April 12, 2011
A bill in the Oregon legislature, SB 40, would allow the Attorney General to issue an order disqualifying certain charities from receiving contributions that are deductible as charitable donations for Oregon tax purposes. In other words, a charity on the disqualification list could receive contributions, but the donors could not take deductions for the contributions and the charities would be required to disclose in solicitation materials that contributions were not deductible. The charities that might end up on the list are charities that fail to expend at least 30% of the charity's total annual functional expenses on program services. Those terms have the meaning they have on the IRS Form 990 and the calculation for Oregon purposes is to be based on the amounts listed on the charity's 990 or other federal return.
The percentage is based on a three-year rolling average, and the Attorney General has discretion not to issue a disqualification order for a charity if the charity establishes (1) that the charity made payments to affiliates that should be included in program services, (2) that the charity is accumulating revenue for a specific program purpose consistent with representations made is solicitation materials, or (3) such other mitigating circumstances as the Attorney General identifies by rule.
Disqualification orders will not be issued for private foundations, community trusts, qualified charitable remainder trusts, charities that are not required to file a Form 990 (so smaller charities are excluded), charities that receive less than 50% of total annual revenues from contributions or grants, and charities that have been in existence for less than four years.
The bill was developed by the Attorney General's office and reflects the frustration may charity regulators feel about their inability to curtail fundraising by private fundraisers who keep most of the money they raise. Statutes in other states have attempted, in the past, to restrict fundraising if a specified percentage of the amounts raised does not go to the charity, but the Supreme Court has held the statutes unconstitutional on First Amendment grounds because speech (concerning the charitable purpose and activities of the charity) is usually intertwined with the appeal for donations.
SB 40 passed the Oregon Senate on April 11 and will next be considered by the House.
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