Protecting Donor Anonymity: Understanding the NPR Scandal

Anonymous gifts are a staple of the charitable world. So why did NPR get upset when it heard one of its fund raisers advising a fake potential donor to consider making an anonymous gift in secretly recorded audiotapes?

The answer has less to do with anonymity and more to do with how the gift would have been reported.

After all, hiding a gift from the public and hiding it from the Internal Revenue Service are two different things.

The NPR fund raiser, Betsy Liley, is heard in the audio recording advising someone she thought represented a Muslim charity that he might be able to avoid a government audit of his gift by making it anonymously.

Ms. Liley never specifically mentioned the IRS in the recordings. But NPR issued a statement saying that her suggestion that anonymous gifts can be hidden from tax authorities is “inaccurate and not reflective of NPR’s gift practices.” The organization added: “NPR complies with all financial, tax, and disclosure requirements.”

Names of Big Donors

Donors to nonprofit organizations like NPR have the legal right to insist on anonymity. And the reasons behind their desires for anonymity are varied. They may not want to be associated with a controversial cause, for example, or to open themselves up to fund-raising pitches.

But if they are giving large sums, they cannot legally hide their names from the IRS.

Charities must file annual informational tax returns with information about their revenue, investments, executive compensation, lobbying, and other activities. Much of the information on that form is considered public record.

They must also list the names, addresses, and ZIP codes of all donors who have contributed $5,000, or 2 percent of the group’s revenue, whichever is greater.

But some of that information is considered confidential.

The public can see the amount of each contribution listed but not any of the personal details. The IRS, however, sees everything.

Gene Takagi, a nonprofit lawyer in San Francisco, says the agency needs to know the identity of donors to verify that those who claim charitable tax deductions have actually made those gifts.

But Mr. Takagi says donors can find one way to keep their gifts anonymous even from the IRS: They can open a donor-advised fund at a community foundation or other charitable organization and ask the fund to send the money to “Charity X.” Donor-advised funds are not obligated to follow the wishes of such donors, but they generally do.

“Charity X,” he says, would then list the gift on its Form 990 as coming from the donor-advised fund, and the IRS would not be able to identify the original donor.

Editor’s Note: Suzanne Perry was communications director for Minnesota Public
Radio from 2002 to 2004.