The Best Way to Curb Charity Fraud

LETTERS TO THE EDITOR

To the Editor:

According to Dean A. Zerbe (“Fighting Nonprofit Abuses,” June 9), I would fall into the Luddite category of nonprofit professionals who seek to understand why new legislation and regulation are needed when enforcement of existing federal rules is so lax.

So-called charity fraud, which is actually fraud committed against charities or by individuals and organizations falsely claiming to be charities, is already against the law and can be prosecuted under fraud statutes.

The abuse of deduction allowances by donors has traditionally been an issue between donors and the Internal Revenue Service.

Charities have no control over a donor’s tax situation, the key factor affecting deductibility of a donor’s gift to an eligible nonprofit. Charities can improve documentation and receipting of gifts without sweeping federal legislation.

The use of tax deductibility by donors is a constantly evolving field based on the core tenet that donations to charitable organizations should be deductible, within limits. It is the limits that are at debate, not deductibility per se.

Meanwhile, the IRS’s exempt-organizations section is being asked to regulate charities and the other nonprofits it has traditionally monitored, plus the proliferation of Section 527 political organizations, with little, if any, increased manpower or budgetary support.

The IRS’s exempt-organization enforcement capabilities are already seriously stretched.

If it will take several years to figure out how to use the current Form 990 effectively, how will the IRS develop and implement new regulations based on additional legislation — as proposed by Mr. Zerbe — effectively and in any reasonable time frame? How much will such new enforcement capacity and regulation cost? Who will pay the bill? Will Mr. Zerbe’s “solutions” really help, or only exacerbate the problem?

If there are holes in nonprofit accountability, I’d like to see more effort spent on plugging existing holes and improving the seaworthiness of the nonprofit accountability ship before we add more ballast in the form of new rules and requirements. Adding weight to a leaky boat only causes it to sink faster.

Michael L. Wyland
Principal
Sumption & Wyland
Sioux Falls, S.D.