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NOTE: The following article was originally published by the Philanthropy Roundtable in their magazine, Philanthropy, in their March/April 2005 issue and is reprinted here with permission. Current and back issues of Philanthropy Magazine may be viewed on their website, philanthropyroundtable.org.
Interview with
Sandra Swirski Sandra Swirski is the executive director of the newly formed Alliance for Charitable Reform (ACR). She is currently a principal at Venn Strategies, LLC, in Washington, D.C. Ms. Swirski has more than 15 years of public policy and government relations experience in the private sector and on Capitol Hill, including stints with two senior U.S. Senators.With law degrees from Georgetown and George Washington universities, she has worked as a tax lawyer with Ernst & Young and was named one of Washington’s Top 10 Tax Lobbyists by Tax Analysts. In January 2005, with Congress expected to consider possible sweeping revisions to the laws governing taxexempt organizations,ACR tapped Ms. Swirski to be their executive director and spearhead an aggressive campaign in which the Alliance would be a key voice on reform within the foundation community. PHILANTHROPY:What is the Alliance for Charitable Reform? SWIRSKI: The Alliance was formed this year to push for reform of the charitable sector while protecting the freedom of foundations to operate. It was launched under the auspices of The Philanthropy Roundtable and is currently composed primarily of private foundations, some of them associates of the Roundtable and others not. ACR members believe it’s critical to form a coalition of donors to have one strong voice promoting common-sense laws and regulations that impose strict penalties on wrongdoers without trapping the innocent or wasting charitable assets. And so the Alliance supports increasing the resources available for charitable activities while improving financial transparency and accountability in the charitable sector. The members of ACR are also eager to safeguard the freedom of foundations to use their best judgment in carrying out their charitable objectives. Our end goal is to expand America’s leadership as the most generous and charitable nation on earth. PHILANTHROPY: Who is eligible to join the Alliance? SWIRSKI: Any charitable organization or donor that agrees with our guiding principles is invited to join. Anyone who wants to learn more may visit our website, www.ACReform.com. PHILANTHROPY: What are the Alliance’s main concerns? SWIRSKI: We’re most concerned with proposals affecting nonprofit organizations, and private foundations specifically, that would interfere with their decision-making freedom and impose new, burdensome regulatory requirements. The staff of the Senate Finance Committee released a "discussion draft" last summer detailing numerous such proposals, and then earlier this year the Joint Committee on Taxation issued a report that further refines some of the Senate Finance Committee’s proposals and also puts new ones on the table. Both of these documents, as well as our detailed responses to them, can be found on our website. An urgent priority for the Alliance is to respond appropriately to these proposals, which we think could threaten the essential functions served by charities and foundations. PHILANTHROPY: What happened at the Alliance’s first public meeting held recently in Washington? SWIRSKI: The event took place on March 3, and approximately 100 members of the philanthropic community attended. We heard a number of speakers well known to the community and experts in their fields. Speakers from the public sector included Randy Brandt of Senator Rick Santorum’s office (RPenn.) and Neil Bradley of Representative Roy Blunt’s office (R-Mo.). Both those members of Congress are intimately involved with the well-known CARE Act that aims to increase charitable giving. We also heard from Tim Goeglein of the White House Office of Public Liaison and from Dean Zerbe, Sandra Swirski
RESPONSE TO THE SENATE FINANCE COMMITTEE’S PROPOSALS Here are some highlights from the Alliance for Charitable Reform’s response to the Senate Finance Committee staff’s 2004 “discussion draft” that proposed broad changes in the laws governing tax-exempt organizations. For the complete response, go to www.ACReform.com. THE ALLIANCE OPPOSES THE FINANCE COMMITTEE’S PROPOSED imposition of one-size-fits-all governance mandates and private accreditation requirements on charities and foundations. Section G of the Finance Committee staff discussion draft has a long list of specific new internal governance requirements, detailed rules on the size and composition of governing boards, and private accreditation requirements, all to be imposed on the charitable sector by federal law. Some of the proposed governance reforms in the Finance Committee list, by themselves, seem sensible: for example, assuring oversight and control of a charity’s budget, operations, and executive compensation by its governing board. But many of the proposals make little sense, for example:
Overall, the Alliance strongly opposes imposition of any such internal governance rules, or private accreditation requirements, by federal law. It is simply not the place of Congress or the IRS to police so intrusively the internal management and operation of charities. These detailed mandates would limit charitable freedom and discretion, and over time would greatly weaken the charitable sector. Such proposals represent a departure from a long tradition in federal and state law of respecting the diversity of charities in terms of mission, philosophy, size, operating style, and division of staff and board responsibilities. Good governance at charities and foundations is to be encouraged, but the rigid mandates in the Finance Committee discussion draft are not the way to go about it. The Alliance opposes granting any private accrediting agency the power to approve or disapprove a charity’s or foundation’s continued tax exemption. The Finance Committee staff suggests imposing private accreditation requirements (see section G, paragraph 5 of the report), and even funding private accrediting agencies with taxpayer dollars (section H). Even though assurances have been given that philosophical positions and public-policy stances would not be taken into account in the accreditation process, these proposals still remain unacceptable, as they would place the coercive power to tax, and thus to determine the future of the whole array of tax-exempt organizations, in the hands of unelected individuals with no accountability to Congress. The Alliance supports the basic goal of limited government in order to maximize the scope of private charitable and philanthropic endeavors, but the administration of federal tax exemption is a core government function that must not be handed over to private groups. The power to approve or disapprove any charity’s or foundation’s initial or continuing tax exemption must never be outsourced to private organizations.
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As part of its discussion of increased penalty taxes on improper activities at private foundations, the Finance Committee report proposes restrictions on the ability of foundations to pay compensation to the individuals who serve them (section B, paragraphs 4 and 5 of the report):
The Alliance opposes these restrictions. Many foundation directors and trustees perform very substantial services for their institutions, including research and investigation of charitable programs and grantees. There is no reason to forbid payment of reasonable compensation for services rendered by directors and trustees. Moreover, artificial restrictions on executive compensation would simply drive competent managers out of the charitable sector. Congress should maintain current law permitting the payment of reasonable compensation (but no more than reasonable compensation) to all persons who serve foundations and other charitable institutions. Charitable freedom and diversity are ill-served by making it more and more burdensome for people to serve as charity and foundation executives and governing board members, particularly at a time when the liability risks of such positions are already increasing. The Finance Committee report also proposes new restrictions on administrative expenses of grantmaking foundations (section C, paragraph 1), and on travel, meal, and accommodation expenses of all charities (section C, paragraph 4). Foundation administrative expenses—meaning all expenses other than actual charitable grants—that exceed 10 percent of total expenses would be subject to special scrutiny, and administrative expenses over 35 percent of total expenses would be disallowed in measuring a foundation’s charitable grantmaking activities. |
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