Article
April 13, 2010

Should Some Charities Be More Equal Than Others?

Tomorrow in Washington, arguably the most important public discussion about charities and the charitable sector this year is scheduled to take place at the National Press Club. It is a symposium sponsored by Catholic Law School that will discuss "Philanthropy in the 21st Century: Should All Charities Be Equal?"

Anyone with an interest in the charitable sector and its future success should attend.

The discussion is focused exactly on the issue that is first in the minds of policymakers in Washington who are interested in the tax-exempt sector: whether there is merit to a broader review and consideration of what is a charity. More specifically, should there be an effort to distinguish between types of charities?

The symposium is moderated by Professor Roger Colinvaux. It is rare that I am more interested in what the moderator has to say than the speakers (although the speakers in this case are of great interest as well).

Professor Colinvaux, formerly on the Joint Committee on Taxation, is on any short list of the people that members of Congress respect and listen to closely when it comes to charitable issues.

On the panel will be Diana Aviv. head of Independent Sector; Richard L. Schmalbeck, a professor of law at Duke University; Eugene Steuerle, a fellow at the  Urban Institute, a Washington think tank; and Russ Sullivan, chief of staff of the Senate Finance Committee and an aide to its chairman, Sen. Max Baucus, Democrat of Montana. This is a first-rate group.

As I noted in my previous column, one of the dangers for a charity’s board seeking to protect the organization’s reputation is when there is little to distinguish the charity’s activities from a for-profit business.

The public and Congress have a high expectation that a charity should act in a manner that provides real separation from the work of similarly situated for-profit companies.

Where there is concern that a charitable sector is not providing a benefit commensurate with its tax-exempt status, Congress has often engaged in industry-specific reforms – most recently with sweeping reforms of nonprofit hospitals included in the health bill and earlier changes in requirements for credit-counseling organizations. The new Form 990 also does much to place greater emphasis on what charitable activities an organization conducts compared with other efforts.

The question for tomorrow is should we move beyond just reforming certain sectors but instead look at broader changes to the subsidies for charities? For example, should there be line drawn that would allow for greater tax subsidies to charities that provide direct support to the poor? What lines should be drawn? What lines can be drawn?

All close readers of The Chronicle of Philanthropy are familiar with the significant number of charities that look, walk, and talk like a business. I commend to your reading an absolutely outstanding article by David Hilzenrath of The Washington Post called Charity Boosts Profits of Erickson Retirement Communities.

Readers may also find of interest The Chronicle’s own good recent article by Caroline Preston, Nonprofit Group Attacks Humane Society Over Spending of Donations, and a 2009 CBS news report, FBI Eyes Charity Linked to Rep. Murtha, by Sharyl Attkisson and Laura Strickler.

And just as a reminder, a 2007 Washington Post article by Philip Rucker, Panel Probes Spending of Veterans Charities.

These articles should serve as sober reading for tomorrow’s symposium. I welcome readers providing their own examples.

Readers can make their own judgment as to whether there should be any separation of treatment in terms of tax benefits that the charities mentioned in the articles cited here receive—benefits that we all subsidize—and, say, the Salvation Army.

At a time of skyrocketing deficits and significant increases in taxes (with more on the way) policymakers (including those at the state and local levels) cannot miss the opportunity to scrutinize the costly subsidies provided to tax-exempt entities and weigh that with the benefit they provide to the public. The charitable sector should be leaders in that discussion. I welcome your thoughts and comments about this idea just below this post.