Responses to Survey on Senate Finance Committee White Paper

Washington State Responses to a Survey about the Senate Finance Committee’s White Paper

The background for this project is presented in http://www.tess.org/ON/0409_SURVEY.html

There were 32 responses to the survey when circulated by The Evergreen State Society, Executive Alliance, the Nonprofit Center and NW Nonprofit Resources. A tally of the responses and the text of respondents’ comments follow.

Should the IRS do a review of each organization's exempt status every five years using additional data (beyond the 990) and charging a sliding-scale fee?

4	This is a good idea that should be explored further
28	This will not produce improvements worth the time and cost

Other comments:

Looking from the other end, how many non profits actually would have their status changed by such reviews? It is worth the cost?
This is information that is already freely available on the Form 990. If this ends up being like the 1% / 2% excise tax charged private foundations as a "compliance fee" to fund IRS enforcement of private foundation rules, the fees will be assessed but the IRS will not use the funds for their intended use.
Adds unnecessary costs and doesn't really improve anything. Is the IRS planning on doing this with corporate America as Enron and World Com?
This will add unnecessary red-tape and expense. Occasional audits would be more effective.
Why not expand the 990 form to include federal standards, combined with explanations made by charities when they don't meet the standards?
The 990 provides all necessary information. If an organization needs to be further scrutinized, based on what the 990 seems to indicate, the mechanisms are already in place to do so if an organization’s tax exempt status becomes in question.
Seems like a bureaucratic nightmare and I don't see how it would result in better management.
This seems a waste of time and just another hoop to make non profits (charitable) jump.
This would not be manageable without large increases in staffing at IRS
I actually like this idea because it could help clean the non-profit rolls of organizations that don't function well anymore or don't have a viable mission.

Should the Form 990 require disclosure of performance goals, activities, and expenses and achievements?

6	This is a good idea that should be explored further
26	This is not an effective way to assure that program information is communicated fully

Other comments:

Instead, require a copy of the organization's annual report.
The IRS should stick to just dealing with the financial aspects.
This would severely burden non-profits staffed solely by volunteers. Again, why add the workload?
Some organizations already provide this information by fully completing the Part III on the Form 990. This is a great opportunity for an organization to let the public know about the great things it is doing.
No; we already produce those in other venues and formats. IRS is financial and should remain financial. Are you asking for performance audits from for profits?
This is the dumbest proposal of the lot.
It really depends on how the information is collected. I think it would be okay as long as it does not require burdensome additional data collection and analysis. This may be unworkable given the trouble King County, United Way and a variety of cities have had in trying to come up with consistent outcome definitions.
I like the notion of basic standards (especially ratios of fundraising expenses to revenues, debt ratios, etc.). However, since 990 information is public, I believe nonprofits should be able to explain why they deviate from any standards by which they might be judged.
Non-profits are already supposed to do annual reports that do this.
This is absurd. Compiling this information is a waste of board and staff time.
The key would be to do this as a way of sharing learning, not as a way of simply reporting. If this process could become a useful tool for nonprofits to evaluate their own activity, that would be great.
This is not appropriate for the 990. Do for-profits have to do this? Many of them get government subsidies and more of them get caught with their hands in the cookies jar.

Should Congress adopt a list of standards for the performance of board duties?

5	This is a good idea that should be explored further
27	This is not a task Congress should undertake

Other comments:

Instead, require a copy of the organization's annual report
This is more properly a function of the state legislatures, not Congress.
I think this is a task that should be undertaken but probably not by Congress. Perhaps an organization like the Council on Foundations should be charged with this task. It is information that may board seeks from consultants.
Again there are many other standard setting organizations. This is not a role for Congress or the IRS.
Some minimum standards would be acceptable. Something akin to Sarbanes-Oxley that would assure board awareness of the organization’s activities.
Seems to be more than adequate resources readily available in this area.
I believe that most of this is outlined in State law and other places.
I think the area of Board performance could use some work, but I don't know that standards set by Congress would help. There is already plenty of info out there for Board development, and I don't think standards set by Congress would be enforceable.
This should be left up to the individual boards.
This is covered by National Standard groups, United Ways, and other funders. No need for another layer.
This is not an appropriate role for Congress.

Should Congress require that boards of charities have at least three and no more than fifteen members and that no more than one member may be directly or indirectly compensated by the organization?

6	This is a good idea that should be explored further
26	The characteristics of an effective board cannot be specified in this way

Other comments:

It is not the Congress's business to be so prescriptive re membership of the board.
This is more properly a function of the state legislatures.
What is the purpose of limiting the number of board members to 15? Limiting compensation is OK, but why allow 1? Why not 2? or None?
I would suspect most respondents feel very strongly about this item in particular.
A one size fits all approach to boards is not helpful. There are too many diverse organizations that are all Section 501(c)(3) organizations.
Again this is a local decision. Also many states have a minimum number of Board members. The Board sets the size of the Board. As to paid Board members, I am in a not for profit and generally speaking the paid staff are not members of the Board. Not sure how other groups, outside the non profit world, conduct their business.
It is already hard to recruit effective board members. Such a requirement would make it impossible.
Boards serve a variety of purposes, governance being just one of them. Different organizations have different needs and the composition of boards should not be regulated.
I wouldn't limit it to 15 members, however. Maybe 25, if any limits.
This could present a real problem to organizations that rely on a large board for fundraising. Also, not sure that there is really anything to support that a smaller board is necessarily better than a bigger board.
How did you get the magic number of 15. We have an active board of over 20 and it works great.
I don't think it should be Congress who determines the number of Board members. States generally set a minimum number for Board. Regarding compensation, generally Board members are not compensated unless the Executive Director, CEO or President of the Organization is a voting member of the Board. I would support limiting that no more than one member may be directly or indirectly compensated if it is salary/wages. Board members can be reimbursed for individual expenses related to their Board duties.
These sorts of limits are very artificial. The rule of thumb I’ve always used is that no more than 49% of the Board should be compensated. Setting upper limits and other standards seems unnecessary.
Any thinking person would avoid most human service boards if all of the work and fund raising was only split among 15 people. This would be the death knell of strong non-profit boards.
Congress has no business telling a non-profit how to construct its board. Every organization is different and, if well run, knows its community and constituency better than any elected body.

Should the IRS receive $10 million to support accreditation of charities nationwide, in States, as well as accreditation of charities of particular classes (e.g. private foundations, land conservation groups, etc.)?

2	This is a good idea that should be explored further
29	This is not a role the IRS should be asked to perform

Other comments:

I support private accreditation.
It should select organizations randomly for audit, just as it does individuals.
This truly seems far afield from the purpose of IRS.
Can this be accomplished on $10 million nationwide? And will it add more to the regulatory burden imposed on non-profits, if not financially, at least in terms of time spent, paperwork and forms to complete, records to submit, etc?
The IRS should only determine if the organization qualifies as an exempt organization. Accreditation, if it is undertaken at all, should be done by an independent organization. The IRS has enough to do without adding something that is likely outside their core competency.
No; there are National Organizations that provide accredation services. Put the $10 million to better use.
Accreditation is best left to sector specific organizations. I see little benefit for the IRS to be involved.
I would rather see states perform the accreditation.
Accreditation could be better performed by some organization whose function it is to perform accreditation.
Absolutely NOT there are proper accreditation organizations already in existence. This is not an IRS function.
Good grief!

Should Congress appropriate up to $200 million per year to support increased oversight, enforcement and capacity building? (Note: as this question suggests, the white paper combines several ideas for new federal expenditures within this proposal; it's worth looking at the actual text of section H to get a sense of what might happen.)

4	This is a good idea that should be explored further
23	This is not a good use of federal resources

Other comments:

The idea that the IRS could or should try to support nonprofit development is ludicrous. Non profit organizations continue to try to self-develop and "professionalize" board of director functioning and one can see a maturing of this sector over the years and its use of public and private funds. The IRS' primary function should be to review organizational applications for status and to periodically assess whether the organizations live up to their status. The periodic assessment should direct its efforts to larger nonprofits that have sizeable budgets and assure that tax benefits are appropriate for the work that the organization is doing.
I doubt it requires $200 million.
I think self-regulation by the nonprofit industry should be the first course of action.
I simply cannot see any benefit accruing to justify the costs in dollars and bureaucracy.
Put the $200 million to better use.
This will inevitably lead to additional administrative costs to agencies at a time when we can least afford them.
Not sure what all is envision here. Some of it might be a good idea such as increase oversight or enforcement. Not sure what the IRS is going to do about capacity building.
May be a good idea for the purposes of capacity building however.
I am sure there are much more appropriate and highly critical things that could be done with this money. Like supporting Food Banks or catching white collar criminals like Enron executives.

Should the IRS have new authority to revoke charitable status for when exempt organizations are found to have assisted with abusive tax shelters?

18	This is a good idea that should be explored further
11	Existing laws provide all the power the IRS needs

Other comments:

This would be within the bounds of what the IRS should be responsible for. The IRS gets information on abusive tax shelters and as they are the body that authorizes exempt status, it seems appropriate that they would be the body that has the power to revoke it.
I do not know what abusive tax shelters are? Do corporations engage in these practices?
I am not sure what is meant by abusive tax shelters.

Should compensation of private foundation trustees be forbidden (or strictly limited)?

11	This is a good idea that should be explored further
16	Foundations need the option of paying trustees

Other comments:

I could support "limited"
The law is appropriate as written. Better enforcement of the existing law is all that is required.
I am not familiar with this issue as I am in the non profit, charitable side and we only compensate Board members for expenses, if they ask.
Foundations, especially large ones, may need to ability to pay Trustees, but may need some sort of sanctions such as that applies to other not for profits or guidelines as to what is excessive.
This would deal with the only abuses I am aware of - family foundations - and would not negatively impact the majority of nonprofits.
I hope, however, that Foundations take a closer look at themselves in terms of extraordinary fees for serving on their boards.

Should there be disclosure by all charitable organizations of everyone paid more than $200,000 (with a lower threshold of $75,000 in the case of certain managers)?

20	This is a good idea that should be explored further
11	These disclosures are not necessary

Other comments:

Disclosure is fine, prohibition is quite a different matter.
This could be burdensome for some organizations but would be in keeping with providing the public with full disclosure and transparency with regard to exempt organizations.
We are already required to disclose, on the 990, the five highly paid employments and have to give the number of employees paid $50,000 or more (although I question if this amount is really highly compensated - maybe in the 1960 or 1970's but not by today's costs)
Let the market set salaries.
Currently 990 asks for top paid people above a certain level so not sure what this adds.
I believe that disclosure is already in place and we have to report the top five wage earners in key positions and give the number of other earners making more than $50,000, which I would hardly considered to be highly compensated in today's economy - maybe the 1960/70's
Don't we already do this in our 990's? This seems redundant.
Nonprofit finances are subject already to public scrutiny. People can judge for themselves whether an organization's administrative costs are out of balance with its programs and fundraising expenses.

Should Congress eliminate the excise tax on private foundations that make grants in excess of 12% of the returns they receive on some assets?

8	This is a good idea that should be explored further
9	This could lead to reduction of assets needed for future community benefits

Other comments:

Not because it reduces assets needed for future community needs but because the excise tax was meant to pay for oversight and compliance and all foundations are subject to oversight and compliance no matter what their payout percentage is.

This question is confusing—how could reducing tax reduce assets? I support reducing excise tax to encourage higher levels of giving, which is the current system. Whether we need more stimulus, I don’t know.

Should the amounts paid for travel, meals, and accommodation by charities be limited to the federal reimbursement (or other published) rates?

9	This is a good idea that should be explored further
20	No single standard will fit all circumstances and nonprofits should be able to set their own rates

Other comments:

We use our State Government for this
Perhaps they should be reported so abuses can be detected.
Nonprofit boards have the responsibility to guard against excessive expenditures.
But maybe it should require Board authorization with rationale for going over.
We do use the federal guidelines but again I think this should be up to the kind of charity it is and the decision making should be with the Board of Directors
I don't think the Federal government should set these standards, but I think the nonprofit sector should establish some standards.

Should States have the authority to prosecute violations of federal standards for tax-exempt organizations?

6	This is a good idea that should be explored further
18	Existing laws provide all the power states and the IRS need

Other comments:

Do states really have all the powers they need to prosecute wrongdoers?
No. Federal violations should be handled by the Federal agency; State should handle State
This could become another unfunded mandate increasing state costs.
I don’t think the state and federal roles should be co-mingled.
Federal offenses should be handled under the federal courts and state in state.

Should the IRS require a signature on the 990 by the Chief Executive Officer under penalties of perjury?

9	This is a good idea that should be explored further
22	This is unnecessary because there are already penalties for filing a false return

Other comments:

I believe we are already required to sign the 990. I always do.
As a result of Enron and World Com we already have to do this. Both the CEO and CFO.

Should Congress increase penalties for failure to file complete and accurate 990s and limit extensions for filing to four months?

6	This is a good idea that should be explored further
23	The present limits are adequate

Other comments:

Currently it doesn’t seem that any penalty is enforced for not filing or filing inaccurately. Maybe there is and I am not aware of it.
Many times the audit is held up by external factors beyond the control of the non profit. If extensions requests are filed promptly then the full amount of time should be allowed.

Should the form 990 for larger organizations require disclosure of any transactions that might raise questions of conflict of interest?

12	This is a good idea that should be explored further
16	Existing standards are adequate to prevent abuse of nonprofits for personal gain

Other comments:

Conflict of interest is so generic a term. There is already a requirement for disclosure of related party transactions which should be sufficient if reported completely and accurately.
We already through our auditing process have to disclose all types of information including any potential conflict of interest.
I would favor private standards.

Should Congress require independent audits or reviews of 990s from larger organizations that would be public documents?

6	This is a good idea that should be explored further
22	This is an unnecessary burden that nonprofits should not have to bear

Other comments:

As long as it also publishes the organization's response in addition.
There already is rulings regarding audits being required and it is based on the size of the organizations income. No need to change the existing rules. The 990 IS ALREADY a public document. Audits are are avail to all funding sources including government agencies.
Financial audits should not be required every year. Bi-annual or even tri-annual audits should be adequate for organizations that are in good financial condition.
Audits are of very limited value.
Most organizations of any size already perform annual audits or reviews because a number of donors require them. The Federal government does not need to get involved in this or cost the expense of existing audits to increase further.

Should the IRS publish final determinations of audits and examinations of nonprofits?

5	This is a good idea that should be explored further
22	This would reveal confidential information but not provide useful information to the public

Other comments:

This could also lead to misinterpretation by people who are not fully conversant with auditing standards and required reporting formats and terminology. Our agency already experienced this with a state employee who read the word finding in the report to me that our audit had a finding, when in actuality none existed. It was a word used in a paragraph of required auditing language. We had to have the auditing company write a letter to the State employee to have this remark removed from our agency's name.
IRS audits often involve complex negotiations to resolve differences and the final determination does not capture these negotiations. There is a potential for political abuse.
I don't think the general public would understand the findings in many cases.
The 990 is already a public document so what purpose would this serve? Is it a harassment tool to be used by a particular governmental agency or administration?
I agree that this is a bad idea, but I'm not certain the response I X'd is accurate about "confidential information." I don't consider anything about my nonprofit to be "confidential." I believe the public has a right to know.

Should Congress require public disclosure of Form 990-T and of all returns from affiliated organizations?

11	This is a good idea that should be explored further
17	This is an unnecessary burden that nonprofits should not have to bear

Other comments:

Depends on how it is done. Will the IRS just scan the form and have on their website?
These are income tax returns and should be afforded the same privacy of any other income tax return. The information on whether the organization has UBIT is already disclosed several places on the Form 990 and 990PF without making the entire income tax return available to the public.
Our 990 is already a public document.
We already do this
Aren't nonprofits required to share that information already? Isn't it available to the public already -- whether or not we want it to be. There are websites in place now that share abbreviated 990 reports of organizations without their knowledge/authorization.

Should public corporations be required to disclose the recipients of their charitable giving?

14	This is a good idea that should be explored further
14	This would make it harder for corporations to provide community support

Other comments:

There's a reason I stopped buying Domino's pizzas for a time when the then-owner gave to right-wing anti-choice causes. As a consumer, I like knowing where a corporation is giving its "community support".
We already acknowledge all our donor by name in our Annual Report.
We can't afford to lose corporate support.
That is a question for corporation. As a non profit we list all our donors, by name, in our Annual Report.
I don't agree with either response choice. I'm trying to think of a public corporation that doesn't disclose the recipients of its charitable giving.

Should tax courts be allowed to intervene in cases of mismanagement and damage at charitable organizations?

3	This is a good idea that should be explored further
23	This is not a role the tax courts should be asked to perform

Other comments:

Only as a remedy that is part of a judicial proceeding. I believe they can already do this under these circumstances.
Go after Enron and WorldCom

Should directors and other stakeholders be permitted to sue charities when there is a possibility of mismanagement or damage at charitable organizations?

3	This is a good idea that should be explored further
25	This would result in distracting litigation without adding public benefits

Other comments:

I see both sides of this one and in a perfect world where states had adequate resources to police charitable organizations within their jurisdiction, I think that would be the best solution.
A potentially good agency/organization with good services could be ruined. Organizations have survived bad leadership and come back to be assets to their communities.
What good would suing the non profit do other than to further harm an already harmed non profit.
Don't agree with either response. Directors and other stakeholders already have the right to sue and have.

General Comments:

Frankly, as I was answering your questionnaire, I found myself answering like a strident – less government reactionary. We have handled ourselves openly and honest from the get go in 2002. Our cause definitely includes the avoidance of public panic, while existing in an emotionally high-strung subject. We absolutely have to be open and completely visible. My point is that we submit to public scrutiny, and in fact invite it. Where then is the problem that is needs to be solved? Are non-profits more out of whack than for-profit Corporations? Who IS responsible for public scrutiny, besides the public? I am sick about another NP that I know of that doesn’t do what they say they will do. I think exposing that is the responsibility of others and myself. Charitable subscribers should be misled in the open environment of NP work. Perhaps I’m too naïve, let me know if you agree. Regardless, you have one 501 (c)(3)’s opinion; life is too difficult as it is under the existing laws. We could not afford to do more.
This entire effort feels like a major knee-jerk reaction to experiences with for-profit companies that could almost never be replicated by a non-profit. While there are some good ideas in the proposals, most simply add another financial burden to already overburdened charitable organizations. For those that may be doing wrong, there are enough legal options available. The rest of the ideas will have no positive impact the missions of most charities and simply insert new operating expenses. I hope the sponsors of the bill will take some time to visit come non-profit agencies to learn - first hand - how most organizations conduct their affairs.