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Oversized hammer

Charity | Hurricanes derail Congress from dealing blows to nonprofits

Issue: "Comfort and joy," Dec. 24, 2005

Charitable organizations of all kinds and all sizes-including hundreds of evangelical Christian groups-are breathing a sigh of relief. A dreaded piece of federal legislation that would have made life harder for nonprofits seems to have been derailed.

Along the way, many conservative groups have found themselves battling a long-time friend-Sen. Charles Grassley (R-Iowa), primary sponsor of the unpopular legislation. Only the force and fury of two giant hurricanes, Katrina and Rita, could slow down the powerful senator.

Mr. Grassley, who chairs the Senate Finance Committee, insists his efforts will help charities by requiring them to raise standards and increase trust among donors. Ugly scandals-first in big nonprofits like the United Way and the Nature Conservancy, and then at the Getty Foundation and at American University-prompted the senator to focus on policing the huge charitable community.

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But key figures throughout the charitable community have not disguised their alarm at the Grassley proposals. They see new levels of bureaucracy and red tape that would add to the cost of doing business for organizations that are already strapped. And they worry that through such costs, their organizations will be forced to pay for the sins of the few that have broken the rules.

"Yes," Paul Nelson of the Evangelical Council for Financial Accountability told WORLD, "we are all aware of cases of abuse: nepotism, offering patronage to friends, lavish travel. But those are isolated cases. That's why we established ECFA in the first place-to make such practices very difficult and very rare. And when we showed Sen. Grassley and his staff details of our standards, and our enforcement procedures, he liked them. I think he was impressed."

But not sufficiently impressed, it appears, to roll over and play dead. One proposal from Sen. Grassley's staff, for example, would have forced most nonprofits to go through the tedious process of requalifying for exemption every five years-increasing legal and accounting costs. That proposal has now been withdrawn.

Another unpopular measure would have scaled back the deductibility of non-cash gifts. Some nonprofits depend heavily on gifts of food, medicine, and clothing to help the poor in the United States and abroad. Abuses-particularly with donors inflating the value of used cars they have given to charitable organizations-have multiplied in recent years. But nonprofit officials say correctives have been applied.

Gammon and Grange, a Washington law firm specializing in nonprofits, last summer reviewed 94 corrective proposals being discussed-and concluded that existing laws and regulations already speak to all but two of the 94.

Charitable foundations, too, claim to be threatened by some of the proposed new laws. Especially onerous are proposals that would diminish the role of family members in the operation of many foundations. Big, professionally managed foundations may find the resources to meet new requirements. But smaller family foundations without full-time staff say that compliance will force them to spend money on overhead they would otherwise be giving to charitable causes.

Discussion of the reforms was slated for Washington during the early fall months, but got sidelined as the focus shifted instead to recovery efforts from Hurricanes Katrina and Rita. When nonprofit giants like the Salvation Army and Red Cross took on a heroic posture, Washington legislators had to conclude it was exactly the wrong time to paint any nonprofits as villains.

Indeed, by late November the Senate had actually passed measures making some charitable giving easier. Nonprofit leaders watched carefully parallel legislation in the House, not yet reconciled last week with the Senate language.

David Wills, president of the National Christian Foundation in Atlanta, stresses that Christian organizations have not done well at building clout in the capital where such far-reaching policies are formed. "We just haven't had our act together as well as we should have," he said-referring in part to the failed opportunity to build a more dependable relationship with Sen. Grassley, well known in Washington as a committed Christian but known also as a tenacious bulldog on issues of corruption and abuse.

Mr. Wills is disturbed that Congress' voracious spending habits are forcing its members to scramble for revenue wherever they can find it. He calls it a sad day for America when Congress turns to the charitable community for such help.

Joel Belz
Joel Belz

Joel, WORLD's founder, writes a regular column for the magazine and contributes commentaries for The World and Everything in It. He is also the author of Consider These Things.

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