US Panel Calls For Tougher Tax Laws In Non-Profit Sector

by Leroy Baker, Tax-News.com, New York

24 June 2005

A new report has recommended that Congress put in place a number of measures to tighten up regulation of the non-profit sector in order to prevent abuse of tax and other rules.

The Panel on the Nonprofit Sector, made up of charitable group leaders, has presented 120 recommendations to the Senate Finance Committee, which is preparing to draft a major overhaul of the tax laws governing charities and non-profit organisations, including more stringent policies on public disclosure of financial information, travel expenses, conflicts of interest and whistleblower protection.

Key recommendations by the panel included: audits by charitable organizations with annual revenues of $1 million or more and an independent accountant review for groups with revenues of $250,000 to $1 million; the establishment of clearer legal guidelines for donor-advised funds (private, professionally managed funds into which contributions gain immediate tax benefits but from which disbursements can be made on a delayed basis); and electronic filing of IRS form 990, giving the agency easier access to enforcement information.

The panel also wants Congress to clamp down on cases of excessive compensation by requiring organisations to disclose more clearly the compensation paid to their chief executives and five highest-paid employees.

Welcoming the report, Senate Finance Committee Chairman Chuck Grassley commented:

"My goal is legislation that will seek to encourage more checks to charities while also ensuring that the dollars are being spent appropriately to help the community and those in need."

"My time line is to have legislation this summer for Finance Committee members to be able to review and then to have the committee mark up legislation soon after that."

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