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?