Congressional interest in the nonprofit group was so high in 2005, in fact, that an attorney for then-committee Chairman Charles E. Grassley (R-Iowa) used it in an internal memo as a case study into whether the tax loophole should be closed. The memo, previously unreported, pointed out that in 2002 the foundation distributed just 0.2 percent of its assets to charity. That was acceptable under the law because GKFF, as it is known, was founded to financially “support” another nonprofit group, the Tulsa Community Foundation.
Most private foundations must spent 5 percent or more of their assets on charitable work each year or face financial penalties.
“Tax deductions for charitable contributions are intended to encourage transfer of wealth to those in need,” the memo said. “Individuals should not be allowed to ‘park’ their assets in charities in order to preserve their assets in perpetuity, while simultaneously benefiting from a charitable contribution deduction.”
The loophole used by GKFF, the memo concluded, “is now being used by wealthy individuals to avoid the private foundation rules.” Those organizations, it said, were in effect “conducting the abusive activities Congress intended to curb” when it established the 5 percent minimum payout for foundations.
Endowed by Oklahoma financier and Democratic fundraiser George Kaiser, GKFF gives to support early childhood education for the poor, to a University of Oklahoma program focusing on community medicine and toward the beautification of Tulsa.
But despite its name, the $4 billion foundation is not a private foundation under tax law. Instead, Kaiser established the organization as what is known as a “supporting organization.” There are thousands of supporting organizations in the United States, and although they are perfectly legal, some reformers think they shouldn’t be — especially one that stockpiles $4 billion.
“In that case, that’s not supporting anything but itself,” Pablo Eisenberg of Georgetown University’s Center for Public & Nonprofit Leadership said of GKFF. “I think it should be abolished.”
Under current law, Kaiser would be entitled to tax write-offs for cash and stock he donated to the organization.
In a written statement, GKFF stressed that it was lawful and “not uncommon” for a supporting organization to include the word “foundation” in its name.
“The purpose of the structure is to support the community, state and other charities focused principally on reducing the cycle of poverty, mainly in the greater Tulsa area,” the statement said. “We have increased donations as opportunities presented themselves. Someday, we fully expect to achieve five percent giving, although we are under no legal obligation to do so.”