An article in The Economist calls attention to a recent report by the senator and says, "The influential Mr. Grassley, who has long championed greater transparency and accountability in the charitable sector, has become increasingly convinced that this privilege is being abused to the tune of many millions of dollars."
While Grassley is probably more concerned about televangelists who run lucrative businesses such as recording studies, there is a big regulatory hole in the way the IRS treats faith-based organizations.
The biggest problem is simply in defining what is a faith-based nonprofit. This is important because they enjoy privileges such as exemption from filing form 990, the tax form required of most other nonprofits, even as they enjoy tax-exempt status.
It seems up to the nonprofit whether or not it will claim to be faith-based. For instance Billy Graham decided not to classify his organization as a church; while the Salvation Army does call itself a church.
According to The Economist article, Grassley is giving religious groups time to respond to his report before he seeks new legislation. One group, the Evangelical Council for Financial Accountability (ECFA), has set up a commission to recommend signifcant reforms.
Is Grassley courting political disaster by taking on the faith-based community, what The Economist's article calls the "third rail of American politics," or is the American public ready to insist on more transparency and clarity from the thousands of faith-based nonprofits that they so generously support?
Related:
What Is a Faith-Based Nonprofit?
Comments
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I was under the understanding, as a non-profit, that if you are a large non-profit there are already guidelines in place for at least religious organizations. Somewhere I think I saw that churches are not.
But, as a non-profit 501c3 tax exempt religious organization we are not required to turn it in because the donations received do not exceed $50,000.
These small ministries have small “paid” staff, if any, and everthing requiring professionals such as accountants adds up. So, I would have no problem filling out a 990-E, but would probably need to hire someone to do the 990.
But, I agree there is much abuse and I have seen it in other ministries previously. So some type of accountability needs to be met. We do turn in a 990-N which is simple and states how much actual revenue came in that year, officers and certain required info, easily looked up.
It is a shame that the abuse of some ends up invariably causing more work for others. I do not believe that a church should be able to hide their records and should be accountable in some way. Many pastors who have founded churches think tax-exempt and sales tax exempt is a free ticket to get whatever they want at a store getting it tax free.
I believe this type of thing is what has caused so much conflict.
I work with a fabulous nonprofit accountant that does this type of work for all sized nonprofits and cuts her rates for them. http://www.irisroskencpa.com/
Thanks for the info. I may check that out.
Yes, Faith based ministries are “protected” by first amendment rights. And yes, while some lot of them are really questionable (ministry of what?) there is no reason for them not to be tax exempt. But the particular exemption that churches have really shouldn’t allow them NOT to file a 990. The 990 is more and more becoming a wonderful tool for transparently seeing how the community’s funds are used by any particular tax exempt organization. If you don’t have to pay taxes, you really should be answerable, just like all the other organizations that are. Not because of administrative red tape, but because the 990 affords an excellent means for the public to view what the organization does and how it spends the money is it was given. Otherwise, to whom are they accountable, if not to the public?
Thank you for such a thoughtful comment, Alexandra!
Transparency? Most definitely. Following U.S. Supreme Court’s odd decision to allow political advertising/campaign contributions, transparency is essential (clearly, “mutiny”/Constitutional amendment towards Supreme Court appt.’s, are driven home by such partisan decision-making). Reason being, there are entities, separate from worthwhile, legit ones: Created to hide money, political/religious contributions/preferences/goals, charities, buying patents/adminstrative costs/salaries, etc. Granted, going too far would ruin nonprofit arena for others. So, @ the very least scrutiny, in conjunction w/streamlining a nonprofits costs/aspirations, should be implimented. Translation: I.R.S.