Article Archives >> Lead Stories >> April 16-30, 2006

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Independent Sector Issues Supplemental Report,
Generally Discourages New Federal Action
One exception is recommendation to create
a national charitable solicitation registration system

The Independent Sector’s Panel on the Nonprofit Sector has issued a Supplement to its Final Report on Strengthening Transparency, Governance and Accountability of Charitable Organizations. Covering nine additional areas of concern, the Supplement generally discourages new federal action to impose limits on charitable activity, with one primary exception. It recommends the creation of a national charitable solicitation registration system to replace the state-by-state system now in effect.

The Supplement follows the Independent Sector’s report last summer (See Nonprofit Issues®, July 1-15, 2005) responding to a variety of proposals to regulate the nonprofit sector that had been suggested by the Senate Finance Committee (See Ready Reference Page: “Senate Committee’s White Paper Proposes Vast Expansion of Federal Power Over Charities.”) and the Joint
Committee on Taxation (See Nonprofit Issues®, February 1-15, 2005).

Many of the proposals were passed by the Senate in the Tax Reconciliation Bill (See Ready Reference Page: “Senate Proposes Two Year Contribution Breaks, Permanent Limits on Deductions, DAFs and SOs.”), but they have apparently been dropped from the version currently being considered by the House-Senate conference committee.

In general, the Supplement covers international grantmaking, charitable solicitation registration, compensation of trustees, the prudent investor standard, conversion transactions, taxation of sales of donated property, consumer credit counseling agencies, disclosure of unrelated business income tax returns, and federal court equity powers and standing to sue. (For details, See Ready Reference Page: “Independent Sector’s Supplemental Report Proposes National Charitable Solicitation Registration Program".)

The Supplement urges against new federal limitations with respect to foreign grantmaking and argues that U.S. charities “are not agents for enforcement of U.S. or foreign laws” or policies.

In its primary recommendation for federal action, the Panel says Congress should authorize funding to create “a national uniform electronic filing system for charitable solicitation registration and annual reporting” administered by the Federal Trade Commission. States would still be “the primary regulators” of solicitation activities, but the “central filings would satisfy the requirements of all states in which the charity solicits.”

The Independent Sector’s Panel is not completely done its work. It has decided to extend its activities in two areas, self-regulation of the charitable sector and improvement of financial reports issued by public charities and private foundations.

It says it will also “identify sample policies on codes of ethics, conflicts of interest, reporting of misconduct, executive and board compensation, audit committees, and records retention to assist charitable organizations in improving governance and standards of practice.”

YOU NEED TO KNOW

The kinds of sample policies that the Panel says it will identify already exist in the Standards for Excellence program initiated by Maryland Nonprofits and now being administered in seven additional states. While the policies can’t be adopted verbatim in every case, they are samples that raise key issues for discussion. There is no need to reinvent them. The real effort ought to be focused on obtaining funding to implement this and similar existing programs more broadly.

The other affirmative effort ought to be focused on implementation of a national charitable solicitation registration system. Most of the initial reaction to the recent Congressional interest in charities has been defensive, trying to keep Congress from imposing ill-considered, unnecessary and burdensome regulations. But if the controversy could be converted into an affirmative effort to relieve charities of the mish-mash of filing requirements of 38 states, the District of Columbia, and uncounted local governments, it would be a great relief for many charities.

Since colleges and universities, hospitals, and churches are generally not required to register, their lobbying clout has never been brought to bear on the problem. But if they would join the rest of the sector in helping to eliminate a time-consuming, expensive, but entirely needless process, it might actually happen.

Article Archives >> Lead Stories >> April 16-30, 2006