Nonprofit Panel Releases Final Report
(June, 27, 2005) The Panel on the Nonprofit Sector presented its report to Sen. Grassley (R-Iowa) and the Senate Finance Committee on Wednesday, June 22, 2005.
The new report contained recommendations in addition to those offered by the panel in its March 2005 interim report. The Panel held a national conference call on Friday, June 24, 2005, so interested organizations and individuals could ask questions about the report.
In addition, the panel will release a supplemental report in the fall with recommendations on issues such as accreditation and standard setting, financial reporting and transparency and possible changes in the legal framework, including federal and state regulation of fundraising activities.
Included in the final report were recommendation that:
- Charitable organizations adopt, implement and publicize audit procedures and policies on travel expenses, conflicts of interest, and whistleblower protection
- Congress require audits for charitable organizations with annual revenues of $1 million or greater and an independent accountant's review for organizations with annual revenues between $250,000 and $1 million. The panel also calls for Congress to require mandatory electronic filing of charitable organizations' annual information returns, the Forms 990; the IRS to improve the design of and instructions for Forms 990; and charitable organizations to have their CEOs or CFOs certify the accuracy of their information returns.
- Congress establish clearer legal guidelines for donor-advised funds, Type III supporting organizations and participation by tax-exempt entities in potentially abusive tax shelters. The report also urges Congress to tighten up rules and strengthen penalties to help prevent transactions that benefit donors, rather than the public.
- Congress strengthen the penalties on board members who approve of and executives who receive excessive compensation; that the IRS revise the Forms 990 to make the total compensation of executives clearer to the public and regulators; and that boards approve executive compensation each year.
On the issue of noncash contributions, the panel recommended that Congress establish clearer rules for valuing donated property and mandate stricter guidelines for appraisals of land and other appreciated property.
During the presentation Sen. Grassley thanked the panel for its work and stated, '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.'
He added that '[m]y 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.' AFP currently is analyzing the final report and will provide its findings shortly.
To view the final report, please visit the Panel on the Nonprofit Sector's website.
Given Senator Grassley's timeline, it is more important than ever for AFP members to write and call their Senators. For draft letters, phone scripts, and contact information, please go to AFP's legislative alerts page.
House Subcommittee to Hold Hearing on Facade Easements
The Subcommittee on Oversight of the Committee on Ways and Means, chaired by Rep. Jim Ramstad (R-Minn.), held a hearing to review the tax deduction for facade easements on Thursday, June 23, 2005.
- Steven T. Miller, commissioner, Tax-Exempt and Government Entities Division, Internal Revenue Service, Washington, D.C.;
- Steven L. McClain, director, National Architectural Trust, Washington, D.C.;
- Paul W. Edmondson, vice president and general counsel, National Trust for Historic Preservation, Washington, D.C.;
- Peg Breen, president, New York Landmarks Conservancy, New York, N.Y.; and
- David C. Lennhoff, president, Appraisal Division, Delta Associates, Vienna, Va.
For a copy of each witness' testimony, go to the Ways and Means Committee's website.
A historic preservation easement is a voluntary legal agreement made between the property owner and a qualified organization to protect a significant historic, archeological or cultural resource in perpetuity from demolition, alteration or development. By donating a facade easement to a qualified organization, a property owner promises in perpetuity not to alter the facade of his or her structure without the permission of the easement-holding organization. In return, the property owner may take a deduction equal to the value of the easement. In recent years, there has been a dramatic growth in the number of facade easements.
Recent media reports have raised concerns about abuse, especially relating to inflated deductions that some taxpayers may be claiming. Some reports have also raised questions about the role of for-profit facilitators in marketing and promoting the donation of facade easements.
AFP will continue to monitor this development and keep members apprised.