Tuesday, May 22, 2012

Ways & Means Oversight Hearing - Increased Focus on Exempt Organizations' Activities

As reported by Rick Cohen in the Nonprofit Quarterly, in addition to topics blogged herein by Elaine Waterhouse Wilson (see Comments to blog entry), an interesting exchange occured between California Congressman Xavier Becerra and Catholic University Law Professor Roger Colinvaux.  In his testimony, Colinvaux commented that the focus of the law with respect to public charities is whether they are violating statutory and other prohibitions (what Cohen refers to as "negative requirements"), rather than the charities' actual activities in furtherance of their exempt puprose (i.e., "affirmatives").  Congressman Becerra, who is noted in the NQ article for focusing on public charities' outputs as the proper measure for tax exemption, subsequently suggested that the “nonprofit sector doesn’t do as much as it can to police itself.”  As Cohen states in the article, the Congressman was not referring to potential illegalities but rather the actual activities of charities in furtherance of their tax-exempt purposes. 

Professor Colinvaux's response was to propose a greater focus on charities' activities rather than merely their purposes.  He further proposed taking a fresh look at Section 170 and what qualifies for deductibility thereunder, as well as thinking about “whether there are some charitable purposes that should be prioritized over others.”  As Cohen notes in the NQ article, no other member of the panel supported or opposed the suggestion for refocusing and redefining priorities with respect to charities' activities and the support thereof from the charitable contributions deduction.  The article is an interesting discussion of the competing policies and priorities of tax-exemption law as it currently stands and potential tax reform in this area due to deficit reduction efforts and shrinking federal budgets.

For a more detailed analysis with respect to refocusing on charities' activities, Professor Colinvaux's article entitled, "Charity in the 21st Century:  Trending Toward Decay," is a must read (available here).



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