Commentary: Does philanthropy’s 5% payout build stewardship or just engender deferral?

In a commentary published in Fortune, philanthropy advisor Vandana Arcot questions whether the IRS 5% annual payout requirement for private foundations still works as a measure of responsible stewardship. Set in 1969 as a compromise, the rule has remained unchanged while foundation assets have grown dramatically. Arcot argues that, with tax incentives for charitable giving weakened, the 5% floor has become the only policy mechanism governing how quickly philanthropic capital reaches communities. The central question, she contends, is whether preserving wealth across generations represents stewardship—or simply deferral. As massive intergenerational wealth transfers accelerate, Arcot asks whether a metric designed more than five decades ago remains an adequate standard for measuring philanthropic impact.