The Philanthropy Roundtable cordially invites our Associates, and other foundation executives and trustees and donors, to a conference on “Congress and Charitable Reform.” The meeting will take place at the Madison Hotel, in Washington, D.C., on Thursday, March 3, from 9 a.m. through lunch.
Early this year, we expect Senate Finance Committee chairman Chuck Grassley and Ranking Democratic Member Max Baucus to introduce legislation providing potentially far-reaching changes in the regulatory framework governing philanthropic foundations, public charities, and other 501(c)(3) tax-exempt organizations.
At the Roundtable’s conference, policymakers from Congress and the White House will share their perspective on the legislative outlook, and philanthropic leaders will assess the Senate Finance Committee’s approach to charitable governance and accountability, while exploring alternative approaches to reform of foundations.
The conference will be co-sponsored by the Alliance for Charitable Reform, a new coalition formed by Philanthropy Roundtable members (and non-members) who are concerned about the threat of potential legislation to every foundation’s integrity and freedom to operate. The Alliance is moving quickly to assess the threat and to respond effectively. At the conference coalition members will describe their plans to reform and strengthen the charitable sector while protecting the freedom of foundations and donors to use their best judgment in carrying out their charitable objectives.
The Alliance for Charitable Reform is directed by Sandra Swirski, a veteran organizer of successful coalitions on Capitol Hill and a former tax counsel to Senators on the Finance Committee. If you would like to become involved or want more information, you can reach Sandra at 202.466.8700.
In the meantime, The Philanthropy Roundtable encourages its Associates and other philanthropic leaders to examine the discussion draft released by Senate Finance Committee staff members in June 2004. This paper, outlining possible legislative action for the tax-exempt sector, is available at www.finance.senate.gov. Its provisions include:
- IRS five-year review of every foundation’s and charity’s tax-exempt status.
- IRS review to include “management policies regarding best practices.”
- IRS makes tax-exempt status contingent on private accreditation.
- Possible IRS delegation of its five-year review to state attorneys general.
- Disclosure of internal performance goals on Form 990 or 990-PF.
- Prohibiting compensation to trustees or allowing only de minimis payments.
- Detailed filing requirements to justify staff compensation over certain amounts.
- No compensation to disqualified persons outside federal rates.
- Limits on payments for travel, meals, and accommodations.
- Prohibitions on foundation grants to donor-advised funds.
- Prohibition of “Type III” supporting organizations.
- Boards can only be between 3-15 people.
- Federal funding of private accreditation and standard setting.
- IRS or board member would have power in federal courts to seek trustee removal.
- Standing for any individual to bring federal action against a foundation or trustee.
The Roundtable expressed deep concerns about many of these provisions in our response to the Finance Committee, which can be viewed at: www.philanthropyroundtable.org. A more detailed analysis was provided by Marion Fremont-Smith of Harvard’s Hauser Center on Nonprofit Organizations at our annual meeting in November. To listen to her presentation, go to www.philanthropyroundtable.org, and click on her Saturday morning session on legislation and regulation governing foundations.
In preparing legislation, the Senate Finance Committee will be drawing not only on its staff white paper but also on a new nonprofit accountability law signed by Governor Schwarzenegger in California. This law imposes Sarbanes-Oxley-type requirements on all California nonprofits with gross receipts over $2 million a year.
The Roundtable believes that there are abuses in the foundation world, and that the abusers need to be punished. But reform legislation should build on the historic principles of a free society that have made America the most generous and charitable nation on earth.
We hope you can join us in Washington on March 3.
Adam Meyerson is president of The Philanthropy Roundtable.