used their resources to weaken, undermine or discredit
the American system of free enterprise either by criticism, ridi-
cule or pale praise while at the same time extolling the virtues
of the socialistic state,
The testimony does not establish this to be the case as to the
foundation system in general. It has been established that some
foundation funds have gone to the support of the Communist line or
to proved Communists or Communist sympathizers, but where this
occurred it is our belief that it occurred inadvertently or through
the stealth and deceit of Communist "infiltrees". To these
instances must be added those few isolated cases where foundations
became captives of the Communist Party. What we are expressing
here is our belief that the foundations, with the exception of the
captive foundations noted above, have not deliberately thrown their
support to the Marxist philosophy and against what we have come to
regard as the American system of capitalistic free enterprise.
In refutation of our position will be cited the instances of
foundation support for the Russian area studies at various univer-
sities, for the translation of Russian books, for studies in the
social sciences deemed socialistic by some critics. We think the
tostimc 'r%LPAEobgj1S / 6IA6iyWW&Ijg0 '@g~03I0998 '5j.nction
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between "study" of a subject and the "teaching" of it. The one
embraces objective analysis. The other contemplates the advocacy
of principles .
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Area studies such as this should be made only after
meticulous screening of those entrusted with the task and
under constant safeguards.
The same reasoning must be applied to the new fields
of inquiry in the social sciences which are receiving the
support of foundations. Many of our citizens confuse the
term "social", as applied to the discipline of the social
sciences, with the term "socialism". And since the social
sciences may be defined as the study of man's relationship
to man, the problem of every man considering himself an
expert in the field is ever present. Few individuals
feel themselves qualified to express an expert opinion on
nuclear fission or the value of isotopes but most of us
will not hesitate to express our opinions on such homely
subjects as divorce, the causes for the increase in the
cost of living, the psychological effect of segregation,
the increase in juvenile delinquency, or the impact of
television on the study habits of children. But these
and other subjects within the orbit of the social sciences
are proper subjects for objective study and analysis under
conditions of control which give promise of revealing
scientific facts.
The Committee is impressed with the testimony of the
foundations that their area of usefulness is to some extent
in WI r NF a 20 /Or34~t8t~xC iIR OQ6 ~d~Q300~ # ring
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these fields, they knowingly invite criticism and thereby
assume the calculated risks incident to exploring new fields
of knowledge. They regard such risks as justified because
of the great good that may evolve for mankind. The Committee
finds no fault with the general policy of the major founda-
tions of promoting experiments designed to help men to live
peaceably together, so long as they are conducted with devo-
tion to the American tradition of freedom.
But there are additional arguments urged in favor of
the foundations' work in the social sciences. Many studies
in these fields have benefited government as well as busi-
ness. Among these are studies of our national income, our
markets, our productivity, our business cycles, the relation-
ship between the productivity of the worker and the standard
of living. It has been said in the hearings that the foun-
dations, both in their conception and their work, give sup-
port to the capitalistic system. It seems paradoxical that
in a previous Congressional investigation in 1915 the fear
most frequently expressed was that the foundations would
prove the instruments of vested wealth, privilege and
reaction, while today the fear most frequently expressed
is that they have become the enemy of the capitalistic
system. In our opinion neither of these fears is justified.
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5. Are trustees of foundations absentee landlords
who have delegated their duties and responsi-
bilities to paid employees of the foundations?
6. Do foundations tend to be controlled by inter-
locking directorates composed primarily of
individuals residing in the North and--Middle-
Atlantic states?
Questions 5 and 6 may be discussed more conveniently
if grouped together. The idea that the office of trustee
or director of a large foundation is a sinecure involving
little work, enormous prestige and not inconsiderable power
which is traditionally delegated to the paid members of
the staff seems to have obtained widespread acceptance.
In part this idea is true but in larger part it is
the child of misinformation. The position of trustee or
director of one of the large foundations undoubtedly
carries with it dignity and the badge of achievement.
This is due not only to the prestige which foundations
themselves enjoy in the public mind but also to the dis-
tinguished company of men who traditionally have held
these positions of trust and responsibility. But the
belief that a trustee has few if any duties connected
with his office is contrary to all that this Committee
has been able to learn. It appears that the duties and
responsibilities of trustees of the large foundations are
onerous to the point that they would seriously interfere
with the work of the average business man
AA$$
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trustees of the larger foundations are men of outstanding
achievement, broad interests and proven competence who
have demonstrated their capability for and willingness
to assume heavy burdens of work. This latter qualifica-
tion is an important one, and is well utilized by the
foundations. Since many of the larger foundations have
their headquarters in New York and since availability is
an important consideration it Is only natural that the
great majority of trustees should come from New York and
near-by areas. It is also understandable that the serv-
ices of an outstanding man should be sought by. more than
one foundation and that we should therefore find a number
of individuals serving on the board of more than one foun-
dation.
Despite these considerations, all of which are per-
suasive, the Committee feels that a wider geographical
distribution would go far towards establishing greater
public confidence in the foundations and would dispel much
of the distrust which shelters under a traditional fear
of wall Street. It is also entirely possible that a sus-
tained search for qualified individuals residing west of
the Hudson River might assist the foundations to maintain
the freshness of approach, flexibility, and breadth of
vision for which they profess to strive. If, as the foun-
datA v 6 akiP90o4/v3/T8'j ~A f~~9T ~1U6S2 20 83 0~ ~~ t51 ons
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are public trusts then the public in its widest sense,
including the geographical, should be fairly represented.
This observation leads naturally to a question which
has given the Committee some concern. Since practically
all foundation trustees serve without compensation and
since the duties of the trustees of the larger foundations
require considerable expenditure of time and effort, are
not foundation trusteeships largely limited to the very
wealthy, the retired or the academic circles? The Committee
recognizes that there are arguments both pro and con with
respect to compensation of trustees but it feels that the
question posed is worthy of consideration by the foundations.
As to the delegation by trustees of their duties and
responsibilities, the problem is basically the same one
that confronts the directors of a business corporation.
Both must rely in large measure upon their staffs. There
is this one important difference, in the opinion of the
Committee. The trustees of a public trust carry a heavier
burden of responsibility than the directors of a business
corporation. In fairness it should be said that in the
opinion of the Committee this principle is fully recognized
by the trustees of foundations and that they make a
determined effort to meet the challenge.
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7. Through their power to grant and withhold funds have
foundations tended to shift the center of gravity
of colleges and other institutions to.a2, point out-
side the institutions themselves? This question arises from a criticism which has come to the
Committee from persons well informed generally and situated in
positions from which a strategic view of the situation can be had.
The Committee does not consider itself sufficiently well advised on
this point to hazard a view.
8. Have foundations favored internationalism?
To what extent are foundations spending American
money in foreign countries?
Questions 8 and 9 present common problems and are discussed
together. While the expenditure of money in foreign countries might,
in and of itself, be considered evidence of a bias toward inter-
nationalism, the Committee does not feel that this is necessarily
so. Those foundations which have made substantial foreign expendi-
tures are frankly and openly in favor of international cooperation
along cultural and educational lines. The Ford Foundation, for
instance, has made the promotion of peace one of its major objec-
tives and it believes this can best be achieved by international
cooperation. To that end it has appropriated large sums of money
for assistance to certain foreign countries and the bulk of this
money is being spent in those countries where assistance is being
given. The officials of the Ford Foundation have stated fatly that
they believe the interests of the United States are being advanced
by the Apprd fl J2tM%i@ 20 '0 giC R Y-d 4920bb3dbb8~0 Eve they
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would not make the expenditures.
The Carnegie Endowment for International Peace is committed
by the very purpose for which it was founded to international
cooperation. To the extent that it implements its avowed purpose
it is in a sense internationalist.
Mr. Rockefeller once said that he had made his money all over
the world and that he wished it spent on behalf of mankind through-
out the world. The Rockefeller Foundation has followed the
founder's thinking in this respect and approximately one-third of
its grants are spent abroad. However, the thinking behind these
grants does not appear to be internationalist in the sense in which
that term is usually used. The Committee gathers that the Rocke-
feller Foundation is thinking internationally in terms of culture,
education and public health rather than in terms of politics. The
quest for total elimination of yellow fever has carried it across
international boundaries and into other continents. Once on the
scent it cares not where the trail leads. These are but a few
instances. We think it a fair statement to say that activities on
an international scale and foreign expenditures in significant
amounts are limited to only the very largest of the foundations.
Some of the smaller foundations cross international boundaries in
connection with the granting of fellowships and grants in aid.
Considering the picture as a whole, those foundations operat-
ing on an international scale are very few in number, but because
they are well known and their expenditures comparatively great, the
at tent i.,Rlprfo9@&: 89R@r6alP2 4/S:Rfe ?~rtionato
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Those foundations which are concerned with internationalism along
political lines appear to center their activities around projects
which support the government policy of participation in United
Nations activities. All foundations deny participation in politics
or political propaganda. The Committee believes that these inter-
national, activities and foreign expenditures of the foundations are
motivated chiefly by consideration 'of the welfare of the American
people and as such are entirely.pralepworthr.
10. Do foundations reco n ze that they are in the
nature ofpublic trusts and are therefor. e
accountable to '-he public or do L11ey
their activities in secrecy and resent and
repulse efforts to learn about there and their
activities?
All foundations questioned have, without exception, stated
that they consider themselves to be public trusts. At that point
unanimity ceases. The larger foundations take the position that
as public trusts they are accountable to the public and that the
public is entitled to know in detail about their resources,
income, expenditures, personnel and programs. Stated in the
words of one of their trustees "foundations should not only
operate in a goldfish bowl - they should operate with glass
pockets." In short the larger foundations favor public accounta-
bility. and public accounting. To this end most of the larger
foundations publish detailed annual reports which are given
wide distribution among the various media of mass communica-
tion, public libraries, schools and colleges.
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On the other hand many of the small foundations, particu-
larly those designed to receive the deductible contributions
from individuals and privately owned corporations, oppose public
accounting on the ground. that they do not wish the public to
know the amount of contributions made by the donor and his
family, or by corporations owned or controlled by the donor.
To a lesser extent many of the smaller foundations oppose public
disclosure of their expenditures. They argue that public dis-
closure of contributions and expenditures will cause the abandon-
ment of many of the small foundations now in existence and will
discourage the formation of new small foundations.
The Committee recognizes that public disclosure of the
names of contributors and the amounts contributed to foundations
might result in an unfortunate curb on philanthropic giving.
It does feel, however, that such information should be made
known to the Bureau of Internal Revenue where it would.also
be available to the appropriate committees of Congress. It feels
also that full. public disclosure should be made by such organi-.
zations of all grants made so that the public will be in a
position to determine whether tax-exempt monies are being used
for the purposes for which these organizations were created.
11. Are foundations being used. as a. device by which
the control of great - c - ( 5 o nns ire kePT-w_i.th-
inn the roily a le fauriuat on's founder o
creator?
12. To what extent are foundations bei used as a
c-evi.ce `Tor tax avoidance and tax evas .'O^ 119
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The Committee regards questions 11 and 12 as matters for
the consideration of the Committee on Ways and Means. It
therefore has made no attempt to find the answers to these
questions. We feel the questions are of sufficient importance
to warrant inquiry by the Ways and Means Committee and this
Committee wishes to make its files available to the Ways and
Means Committee if the latter believes they will be of assist-
ance to it.
The Committee's recommendations are as follows;
1. Public accounting should be required of all founda-
tions. This can best be accomplished by amendment of the existing
laws in substantially the form herewith submitted as Appendix A,
to which we direct the attention of the Eighty-Third Congress.
2. That the Ways and Means Committee take cognizance of
our finding that the maintenance of private sources of funds is
essential to the proper growth of our free schools, colleges,
churches, foundations and other charitable institutions. We
respectfully suggest that the Committee re-examine pertinent
tax laws, to the end that they may be so drawn as to encourage
the free enterprise system with its rewards from which private
individuals may make gifts to these meritorious institutions.
The Committee has received material assistance from
numerous government agencies, and especially from the Bureau
of Internal Revenue, the Library of Congress, the Committee
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on Uri-American Activities, the McCarran Committee, the Office
of Education, the Banking and Currency Committee, the Committee
on Labor and Education and the Federal Bureau of Investigation.
The Committee wishes to acknowledge the cooperation
afforded it by the foundations. There has been no instance of
obstruction, delay or resentment on the part of the foundations.
The Committee was fortunate in securing the services of
Harold M. Keele, of Chicago, as General Counsel. Upon his ap-
proval by the Committee, Mr. Keele arranged to devote his full
time to this study and has rendered an outstanding service in
directing the surveys and legal inquiries necessary to carry
out the mandate of Congress. The Committee appreciates his
devotion to this task and the excellent service which he has
rendered.
Committee desires to give recognition to the able and
unremitting work of the following
Thomas J. Feeney
Edward C. Kennelly
Joseph C. Kiger
Mary E. Searight
Edith M. Knight
Russell McFarland
Roger H. Mudd
William H. Snape, Jr.
Sarah Jane Billingsley
Mary L. Taylor
Clarence A. McGillen,Jr.-
members of its staff:
Staff.Director
Attorney
Director of Research
Clerk
Administrative Assistant
Investigator
Research Assistant
Research Assistant
Clerical Assistant
Clerical Assistant
Clerical Assistant
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The foregoing report is respectfully submitted this 1st
day of January, 1953.
Brooks Hays, Ark. ? - Acting Chairman
Donald T,,. 0 ' Dole; -New Yk
Aime .Gran , R.
Richard M. Simpson, Fa.
Angier L. Goodwin; i'4a ss.
B, Car o eece, Tenn,
(As pointed out and stressed in this report, the Select
Committee his had insufficient time for the magnitude of its
task. Although I was unable to attend the full hearing I feel
compelled to observe that, if a more comprehensive study is de-
sired, the inquiry might be continued by the 83rd Congress with
profit in view of the importance of the subject, the fact that
tax-exempt funds in very large amounts are spent without public
accountability or official supervision of any sort, and that, ad-
mittedly, considerable questionable expenditures have been made.--
?B. Carroll Reece)
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APPENDIX A
To provide for public accountability by tax-exempt organizations
and other purposes.
Be it Enacted by the Senate and House of Representatives of
the United States of America in Congress Assembled, That this
Act may be cited as the "Public Accountability Act for Tax-
Exempt Organizations", and
That Section 153 of the Internal Revenue Code is hereby
amended to read as follows:
"Section 153. Information Required From Certain Tax-Exempt
Organizations and Certain Trusts,
(a) Certain Tax-Exempt Organizations. -- Every organization
described in section 101 (6) which is subject to the requirements
of section 54 (f) shall furnish annually information, at such
time and in such manner as the Secretary may by regulations pre-
scribe, setting forth --
(1) Its total contributions received during the year,
(2) Its gross income for the year,
(3) Its expenses attributable to such income and incurred
within the year,
(4) A breakdown of such expenses to show its administrative
overhead, including the annual salaries of any trustees, directors,
officers or employees receiving more than $4,000.00 per year,
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(5) Its disbursements out of income within the year for
the purposes for which it is exempt,
(6) Its accumulation of income within the year,
(7) Its aggregate accumulations of income at the beginning
of the year,
(B) Its disbursements out of principal in the current and
prior years for the purposes for which it is exempt,
(9) A balance sheet showing its assets, liabilities and
net worth as of the beginning of such `year,
(10) A complete list of all contributors and amounts con-
tributed during the year where the amounts of such individual
contributions exceed $200.00.
(11). The names and addresses of all persons or organizations
receiving grants during the year and the amount and general pur-
pose of each such grant.
(b) Trusts Claiming Charitable, Etc., Deductions Under
Section 162 (a). -- Every trust claiming a charitable, etc.,
deduction under section 3.62 (a) for the taxable year shall fur-
nish Information with respect to such taxable year, at such time
and in such manner as the Secretary may by regulations prescribe,
setting forth --
(1) the amount of the charitable,. etc., deduction taken
under section, 162 (a) within such year (showing separately the
amount of such deduction which was paid out and the amount which
was permanently set aside for charitable, etc., purposes during
such year),
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(2) the amount paid out within such year which represents
amounts for which charitable, etc., deductions under section 162
(a) have been taken in prior years,
(3) the amount for which charitable, etc., deductions have
been taken in prior years but which has not been paid out at the
beginning of such year,
(4) the amount paid out of principal in the current and
prior years for charitable, etc., purposes,
(5) the total income of the trust within such year and the
expenses attributable thereto, and
(6) a balance sheet showing the assets, liabilities, and
net worth of the trust as of the beginning of such year.
This subsection shall not apply in the case of a taxable year
If all the net income for such year, determined under the appli-
cable principles of the law of trusts, is required to be distrib-
uted currently to the beneficiaries.
(c) Information Available to the Public. -- The information
required to be furnished by subsections (a) and (b), with the
exception of that required by subsections (a) (4) and (a) (10)
above, together with the names and addresses of such organiza-
tions and trusts, shall be made available to the public at such
times and in such places as the Secretary may prescribe.
(d) Penalties. -- In the case of a willful failure to furnish
the information required. under this section, the penalties pro-
vided in section 145 (a) shall be applicable. In addition
exemption under section 101 (6) shall be denied for the taxable
year.
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