Going the Distance: The Case for Charitable Reform

Going the Distance: The Case for Charitable Reform

Creating major congressional reform can seem like a marathon race. Fashioning and passing comprehensive reform is an arduous process in which patience and pacing succeed where sprinting fails. As we have seen in many past legislative struggles, the moral outrage and passion that spark many major legislative efforts often dissipate when political positioning, the short attention span of a fickle public, and electoral math outweigh the imperative for change that inspired the effort.

The charitable sector is now facing this kind of challenge to our endurance. Many in our community have been committed to effective and sensible charitable reform and giving incentives, currently contained in the Tax Relief Act of 2005 (aka the tax reconciliation bill). And we must remain so, particularly with recent promises by committee staff to remedy problematic provisions of the bill.

For those who reflexively oppose any legislative oversight, it is worth noting that the reforms included in the bill pale in comparison with the type of rash congressional overreaction that may spring from the next national news story detailing abuse within our sector. Measures could be introduced ad hoc, attached without context to other legislation, and give us a patchwork of damaging rules and regulations that in no way could be called reform. Such a piecemeal approach might include gaps that could render us vulnerable to exploitation by those whose intent is to enrich themselves.

The package of reforms in the tax reconciliation bill are a clear illustration of the ways we can prevent and penalize abuses in the future and, at the same time, avoid overbearing regulation. It was, after all, that goal that led us to where we are today.

In 2004, at the encouragement of the Senate Finance Committee, Independent Sector convened the Panel on the Nonprofit Sector, a broad effort undertaken by the charitable community to improve the transparency and accountability of charities and foundations and reduce the instances of abuse that were beginning to siphon some of the attention away from the good work our sector was doing to improve society.

The Panel and its working groups, consisting of leaders that reflect the diversity of the sector, collaborated with a broad spectrum of nonprofit leaders to examine the various aspects of governance and practice that had been flagged by the Internal Revenue Service and lawmakers as areas of potential abuse. We examined existing law and carved out a path to enlightened legislative reform that would allow us to work with government to fill the gaps we saw, to better enforce existing laws, and to encourage methods through which our sector might improve our own practices.

That path was paved by the more than 120 integrated recommendations for charitable organizations, government regulators, and the IRS that the Panel detailed in its Final Report. Designed to reduce abuse throughout the sector, these recommendations have become the roadmap for many of the charitable reforms included in the Senate's version of the tax reconciliation package currently being debated in a House-Senate conference. That version also contains a slate of tax incentives to spur increased charitable giving, increasingly vital provisions at a time when our organizations are being stretched financially in an unstable budgetary climate. Independent Sector, in tandem with many other charitable organizations, has been working closely with Congress to ensure the legislation that makes its way out of the conference is changed to reflect the values and needs of our ever-growing mosaic of charitable organizations.

And that brings us back to the home stretch of this particular race.

Just recently, the press reported that many of the reforms and incentives for which we have fought so steadfastly over the past year might not make it into the final reconciliation package. Those reports may be premature, fired off by a quick-trigger press.

I know there are those in the sector who would look at a failed bill and declare victory. It is true that the Senate bill is not perfect. There are provisions we are currently working with Congress to eliminate or amend because they would hamper the ability of some charities and foundations to fulfill their charitable missions. And I understand the potential dangers of government overreaching that interferes with our work. But the reforms that are consistent with the Panel's recommendations were shaped by the ideas of leaders within our sector “ and not merely by lawmakers who are removed from their real-world ramifications. The recommendations were propagated by balancing the pressing need for maintaining sector independence with providing meaningful government oversight “ the two ideals behind any major charitable reform. And they were created with the most critical goal in mind: the overall long-term health of the sector.

In truth, real reform can only occur with our own proactive involvement. We are far better off encouraging Congress to reform our sector with our own passionate and reasoned voice at the center of the debate. And we must do so immediately, while the opportunity for real reform is upon us.

Diana Aviv is president and CEO of Independent Sector, the Washington, D.C.-based leadership forum for charities, foundations, and corporate giving programs committed to advancing the common good in America and around the world.