Take a step back for a moment and consider a long view of what could be the future for nonprofits. The revisions to the Form 990 have just been completed, but it seems the winds of change are blowing again with a forecast that could potentially bring a tsunami.
The Senate Finance Committee has oversight of charitable laws for the Senate while the Ways and Means Committee has a similar role in the House. Measures must ultimately be reconciled and approved by both Houses of Congress and then signed by the President before any laws are changed. So it’s a long process which is why, in part, no sweeping changes have been made in charity law in nearly forty years. But the climate is clearly different now as lawmakers see what has long been considered a lightly regulated “industry” in need of an overhaul.
Nearly five years ago the Senate Finance Committee set off alarm bells throughout the charity world with a “discussion draft” that envisioned new regulations that would have seriously imposed intrusive and costly requirements on charities, including most ECFA members. Finance Committee hearings were held, and an advisory Panel was convened by Independent Sector at Committee Chairman Senator Charles Grassley’s (R-IA) encouragement. The Panel, which included ECFA representation, issued a series of reports on suggested changes to the law and a long list of best practices that many charities have adopted voluntarily as a way of preempting the need for new legislation. Only minor changes were made to the law as a result of the initiative.
But the issue has not gone away. Some nonprofits continue to make the news by pushing the law or ignoring best practices regarding raising and spending money that is subsidized by the government in the form of tax deductions for contributors and property and income tax exemption for nonprofits. This keeps lawmakers stirred which leads to new proposals to change the law.
The latest edition of proposals, this time from a member of the House Ways and Means Committee, is perhaps more striking than any in memory. With Federal deficits mounting and budget battles increasing, Congress is looking for more revenue—and that was before the $700 billion bail-out was conceived! The charitable deduction is being viewed by some as a source of income and this is a concept which could get traction. One of the steps for Congress to raise more revenue would be to redefine a charity or a church, providing less tax-exemption shelters for organizations that now enjoy this benefit.
Some have suggested a greater incentive for gifts to help the poor and a lower or no deduction for gifts to arts or education. The faith based initiative could be revised to require all ministry recipients of federal funds to fall under EEOC hiring guidelines in order to qualify.
None of this is imminent, in fact it is probably a long shot, but come Spring 2009 we could begin to see if any of these ideas have traction in a new Congress or Administration. Realistically, the more likely early targets could be nonprofit hospitals—which some believe look and operate too similar to for profit hospitals—or colleges and universities, which are often mentioned because many continue to grow enormous endowments even as tuitions go through the roof.
In any of this, ECFA will give voice to its membership. We will continue to provide the latest information in these pages, on its website and in its regional seminars and other conference venues.
Meanwhile, pursue your mission with passion and excellence. Implement best practices intentionally. Trust the Lord to supply all your need now and in the future—come what may!
