Congressional Oversight of Nonprofits (Aug 04)

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Congress is now considering the most sweeping change of nonprofit law in 25 years, with increased fees, mandatory reports and increased regulation that would affect the way your nonprofit functions.

Several U.S. Senators concerned about nonprofit and foundation scandals held hearings on June 22nd and July 22nd — meeting under the title “Charity Oversight and reform: Keeping Bad Things from Happening to Good Charities.”

A series of recommendations intended to “fix” nonprofits and foundations have been put forward — a mixed bag of “the Sheriff is back in town” initiatives — which deserve careful scrutiny.  Ranking Democratic Finance Committee member Max Baucus (D-Montana) set the tone when he stated at a hearing June 22nd: “It’s obvious from the abuses we see that there’s been no check on charities. Big money, tax free, and no oversight have created a cesspool in too many cases.”

Senate Finance Committee staff, lead by Dean Zerby, aide to Committee Chair Senator Grassley (R-Iowa), issued a 23-page “Staff Discussion Draft” with dozens of ideas for reforms — twelve of which are presented here.


*** Take a look below at the measures being proposed and at the whitepaper they come from (accessible through the link at the end of this email) and respond by return email. Are these good ideas?  Are they needed?  Would they improve organizations or prevent abuses?  Are there other issues within the discussion draft that you feel are important?

We’re also looking for your overall reaction and will be printing some of the responses. (Page numbers refer to pages in the Senate document.)

*** Feel free to forward this email on to others who might be interested in educating Congress about nonprofits.

NPQ will compile your responses and send them along to the Senate Committee. We will also use some of them in a future  article (of course nothing would be used without your permission, and if you prefer, you may indicate that we only use your feedback on an anonymous basis). We would also encourage you to send a copy of your comments to your own U.S. Senator, especially if he or she is a member of the Senate Finance Committee.  We have attached a link to the list of committee members.


— Require nonprofits to have their IRS tax exempt status reviewed every five years, with extra documents and a new processing fee;  [p. 1]

— Increase information disclosures on IRS form 990, including annual performance goals and measurements for meeting those goals (to be established by the board of directors) for the past year and for the coming year; [p. 8, 11]

— Require Form 990 to be signed by an organization’s Chief Executive Officer or equivalent under penalties of perjury;  [p. 9]

— Institute a sliding scale filing fee for annual form 990 filing to cover costs of additional reviews; create penalties for failure to file a complete and accurate 990 and late fees [p. 9]

— Require public disclosure of IRS form 990T (Exempt Organization Business Income Tax Return – for paying unrelated business income tax (UBIT)); [p. 13]

— Revoke charitable status for nonprofits serving as accommodations to tax shelters; [p. 3]

— Increase restrictions, payout requirements and reporting on “donor advised funds;” [pp. 1-2]

— Funding of $25 million for management improvement education, with a priority on assistance to small charities.  [p. 19]

— Appropriate $10 million for various forms of nonprofit accreditation [p. 19]

— Establish federal duties for board members, a federal conflict of interest requirement, and require that boards approve compensation for all management positions.  [p. 14]

— Establish Exempt Organization Hotline for reporting abuses by charities and complaints by donors and beneficiaries [p. 19]

— Limit boards to 15 members. [p. 15]


The full “Staff Discussion Draft” is available at:

Written testimonies submitted to the hearings can be accessed at:

Video streaming of the Senate Hearing can be accessed at:

Members of the United States Senate Committee On Finance.