Press Releases

For Immediate Release
1/20/2004
Contact: Rick Cohen or Jeff Krehely
(202) 387-9177, ext. 13 / ext. 26
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NCRP CALLS ON CONGRESS TO BEEF UP OVERSIGHT OF FOUNDATIONS BY RECOMMITTING EXCISE TAX REVENUE TO ITS TRADITIONAL PURPOSE
Refocusing of Excise Tax Would Protect the American Public, Says Philanthropy Watchdog
WASHINGTON ­­­­- The National Committee for Responsive Philanthropy (NCRP) today called on Congress to beef up public oversight of charitable foundations and the entire nonprofit sector by rededicating revenue from the private foundation excise tax toward that purpose. The private foundation excise tax was originally devoted to funding such oversight. NCRP favors legislation that would return the public revenue from that tax to its traditional intent, and use it to enhance the nonprofit oversight capacities of both the IRS and America's state attorneys general.

"The excise tax on private foundations should once again fund appropriate oversight of the nonprofit sector to protect the American people and prevent uncharitable abuses of the charitable tax laws," said NCRP Executive Director Rick Cohen. "The media, researchers and state attorneys general continue to uncover abuses which ought to be acted upon - but neither the state attorneys general nor the IRS have the resources to get the job done. Congress has the power to change that by simply redirecting the revenue from this excise tax toward its traditional oversight purpose."

NCRP today also reaffirmed its support for simplifying and reducing the tax from a complex variable rate that wavers between 1 percent and 2 percent of private foundation investment income, to a consistent 1 percent rate. The reduction in the excise tax will free up potentially more than $140 million for foundation grantmaking. But $350 million or more will remain in general revenues, where it should be used to address its original intended purpose - the oversight costs for philanthropic accountability.

"Reviving the use of the excise tax for philanthropic accountability is the right thing to do, and this is an issue on which there is broad agreement," noted Cohen. "As an independent watchdog for improved philanthropy, NCRP can find common ground on this matter with the foundation community and the nonprofit sector as a whole. Improved oversight will benefit the entire sector, from foundations to charities, and we hope that Congress will act on this important issue of accountability to restore public trust in the nonprofit sector."

NCRP's legislative proposal for making the foundation excise tax a tool for a more accountable philanthropic sector includes the following: 

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NCRP News Release
Tuesday, Jan. 20, 2004

Page 2 of 2

1.   Reduce the foundation tax to a simplified, consolidated 1 percent of private foundation investment income, but require that the money that foundations "save" from the tax reduction go to nonprofit organizations in the form of grants-as opposed to being used by foundations to increase foundation executives' salaries, foundation trustees' compensation and other expenses.

2.   Dedicate 20 percent of the remaining excise tax to more than double the budget of the Tax Exempt/Government Entities division of the Internal Revenue Service from its current budget of less than $60 million to approximately $130 million, enabling it to more effectively oversee and audit private foundations, public grantmaking foundations, donor advised funds and other philanthropic grantmaking mechanisms as well as nonprofits in general to weed out the bad apples currently undermining the accountability of philanthropy and charity.

3.   Dedicate 40 percent of the remaining excise tax to create a fund of $140 million, which the Commissioner of the Internal Revenue Service can use to supplement the charity investigative and oversight arms of state attorneys-general offices.
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