ACR NEWSLETTER

Growing Trend of Local and State Governments Looking to Tax Exempt Organizations for Revenue

The Urban Institute, a D.C.-based think tank, held an event yesterday on the growing focus nonprofit tax exemptions and pressure from state and local municipalities to fill budget gaps.  While this is not an issue where ACR typically engages, we found it interesting and noteworthy.  Many tax-exempt nonprofit organizations such as universities, nonprofit hospitals and museums occupy property that would otherwise be taxable to businesses or individuals.  With being tax exempt, an organization is typically providing some kind of benefit to the public. However, with the economic slump, many state and local governments have been running budgets into the red and have been looking for alternate ways to find revenue.  Panelists present to speak on these issues included:

The Current Landscape: Who wins and who loses from exemption?
- Evelyn Brody, Chicago-Kent College of Law
- Joseph Cordes, George Washington University
- Rick Cohen, Nonprofit Quarterly
- Thomas Longoria, Texas State University

Focus on Eds and Meds, A focus on the current major pressure points: nonprofit hospitals and colleges and universities.
- Higher education: Matt Hamill, National Association of College and University Business Officers
- Hospitals: Keith Hearle, Verite Healthcare Consulting
- Woods Bowman, DePaul University

Negotiated Payments in Lieu of Taxes as Wave of the Future?
- Ron Rakow, City of Boston
- Daphne Kenyon, Lincoln Institute of Land Policy
- David Thompson, National Council of Nonprofits
- David Brunori, State Tax Notes
- G. Reynolds “Renny” Clark, on behalf of the Pittsburgh Public Service Fund, University of Pittsburgh

The last panel was of particular interest because there were very divergent opinions on the best approach to payments in lieu of taxes (PILOTs). One panelist equated a systematic approach of seeking voluntary PILOTs from nonprofit groups as near “bullying” and identified PILOTs as merely a tax with another name. Another panelist justified systematic systems of PILOTs because some cities have over half of their property as tax exempt making raising revenue through property taxes in an economic downturn very difficult. This will be an interesting debate as it unfolds and there is more discussion around the tax exemption of nonprofit organizations.

You can access the full event materials when they are posted here.

House Ways and Means Subcommittee on Oversight Holds Hearing on Tax Exempt Organizations

The House Ways and Means Subcommittee on Oversight held a hearing today to examine compliance and regulatory issues for some tax exempt entities, specifically public charities. ACR followed this hearing, which was the first in a series of hearings that will occur on nonprofit issues.

-Roger Colinvaux, Associate Professor, Columbus School of Law, The Catholic University of America
-Diana Aviv, President & Chief Executive Officer, Independent Sector
-Joanne M. DeStefano, Vice President for Finance and Chief Financial Officer, Cornell University, testifying on behalf of the National Association of College and University Business Officers
-Michael Regier, Senior Vice President of Legal and Corporate Affairs, VHA Inc.
-Bruce R. Hopkins, Senior Partner, Polsinelli Shughart

For a more in-depth report click here. You can read the written testimony from all the witnesses here and view the entire video.

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What is Transparency and What Does it Mean for Philanthropic Organizations?

This was the topic of a lively roundtable event yesterday co-hosted by The Philanthropy Roundtable and the Aspen Institute. The panel featured experts from different areas of the nonprofit sector to bring a broad perspective to the discussion. Panelists included Rick Cohen, national correspondent for Nonprofit Quarterly, Jack Horak founder of the nonprofit organizations practice area at Reid and Riege Law Firm, Cindy Lott, senior counsel to the National State Attorneys General Program at Columbia Law School, and John Tyler, general counsel, secretary, and chief ethics officer at the Ewing Marion Kauffman Foundation. Suzanne Garment, visiting scholar at Indiana University’s Center on Philanthropy, moderated the discussion.

This discussion previews issues that will be covered in a new Roundtable publication (coming Summer 2012) authored by John Tyler on transparency in the nonprofit sector. This book will discuss some of the myths surrounding transparency, provide a practical guide to encourage thoughtful planning of transparent endeavors, and open thought on means of good voluntary transparency.  There have also been movements to increase transparency by nonprofit organizations through both mandated and voluntary means.  The Roundtable believes that transparency raises complex and important issues, and we are enthusiastic to host thought, discussion and debate on the topic. 

You can watch the full event here, but here are just a few nuggets as a primer.

Tyler opened the event and introduced some of his ideas that will appear in the new publication. Tyler challenges his audiences – at this panel and his future readers – to consider the basic question, “what is transparency,” suggests the need for clarity, and offers to dispel some common myths.  This included the idea that just because an organization is being transparent doesn’t mean they are being effective. Tyler was followed by Rick Cohen who offered areas where he believes more transparency is needed (preview his latest column on transparency here). Tyler and Cohen did agree that there are no easy answers and organizations are diverse, requiring thoughtful deliberation. Jack Horak provided a “boots on the ground” perspective as a legal adviser, and offered that there are many issues nonprofit organizations do not consider that can cause trouble down the road.  Horak’s comments re-emphasized the need for organizations to plan and anticipate.  He offered that applying “the Goldilocks principle” – not too hot, not too cold, just right – was both helpful and complicated.  And, Cindy Lott provided insight on the perspective of state regulators and how they are key players in transparency strategies.  She also stressed the importance for nonprofits to be proactive and take charge of their own image, especially in the context of online and social media where, if you’re not careful, others will shape your image for better or worse. Simply put, if you aren’t telling your story somebody will do it for you.

This is a very brief overview of the incredible and rich content of this event.  It’s definitely a panel worth watching because all of us in the nonprofit sector should be thinking about how we will approach transparency.

This event was co-hosted by The Philanthropy Roundtable and the Aspen Institute’s Justice and Society Program and Program on Philanthropy and Social Innovation.

What Does Transparency Mean to Philanthropy and Why Should You Care?

Also posted in CoF blog RE: Philanthropy

If you haven’t already, you should start thinking about how transparent you want your organization to be. The Philanthropy Roundtable began looking at this topic and is about to publish a short book, by John Tyler of the Kauffman Foundation, about all of the intricacies involved. So why are we talking about it and what does it mean for your organization? Does it mean releasing all of your organization’s financial information? Does it mean releasing detailed information about your board members and how they are selected? Does it mean releasing detailed information about all of your grantees and the criteria by which they were selected? Does it mean releasing racial or socioeconomic information about the beneficiaries of your grants?

There are a many questions to ask about transparency. But at the same time, there are also some myths about transparency. So let’s have a look at some of those myths, some of the useful means of transparency, and what you can do to get ahead.

Myth #1: Because foundations have tax-favored treatment, the public has a right to know. If private money is given to charity, what right does the public have to extensive information? The public does have the right to know we’re following the law. That is why we require foundations to fill out a Form 990, which is publicly available. But there is a distinct difference between private money going to charity and public money going to charity. What does the public have the right to know and where is the line? Watchdogs, Congress, and others who want information about your organization have different motives and objectives. But it’s your information and you need to think about its purpose. So what about voluntarily providing information to the general public? Foundations may be very well served by voluntarily publishing information. This gives your organization an opportunity to tell YOUR story, highlight YOUR work, and establish integrity.

Myth #2: Blanket transparency will mean all are behaving appropriately. If we inundate the airwaves with heaps of information, we will literally flood people. The flood of information only creates a false security blanket that everybody in the sector is behaving appropriately. This could actually obscure good information, drown positive messages, and negate the goals of transparency. Overwhelming amounts of information also denies your organization the ability to tell its own story. You lose control of your message when you indiscriminately release lots of information in a one size fits all approach. How many of us read all the privacy disclosures we get from our credit cards, insurance companies, or something we sign up for on the Internet?

Myth #3: Complete transparency equals organizational effectiveness. First off, who says you have to be effective, to whom, and for what? The release of information about an organization’s activities does not automatically mean it is effective or achieving its mission. For example, small foundations do not have the same resources to comply with broad transparency as large foundations. The need to release lots of data costs time and money, perhaps resulting in less effectiveness. Conversations about effectiveness are important, but let’s not forget about the variety of foundations that exist! The foundation world is diverse-large and small, new and old, corporate and community, independent and family-and we all have our own visions of effectiveness.

Myth #4: Blanket transparency would not result in the forced change of foundation activities. If organizations are forced to release all grant information, it could chill support for things that may not be publicly popular. Gay rights, civil rights, school choice, global warming, and religious causes are all political hot potatoes. And they’ve all been funded by philanthropy. For business or personal reasons, donors may not want to release everything about funding decisions. But, this does not mean these organizations are misbehaving. Should organizations be forced or pressured to release information on grant decisions? What impact might this have on the grantmaking process? Could it embarrass applicants that submit poor proposals? Consider these questions and make a plan.

These are just some of the issues involved in discussions on transparency. We hope we have piqued your interest about this and look forward to future conversations when Tyler’s book is published.