Charles Schwab charitable fund halts donations to NRA
- Schwab Charitable has suspended clients' ability to give money to NRA-affiliated charities through its donor-advised fund.
- The move comes as state regulators examine whether the NRA abused the non-profit status of a charity controlled by the gun advocacy group.
- "Donor-advised" funds managed by Schwab, Fidelity and other large financial firms have donated hundreds of thousands of dollars to NRA groups in recent years.
A Charles Schwab charitable fund has stopped allowing customers to make donations to non-profits linked to the National Rifle Association through its $10 billion donor-advised fund.
The decision to suspend contributions to charities linked to the gun owners advocacy group, which has not been previously reported, was made in the past few months. It comes at a time the NRA has faced a drop in donations, as well as allegations that it abused its non-profit status. Schwab's fund had donated a total of $146,000 to NRA-affiliated charities in its past three fiscal years, according to IRS filings.
Attorneys general in the District of Columbia and New York have opened investigations into whether the NRA illegally transferred millions of dollars in tax-exempt payments from its non-profit, the NRA Foundation, to the parent organization. Donations made directly to the NRA would not qualify as tax exempt.
"The NRA strives to comply with all applicable regulations," NRA outside counsel William Brewer III said in a statement to CBS MoneyWatch. "As we have stated on several occasions, the NRA is confident that its business practices enable its mission to protect Second Amendment freedoms."
Fred Kaynor, a vice president at Schwab Charitable, the independent non-profit that manages Schwab's affiliated donor-advised fund, told CBS MoneyWatch, "Like other donor-advised fund providers, Schwab Charitable follows IRS guidance and suspends grants to [non-profit] organizations that are under investigation. In accordance with this policy, Schwab Charitable is not currently facilitating grants to 501(c)(3) public charities involved in the investigation of the NRA."
Kaynor did not say whether Schwab would lift the suspension on NRA-linked groups if the organization is cleared of wrongdoing.
"We are disappointed in Charles Schwab's decision, however, it has no material impact on the NRA, its affiliates, or our mission to protect the Second Amendment," said Andrew Arulanandam, managing director of public affairs for the NRA. "Our members appreciate that, unfortunately, not every corporation is fully committed to our cause and freedoms."
Schwab is the most recent large financial firm, including Bank of America and Citigroup, to distance itself from the NRA and the gun industry following a rash of mass shootings. The NRA and other gun rights groups have criticized banks for refusing to process gun purchases or lend to gun manufacturers.
City officials in San Francisco, where Schwab is based, passed a resolution in September that labeled the NRA a "terrorist organization" following a recent mass shooting there. The non-binding resolution called on the city and its agencies to limit their relationships with companies that do business with the NRA.
Schwab declined to comment on whether the measure played a role in its decision. Wells Fargo, which is also based in San Francisco, has continued to lend money to gun companies as well as to a number of non-profit groups linked to the NRA.
Schwab on Monday said it will buy rival TD Ameritrade for $26 billion. As part of the deal, Schwab is moving its headquarters to Westlake, Texas.
Bloomberg reported last year that the NRA Foundation had an investment account at Charles Schwab. The brokerage firm said it does not disclose the identity of its clients, citing privacy concerns.
A "strict" approval process
Schwab offers one of the largest donor-advised funds in the country, which is run by an affiliate organization, Schwab Charitable. Donor-advised funds allow individuals to designate money for charitable giving and get a tax break without making an immediate donation.
Individuals direct Schwab regarding what charities should receive their funds in its donor-advised fund. All of the money must eventually go to charity, but there is no limit on when donations must be made. Experts have criticized the practice, arguing that financial firms, which earn fees from managing the funds and facilitating transactions, have turned charitable giving into a for-profit enterprise.
Schwab says that, while its donor-advised fund makes grants to charities specified by its clients, every grant made by the fund goes through a "strict" approval process.
"Schwab Charitable does not condone hate groups, and we take concerns about the illegitimate activity by grant recipients seriously," said Kaynor, who also dismissed the idea that the firm makes money off its donor-advised fund. "The amount of support Charles Schwab & Co. provides to Schwab Charitable is far greater than any fees Charles Schwab receives for investment management."
Other donor-advised funds managed by large financial firms have also directed large donations to groups tied to the NRA. The Fidelity Charitable Gift Fund, which is the largest donor-advised fund in the nation, donated nearly $375,000 to NRA-linked groups in its past two fiscal years, according to IRS documents.
Like Schwab, Fidelity said it is generally up to clients where the money in its donor-advised funds goes. But the company will not donate to charities that are currently under investigation by either federal or state authorities, as is the case with the NRA and its affiliated charities. A Fidelity spokesperson declined to say whether the company was still facilitating donations to NRA-linked charities.
An official at the National Philanthropic Trust, which is part of an advisory group of the largest donor-advised funds, said Schwab officials recently contacted the organization about the brokerage's decision to suspend grants to the NRA. The NPT official said he has not heard of other funds making the same decision, and that its advisory group, which meets regularly, has not discussed the issue.