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Laws and Orders: Why Public Policy and Advocacy Should Matter to You

The following is excerpted from the March/April 2002 Advancing Philanthropy cover story.

We all know that it's our civic duty to vote, but that's not where our obligations end. The individuals whom we elect at the ballot box are responsible for determining the laws and regulations we have to live and work with. If our legislators don't receive information and advice about issues from the public, they're liable to enact laws that have unintended bad consequences. As advocates and good stewards for our charitable organizations, we must be engaged in public policy debates at all levels of government. It just makes sense.

The new Victims of Terrorism Relief Act provides a case in point. It is intended to provide financial relief to the victims of the September 11 attacks. But the bill also seeks to clarify who is eligible to receive disbursements from the various charitable funds that have been set up. In the first few weeks following the attacks, the Internal Revenue Service (IRS) issued conflicting standards, initially ruling that potential beneficiaries had to demonstrate actual financial need. A charity that did not perform a means assessment before disbursing funds could jeopardize its 501(c)(3) status.

The IRS quickly clarified its position to rule that potential beneficiaries must be "poor or distressed." Members of Congress wanted to make sure that this broader standard applied, so they codified it in the new legislation. But they didn't stop there. They added an exemption that effectively says charities do not have to follow the standard--which means that no standard exists other than the vague criterion that a person has to be "distressed." Thus, a homemaker with three children who lost her husband in the World Trade Center tragedy and a management consultant who lost only the contents of his WTC office could be awarded the same amount. Funds could be disbursed to pay car loans or college tuition.

"Under this law, charitable organizations are not required to make a specific assessment of need in order for payments to individuals to be considered charitable," says Bruce Hopkins, an attorney with Polsinelli, Shalton & Welte in Kansas City. "Congress set out to improve the situation, but it ended up adding a lot of confusion."

Three factors have contributed to the attention being paid to philanthropy by legislators across North America: (1) the phenomenal growth of the nonprofit sector, (2) the increasing size and scope of many charitable agencies, and (3) the continuing success of the fundraising profession. Scores of bills that affect fundraising--some of them good for philanthropy--are introduced every year. But some bills are bad for philanthropy and fundraising, and others have unintended consequences. That's why we need to pay as much attention to the legislators as they are paying to us.

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