Charities find Delaware is good company

More than 1,200 charitable foundations are incorporated in Delaware, nearly all of which focus their philanthropy elsewhere.

WILMINGTON, Del. — It's hard to imagine Brad Pitt and Angelina Jolie spending much time at their office here.
The low, brown-brick building on Silverside Road is a far cry from the mansions and spotlights of Hollywood. Anyone – adoring fans,
stalkers, the paparazzi – can walk through its glass front door, down the hall, up the stairs and around the corner to reach their office, Suite 123. The carpet is beige, not red.

Yet 501 Silverside Road is the address the movie superstars and global philanthropists consider their legal address as co-presidents of the non-profit Jolie-Pitt Foundation. It's incorporated here, but it gives all its money — $21.5 million from its founding in 2006 through 2011 — to charities in Cambodia, Namibia, Pakistan and destitute portions of the USA.

Theirs is one of more than 1,200 charitable foundations incorporated in Delaware, nearly all of which focus their philanthropy elsewhere. Only Rhode Island has more foundations per capita, but Delaware specializes in "foreign" foundations that have no significant connection to the state.

Nearly 800 of those foundations — which are established by wealthy donors to give money to favorite causes — all legally reside with Pitt and Jolie behind the oak door of Suite 123. They include those of actor Hugh Jackman, entertainer Cher, NFL quarterbacks Matt Hasselbeck and Phillip Rivers, Jeopardy! host Alex Trebek, Melrose Place creator Darren Star and actress Yeardley Smith, better known as the voice of Lisa on The Simpsons.

They give to their alma maters and their churches, to charities for sick children and endangered animals, to non-profit groups advocating abortion rights and others fighting to end abortion.

An additional 100 foundations with an overseas focus — such as Save the Rhino International, Friends of the American School of Warsaw and Historic Royal Palaces, which supports several popular British tourist sites — are served by Chapel & York, a British company with a "virtual" office in downtown Wilmington.

They're all drawn, experts say, by Delaware's well-earned reputation as a place to set up shop quickly, easily, cheaply and with few questions — many of the same reasons that nearly 1 million public corporations are here.

"It's the company state, and it's well known that way," said David Wickert, executive director of Chapel & York.

Foundations in Delaware pay just $25 a year in franchise tax, don't need CPA-certified audits and don't pay state tax on unrelated-business income, as they would in some other states, said Jeffery Haskell, chief legal officer for Foundation Source, the Connecticut company that administers the Silverside Road foundations.

"They really know how to attract for-profit businesses and non-profits, too," Haskell said.

Like most states and the federal government, Delaware's oversight of the growing number of private foundations and public charities is "woefully inadequate," said Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, a non-profit advocacy group.



The Internal Revenue Service audits only a small portion of the 1.1 million financial statements filed by non-profit groups annually, most of which are a year or two out of date anyway, Dorfman said. States don't do much better.

"Most state attorneys general have just one person overseeing the entire charity sector," Dorfman said. "Without staff at the state level to investigate, most abuse goes undetected. It's not rampant, but it is significant."

In Delaware, foundation oversight falls to the seven attorneys in the attorney general's consumer protection unit, but they cover 3,200 other charities and all kinds of disputes between consumers and businesses. Their work is entirely driven by complaints, director Gregory Strong said.

"Someone would have to call us and say, 'I gave money to this organization, and I don't think it was used for charitable purposes,' " he said.

The attorney general's office collects the Form 990 financial statements that Delaware non-profit groups submit annually to the IRS, Strong said. No one reviews those statements, and the state does not make them public.

Strong said 39 other states require non-profit groups to register and submit financial information annually, so regulators and the public can know who is operating in their states.

Delaware laws allow foundations to have just one director, instead of three, and the state lets Foundation Source pay the franchise tax and file papers for all of its 800 non-profit groups at once, instead of separately, he said.

"They do things in a friendly, efficient, convenient way," Haskell said. "It's just such a clear choice to go with Delaware."

The IRS requires all tax-exempt organizations to be incorporated somewhere, so Delaware appeals to philanthropists who don't care where their legal home is, Wickert said. That's especially useful for organizations with a global focus.

"More and more Americans want to support organizations outside the United States, and the only way to do that is to make a donation to a group registered in the United States," said Wickert, a former Episcopal priest who lives in Sussex, England.