The Senate Finance Committee Still on the Charitable Accountability Case
posted on: Monday, June 05, 2006
Despite the opposition of conservative and libertarian opponents in the philanthropic sector, particularly those lodged behind the name "the Alliance for Charitable Reform", the Senate Finance Committee under the leadership of Senator Chuck Grassley (R-IA) is not dropping its advocacy for charitable accountability. The Committee issued a June 1st press release that outlined its next steps in chasing down nonprofit miscreants regardless of their political persuasion, and that's noteworthy. Unlike the ACR players who with allies like Mark Souder (R-IN) and the Republican Study Committee in the House and Rick Santorum in the Senate, opposing any and all efforts in the laws governing nonprofits and foundations (we wrote about this in a recent issue of The Hill), unlike the Committee's more liberal opponents who somehow feel obliged to give a mostly free pass to nonprofits on accountability issues, Grassley remain fixed on completing the mission they started with hearings on this topic in 2004 and 2005.
The press release is actually the cover for Senator Grassley's letter to the Internal Revenue Service asking what the heck the IRS is doing about some of the major issues in nonprofit accountability. The Senator's words are worth quoting in full:
"Sen. Chuck Grassley, chairman of the Committee on Finance, is seeking Internal Revenue Service (IRS) comment and in some cases stepped-up enforcement on a series of problems in the tax-exempt arena, including non-profit hospitals, non-profits that may be used for political purposes such as those tied to then-lobbyist Jack Abramoff, generous non-profit board member compensation and trustee fees, and non-profits that appear to function like for-profit businesses and undercut their business competitors. 'I’m seeing dozens of separate problems united by a theme,' Grassley said. 'The theme is some individuals are exploiting vagueness or silence in or a lack of enforcement of the laws governing tax-exempt groups to enrich themselves rather than serve the public. It’s unseemly for tax-exempt groups to function this way. It’s also unfair to the taxpayers who subsidize that behavior. That’s why I continue to try to tighten the laws governing tax-exempt groups and encourage the IRS to step up enforcement of the existing laws and go after bad actors.'"
This sort of undermines the liberal opponents longstanding dubious contention that the purpose of the Committee's investigations was to simply defund the liberal and left-wing foundations and nonprofits, ultimately to attack and undermine the charitable tax exemption itself. Just look at the issues the Senator outlined in his letter:
1. Nonprofits used for political purposes: Grassley isn't challenging the ability of nonprofits to engage in public policy advocacy and lobbying. His press release targets scams like Jack Abramoff's Capital Athletic Foundation, the uber-lobbyist's 501(c)(3) used to pay for political activities like a golf trip to Scotland for a member of Congress and a senior staff person at the GSA and other activities of political persuasion camouflaged by the confidentiality accorded to (c)(3) organizations. Only Grassley and his committee colleague from the other side of the aisle, Max Baucus (D-MT), have shown the gumption to take on the charities and foundations established and controlled by politicians, many of the Republican persuasion because that is the party in power at the moment, and issue NCRP has repeated brought to the attention of the sector with little or no response. In the June 1st press release, Grassley even questions the practice of some (c)(3)s working with (c)(4)s, in Grassley's words, "for activities primarily intended to benefit private parties or which appear to have little or no connection to furthering a valid social welfare purpose...(or) that some such activities generate unrelated business taxable income to the organization(s)." The most recently publicized example of this involves conservative activist Grover Norquist, whose 501(c)(3) and (c)(4) organizations have demonstrated unusual financial transactions, garnering attention from various critics, including NCRP. Credit Senator Grassley for holding firm to the notion that corruption in the nonprofit sector deserves no ideological or partisan protection.
2. Trustee fees: Most of the big nonprofits and foundations that pay their trustees large 5-figure and 6-figure sums for their service on boards of directors had assumed that criticism of this issue was by the boards. It wasn't really taken on in the Independent Sector's Nonprofit Panel reports, and since the demise of the Charitable Giving Act of 2003, which would have taken trustee fees out of private foundations "qualified distributions" (payout), the issue hasn't gotten much new attention. But Senator Grassley's letter asks the IRS whatever happened to the Service's review of executive compensation. He noted the findings of his own staff: "(M)y staff found that the governing bodies of such trusts often perform no analysis to determine whether compensation is reasonable, that is, whether a trustee’s fees are justified in light of the services performed by the trustee." Grassley questions whether state authorities are doing any better oversight of the "reasonableness" of trustee fees than the federal government and poses a myriad of examples and questions that make current practices hard to defend, including these: "A question also arises as to whether a trustee should be compensated for serving on the board of a supported organization since such service may be as a result of the trust’s supporting
organization status. A further problem arises when there are so few trustees that there is no
independent review of trustee compensation." The world of foundations and big nonprofits may think that the trustee compensation issue has passed by the boards, but not with Grassley on the case.
The letter to the IRS also goes on to identify a number of 501(c)(3)s that look and feel a lot more like for-profits than charitable nonprofits. The blurring of the lines between for-profits and nonprofits merits attention and investigation. Senator Grassley and his staff are taking a look and posing HBR case study-like questions to the IRS to see what the thinking is.
There's not a lot of political upside for Grassley and the Senate Finance Committee to take on these issues. Voters haven't identified charitable accountability as a high priority issue in their motivations, when issues of gas prices, job security, health insurance, terrorism, and the wars in Iraq and Afghanistan are in the mix. For Grassley as a Republican to be raising questions about charities associated with his Senate and House colleagues, with conservative advocates and lobbyists like Norquist and Abramoff, and against the interests of conservative and nonprofits associated with ACR and the Philanthropy Roundtable (the trade association of conservative foundations), there's not much to be gained that will advance him in political circles. But the man truly seems to care about issues of ethics and accountability, and he's apparently not willing to write off a sector that employs north of 9 percent of the American workforce as an unimportant sideshow. (RC, 6/5/06)
The press release is actually the cover for Senator Grassley's letter to the Internal Revenue Service asking what the heck the IRS is doing about some of the major issues in nonprofit accountability. The Senator's words are worth quoting in full:
"Sen. Chuck Grassley, chairman of the Committee on Finance, is seeking Internal Revenue Service (IRS) comment and in some cases stepped-up enforcement on a series of problems in the tax-exempt arena, including non-profit hospitals, non-profits that may be used for political purposes such as those tied to then-lobbyist Jack Abramoff, generous non-profit board member compensation and trustee fees, and non-profits that appear to function like for-profit businesses and undercut their business competitors. 'I’m seeing dozens of separate problems united by a theme,' Grassley said. 'The theme is some individuals are exploiting vagueness or silence in or a lack of enforcement of the laws governing tax-exempt groups to enrich themselves rather than serve the public. It’s unseemly for tax-exempt groups to function this way. It’s also unfair to the taxpayers who subsidize that behavior. That’s why I continue to try to tighten the laws governing tax-exempt groups and encourage the IRS to step up enforcement of the existing laws and go after bad actors.'"
This sort of undermines the liberal opponents longstanding dubious contention that the purpose of the Committee's investigations was to simply defund the liberal and left-wing foundations and nonprofits, ultimately to attack and undermine the charitable tax exemption itself. Just look at the issues the Senator outlined in his letter:
1. Nonprofits used for political purposes: Grassley isn't challenging the ability of nonprofits to engage in public policy advocacy and lobbying. His press release targets scams like Jack Abramoff's Capital Athletic Foundation, the uber-lobbyist's 501(c)(3) used to pay for political activities like a golf trip to Scotland for a member of Congress and a senior staff person at the GSA and other activities of political persuasion camouflaged by the confidentiality accorded to (c)(3) organizations. Only Grassley and his committee colleague from the other side of the aisle, Max Baucus (D-MT), have shown the gumption to take on the charities and foundations established and controlled by politicians, many of the Republican persuasion because that is the party in power at the moment, and issue NCRP has repeated brought to the attention of the sector with little or no response. In the June 1st press release, Grassley even questions the practice of some (c)(3)s working with (c)(4)s, in Grassley's words, "for activities primarily intended to benefit private parties or which appear to have little or no connection to furthering a valid social welfare purpose...(or) that some such activities generate unrelated business taxable income to the organization(s)." The most recently publicized example of this involves conservative activist Grover Norquist, whose 501(c)(3) and (c)(4) organizations have demonstrated unusual financial transactions, garnering attention from various critics, including NCRP. Credit Senator Grassley for holding firm to the notion that corruption in the nonprofit sector deserves no ideological or partisan protection.
2. Trustee fees: Most of the big nonprofits and foundations that pay their trustees large 5-figure and 6-figure sums for their service on boards of directors had assumed that criticism of this issue was by the boards. It wasn't really taken on in the Independent Sector's Nonprofit Panel reports, and since the demise of the Charitable Giving Act of 2003, which would have taken trustee fees out of private foundations "qualified distributions" (payout), the issue hasn't gotten much new attention. But Senator Grassley's letter asks the IRS whatever happened to the Service's review of executive compensation. He noted the findings of his own staff: "(M)y staff found that the governing bodies of such trusts often perform no analysis to determine whether compensation is reasonable, that is, whether a trustee’s fees are justified in light of the services performed by the trustee." Grassley questions whether state authorities are doing any better oversight of the "reasonableness" of trustee fees than the federal government and poses a myriad of examples and questions that make current practices hard to defend, including these: "A question also arises as to whether a trustee should be compensated for serving on the board of a supported organization since such service may be as a result of the trust’s supporting
organization status. A further problem arises when there are so few trustees that there is no
independent review of trustee compensation." The world of foundations and big nonprofits may think that the trustee compensation issue has passed by the boards, but not with Grassley on the case.
The letter to the IRS also goes on to identify a number of 501(c)(3)s that look and feel a lot more like for-profits than charitable nonprofits. The blurring of the lines between for-profits and nonprofits merits attention and investigation. Senator Grassley and his staff are taking a look and posing HBR case study-like questions to the IRS to see what the thinking is.
There's not a lot of political upside for Grassley and the Senate Finance Committee to take on these issues. Voters haven't identified charitable accountability as a high priority issue in their motivations, when issues of gas prices, job security, health insurance, terrorism, and the wars in Iraq and Afghanistan are in the mix. For Grassley as a Republican to be raising questions about charities associated with his Senate and House colleagues, with conservative advocates and lobbyists like Norquist and Abramoff, and against the interests of conservative and nonprofits associated with ACR and the Philanthropy Roundtable (the trade association of conservative foundations), there's not much to be gained that will advance him in political circles. But the man truly seems to care about issues of ethics and accountability, and he's apparently not willing to write off a sector that employs north of 9 percent of the American workforce as an unimportant sideshow. (RC, 6/5/06)
posted by NCRP at
9:15 AM
0 Comments:
Post a Comment
Links to this post:
Create a Link
<< Blog Home