Prequel: The “Charitable work” of Elon Musk
Alan Cantor is a quintessential muckraker -- a species we need more of. Here he brings a deeply personal take on Elon Musk and his relationship with the nonprofit/philanthropic sector.
Elon Musk, now seemingly everywhere as the head of DOGE, has shown no hesitancy in dramatically cutting federal agencies and programs. What can we expect from him in terms of nonprofits and the people and causes they serve?
A look at his track record with philanthropy gives us thunderous evidence.
In a nutshell, as with Musk's approach to business, social media, and now politics, his treatment of charitable giving has been self-serving and disrespectful of the norms and the rules.
Musk’s charitable misdoings were brought to national attention in a March 2024 New York Times story by Pulitzer Prize-winning journalist David Fahrenthold and his colleague Ryan Mac. For those of us who have been writing and speaking about how some of the wealthiest Americans take unconscionable advantage of e charitable tax laws, it’s instructive when the single wealthiest person of all shows just how off the rails high-end philanthropy has become.
I admire so many philanthropists. I’ve written about MacKenzie Scott’s trusting approach to giving. and Ruth Gottesman’s billion-dollar gift to the Albert Einstein College of Medicine, which will make the school tuition-free for all students going forward. There is nothing admirable about Musk’s approach to philanthropy.
Allow me to sort Musk’s tactics as described in the Times article and add one more.
1. The Tax Benefits
According to Fahrenthold and Mac, since 2020 Musk has donated around $7 billion of stock to the Musk Foundation, in the process saving himself some $2 billion in tax payments. Two billion dollars is a lot of money not going to the common good through taxation.
2. The Self-Interest
Musk’s “philanthropy” in large part has gone to enterprises that technically qualify as charitable, but that also support his own business interests and even his family’s welfare.
- One major beneficiary is Ad Astra, a nonprofit school founded by Elon Musk, a school his own children attend – along with the children of his top executives at SpaceX. As the Times story explained, “In its first year of operation out of [Musk’s] home in the Bel-Air neighborhood of Los Angeles, five of Ad Astra’s 14 students were his own children.”
- Ad Astra continues to receive funding from the Musk Foundation, and it’s relocated to the campus of SpaceX in Texas and is situated behind security gates. Technically a public charity, it’s not available in any real way to the public.
- The Musk Foundation granted $5 million to a United Nations program called Giga that helps rural nations connect to the internet, two of which (Rwanda and Kazakhstan) ended up as customers of the Starlink satellite service. Starlink is a subsidiary of SpaceX, owned and controlled by Elon Musk.
3. The Self-Aggrandizement
An interesting Musk moment occurred when he responded to a young activist in Flint, Michigan, by tweeting, “Please consider this a commitment that I will fund fixing the water in any house in Flint that has water contamination above FDA levels. No kidding.”
That would have been wonderful – but instead of responding to the city’s subsequent proposal for funding for new water infrastructure and wide-scale pipe replacements in homes, the Musk Foundation donated $1 million to Flint schools for water filters and laptops. A million dollars is not nothing, but it’s also not close to what he promised. I need to add that Musk sent a Tesla executive to Flint to give rides around the city hall parking lot in a self-driving car, so there’s that.
In short, Musk made a grand gesture winning him praise and attention . . . but didn't follow through on his promise.
4. The Underpayment
The federal government requires private foundations like the Musk Foundation to direct 5% of their assets each year to charitable purposes. The rules are loose around what counts as the 5%: Foundations can include many administrative costs, including salaries of staff, even those who are related to the founder/donor. All of which is to say that it’s not hard to meet this minimum distribution of 5%.
But in recent years the Musk Foundation has failed to hit that target. In 2021 the Musk Foundation fell $41 million short. It was even worse in 2022: The foundation missed the mark by $193 million, giving away only 2.25% of its $7 billion in assets. And, according to a December 12, 2024 New York Times piece by Farenthold and Teddy Schleifer, the Musk Foundation’s shortfall in charitable distributions in 2023 was no less than $421 million. Not exactly a minor accounting error.
5. The Lack of Accountability
The consequences for Musk’s disregard of the regulations are negligible, at least in terms of what matters to Musk.
When a foundation under-distributes to charity, the IRS can assess a penalty equal to 30% of the shortfall. If the feds indeed assess this fee, it is the Musk Foundation that would owe the money, not Elon Musk himself. Given that he clearly doesn’t care about charity, and given that this penalty would only mean that his foundation would have a bit less to distribute in the future, I’m guessing that the penalty wouldn’t bother Musk in the slightest.
Now, if, on the other hand, the IRS were to say, “Clearly, this guy is taking us for a ride. Let’s claw back that $2 billion tax deduction from when he contributed stock to the foundation!” – well then, Musk might take notice. But that’s not the way it works, and Musk knows that. His tax break, essentially, is forever, especially for a guy with the money, power, and reach of Elon Musk. So why should he break a sweat to distribute grants?
6. The Lack of Transparency
The Musk Foundation provides no contact information. In fact, it has no website, unless you consider this a website. Somehow, I think that one of the leading technologists in the world would have the wherewithal to put up a website. Unless he doesn’t give a damn. Which leads me to…
7. The Disregard
Musk’s attitude reminds me of the Donald J. Trump Foundation, which was shut down by the State of New York in 2019. (Yes, this was many, many Trump scandals, lawsuits, and criminal cases ago.) The court found that Trump had used his foundation as a personal checkbook for causes that feathered his own nest, paid for his personal obligations, or furthered his public image.
Essentially, Musk – like Trump – thinks the rules don’t apply to him. Whatever he does (or doesn't do) with his foundation, he maintains power and control. The potential grants from his foundation give him power. People cozy up to him in the hope that some money will eventually flow their way, if they only play their cards right.
Musk isn't stupid. This all works for him.
8. The Redirect -- donor-advised funds
The Times article fails to mention a long-time tactic of Musk’s: Instead of making outright gifts to charity, the Musk Foundation dumps money into donor-advised funds that Musk controls. This is an old story: Back in 2016, three-quarters of the Musk Foundation’s grants went to a donor-advised fund at Vanguard Charitable. That was back when Musk bothered to care about meeting the 5% distribution requirement described above. (Grants to donor-advised funds count toward the required charitable distribution, because DAFs are sponsored by public charities. I know. These grants shouldn’t count. But they do.)
Apparently, Musk still likes the tactic, because according to the Musk Foundation’s 990 return, in 2022 over $36 million went to a donor-advised fund at Fidelity Charitable.
This is a way for Musk to look as though he’s giving money away, while he’s really only shifting funds from the Musk Foundation into another charitable pocket he controls. It’s also a way to avoid transparency, because any grants that come out of Musk’s Fidelity donor-advised fund (if, in fact, any grants do come out from it) are not attributed to him or his fund.
Why Does This Matter?
We can look at Elon Musk’s charitable record and say to ourselves, “Well, isn’t he a jerk?!” And we’d be right. But the problem goes way beyond one rich guy flouting the rules.
Congress introduced the charitable income tax deduction in 1917 to encourage wealthy individuals to give to charitable causes. The United States had established the income tax a few years before, and the government did not want the nation’s leading philanthropists, facing this new tax, to fold their tents and let critical charitable services wither. The solution was the charitable deduction. Essentially, Uncle Sam said: I’ll tax you less the more you give to charity.
That arrangement – whereby the government gave up tax-generated income when the taxpayers gave to charities of their choice – has long been ripe for abuse. But we’re now facing a perfect storm of factors driving charitable misdealing into hyperdrive.
- An increasingly activist, conservative Congress has consistently underfunded the IRS, the agency that both regulates charities and enforces tax compliance, and has bullied the IRS into ignoring rogue charities – particularly if the entity in question is controlled by the world’s richest man, who also happens to be the president’s consigliere;
- Given Musk’s outsized role in the Trump Administration, he is helping set the tone for government’s approach to the nonprofit sector for the next four years.
Big philanthropy has long catered at least as much to the desires of the wealthy as to the needs of society, and people are taking notice. And I fear that, without real change, Elon Musk won’t be the outlier among philanthropists, but the role model.
Alan Cantor is principal of Alan Cantor Consulting LLC, a firm that helps nonprofit organizations in development, governance, and strategy. He lives in New Hampshire and is a member of the Working Group of The Philanthropy Project.
