A Nonprofit Agenda for the New Congress

Next month’s elections have the potential to bring about big changes in how Congress acts, especially if the Republicans lose control of the House or the Senate.

Nonprofit groups have a major stake in the outcome. Their missions are vitally affected by the conflict in Iraq, the war on terror, the reconstruction of the Katrina-ravaged Gulf Coast, and federal policies on education, health, the environment, arts, and so much more. Congressional action or inaction on those and other issues will shape demands on the nonprofit world, and the advocacy agenda of many organizations.

Also important are federal policies that govern the fund-raising and management operations of all nonprofit groups — especially those dealing with nonprofit accountability, the extension and expansion of tax incentives to encourage charitable giving, and the appropriate role of charities in advocacy and voter registration.

Neither Democrats nor Republicans have said much about how they plan to handle such matters in the next session of Congress, but if the Democrats win control of either house, let’s hope they don’t cede the charitable-accountability issue to the Republicans who have thus far been leading the crusade.

Charitable accountability should not be a Democratic or Republican issue, but a priority for anybody who values the role of nonprofit groups in public life.

Sen. Charles E. Grassley, Republican of Iowa, made some important strides by pushing Congress to eliminate many of the outrageous abuses in the nonprofit world — but plenty more is left to be done.

While some critics of Senator Grassley have spun his fervor for charitable accountability as simply a right-wing Republican tactic aimed at “defunding the left,” there’s no truth to that suggestion.

Under Mr. Grassley’s direction, the Senate Finance Committee has taken on aberrant charities no matter what their ideological leanings, even inviting scrutiny of conservative-leaning institutions such as the National Heritage Trust and the Capital Athletic Foundation, a highly questionable charity run by the lobbyist Jack Abramoff.

The most vociferous, well-organized, and lobbied-up critics of Senator Grassley’s legislative agenda were on his right, led by groups like the Alliance for Charitable Reform and the Philanthropy Roundtable, not the organizations on his left.

On the Senate Finance Committee, the most consistent burr in Mr. Grassley’s saddle was Sen. Rick Santorum, Republican of Pennsylvania.

Given questions that have been raised about his oversight of the Operation Good Neighbor Foundation, Senator Santorum hardly stands as an archetype for philanthropic accountability. Critics have charged that donors to the foundation are frequently more interested in currying favor with the senator than in supporting its philanthropic mission, and other people have suggested that the organization spends too much on overhead — charges Mr. Santorum denies.

Senator Santorum is in a closely contested bid for re-election, and if he loses — along with a large number of his Republican colleagues — the Democrats could take over the Senate. That would probably put Sen. Max Baucus, of Montana, the committee’s senior Democrat, at the helm.

Mr. Grassley and Mr. Baucus have directed the committee seemingly as a cordial, bipartisan partnership, though that fact — plus Senator Baucus’s unwillingness to support his fellow Democrats on efforts to preserve the estate tax and on other tax issues — has made him suspect in the eyes of some Democrat-leaning observers.

As a result, he may have some trouble getting the committee to go along with a continuation of the efforts to focus on making charities and foundations more accountable.

While charitable accountability is not a topic that needs to become partisan, other issues important to charities, such as tax policy and advocacy rights, often are the subjects of ideological battles because they are so rooted in political philosophy. It is on those issues where next month’s elections could make a big difference.

For example, views about the role of government have been a key reason that Senator Santorum has been the main proponent of efforts to extend tax breaks for charitable donations to people who don’t itemize on their taxes. Mr. Santorum’s inclusion of such a tax break as the first item listed on the Senate Republican Conference’s Anti-Poverty Agenda reveals his belief that charities need to take over many of the tasks traditionally carried out by government, especially when it comes to serving the neediest Americans.

Extending tax deductions to millions of American donors is not a popular idea with other Republican lawmakers, as well as some Democrats, in part because of the high cost to the federal treasury. Among the opponents has been William Thomas, the Republican chairman of the House Ways and Means Committee.

Mr. Thomas has not spent as much time on charity issues as Mr. Grassley, but he has raised tough and important questions about what organizations deserve tax- exempt status. In particular, he has pressed nonprofit hospitals to demonstrate what they do to deserve tax-exempt status.

Mr. Thomas is retiring this year, so he will probably be replaced by Louisiana’s Jim McCrery or Florida’s E. Clay Shaw if the Republicans continue to control the House, or potentially by one of the nation’s most experienced lawmakers, Charles B. Rangel of New York, if the Democrats are in charge.

Regardless of who becomes leader of the House Ways and Means Committee in January, he or she should immediately join with Senator Grassley or Senator Baucus and make it clear to the Internal Revenue Service, the state attorneys general, and nonprofit organizations that they plan to continue their focus on making sure charities, donors, and foundations are doing all they can to serve the public and not taking unfair advantage of the benefits of tax exemption.

Lawmakers should also announce that they plan to take seriously the reports of the treasury secretary on donor-advised funds and supporting organizations — reports that Congress ordered when it passed provisions designed to cut down on abuses by donors and charities who use such techniques. Such entities have been involved in major scams, and Congress needs the report to better understand how to curb wrongdoing.

The new leadership should keep the Senate Finance Committee and House Ways and Means engaged in investigations and hearings into critical issues of accountability — asking exactly how nonprofit hospitals differ or should differ from their for-profit counterparts, maybe taking a long-overdue look at the percentage of assets that foundations and nonprofit institutions, such as hospitals and colleges, spend from their endowments each year.

It is also important that Congressional leaders finally do something about the misuses and abuses of nonprofit groups and foundations by members of Congress (and their families, political fund raisers, and campaign factotums).

Senator Baucus has already demonstrated that he has the courage to take on an issue that is among the least popular on Capitol Hill.

He drafted legislation aimed squarely at charities with ties to lawmakers, but it was dismissed after a few milliseconds of consideration by a Senate committee. He also released a report this month investigating five charities associated with the lobbyist Jack Abramoff, charging that the charities’ involvement in peddling scams constituted a “fraud” against the American taxpayer and a violation of the organizations’ tax-exempt status.

If Congress truly wants to make changes in the way lobbying is conducted, Senator Baucus could be the champion willing to call for higher standards of disclosure and ethical behavior by charities allied with lawmakers — and he may well be willing to push for investigations of members of Congress who appear more than willing to play fast and loose with the charities they or their associates establish or control.

In addition to its maintaining — and bolstering — the vigilance of its own oversight of the nonprofit world, it is vital that the next Congress put some muscle into the Internal Revenue Service.

It needs to give the IRS sufficient resources to properly oversee nonprofit groups — and to pass money along to state regulators that monitor charities so that government can make a serious effort to punish wrongdoers.

Support for the IRS and state regulators cannot be a one-shot appropriation — otherwise it will be impossible for regulators to carry through in punishing charities, trustees, and donors who run afoul of tax laws. The excise tax that foundations pay every year should be earmarked exclusively for this purpose; that would provide a regular source of money for this vital function.

That idea almost made it into a bill Congress was considering this year, only to be removed at the last moment. Why? Because nonprofit leaders have not made an urgent pitch about the importance of giving the regulators the money they need — at least not in a vocal-enough way that Congress felt a need to respond.

The nonprofit world doesn’t need the 110th Congress to make any soapy political paeans to the importance of charity and philanthropy.

What it does need is somber perseverance by lawmakers in finishing the task of bolstering charitable accountability and, in doing so, restoring and sustaining the public’s trust in charities and foundations.

Rick Cohen, former executive director of the National Committee for Responsive Philanthropy, is a writer in Washington.