Government and Politics Watch

November 21, 2008

Judge Denies IRS Attempt to Audit Minn. Church

A U.S. District Court judge has rejected an effort by the Internal Revenue Service to force a Minnesota Church to comply with an audit, ruling that the agency violated a 1984 law that raises the bar for examining churches.

The tax agency was trying to get the federal court to enforce a summons, issued in March, against Living Word Christian Center, in Brooklyn Park, Minn., a suburb of Minneapolis, after the church refused to turn over documents about its financial operations and governance.

The tax agency began investigating the center in 2007, following reports that the church may have been involved in improper political activities, according to court documents.

Instead the IRS said it found financial transactions that may have benefited the organization’s pastor, the Rev. James M. Hammond. Living Word leased planes owned by Mr. Hammond, and the pastor borrowed money from the organization, which eventually forgave a portion of his debt, according to the case history.

But the judge ruled that the federal agency had not properly followed the Church Audit Procedures Act of 1984, enacted to give churches greater protection in audits. Among other things, that law dictates that only certain high-level officials within the IRS are allowed to initiate an examination.

The person who signed off on Living Word’s audit, the director of examinations for the exempt organization department at the IRS, was too low-ranking to have that authority, the judge said in his report.

—Eric Kelderman

November 20, 2008

Obama Examines Nonprofit Ties of Potential Appointees

As Bill Clinton seeks to decrease concerns about his foundation work so that his wife potentially can lead the State Department, another possible pick for a cabinet position is under scrutiny for his nonprofit ties.

Tom Daschle, a former Democratic senator from South Dakota, has been tapped to head the U.S. Department of Health and Human Services, according to The New York Times.

But the newspaper writes that some concerns have been raised about Mr. Daschle’s role as a lobbyist for the health-care industry and as a board member of the Mayo Clinic, a nonprofit health center.

To be sure, the newspaper says the positions may not prevent Mr. Daschle from accepting the post and that such work is common for ex-lawmakers. But given that Barack Obama has set stringent conflict-of-interest rules for his appointees, Mr. Daschle may test them, it says.

Some nonprofit observers say such rules have gone too far.

Jack B. Siegel, a lawyer specializing in nonprofit law, writes on his blog, Charity Governance, that the vetting of Mr. Clinton is unfair.

While also scolding Mr. Clinton for some decisions the former president has made, Mr. Siegel writes, “We like good government as much as the next guy, but at some point conflicts-of-interest and disclosure standards can be too stringent. A good case can be made that if we live in a world of equality and two working spouses, then one spouse’s activities should not be taken into account when making hiring decisions for public office.”

Read The Chronicle’s article about the questions being asked of Mr. Clinton.

What do you think? Should the nonprofit ties of Mr. Clinton and Mr. Daschle be a concern for the Obama administration? Click on the comments link to share your views.

— Ian Wilhelm

November 18, 2008

Nonprofit Representatives Advise Obama Administration on Transition

President-elect Barack Obama’s transition team, which is in the process of preparing for a change of power on January 20, includes a number of representatives of nonprofit groups, foundations, and think tanks.

Most are members of “agency review teams” that are charged with examining particular government bodies and offering advice on policy, budgetary, and personnel matters. Members from the nonprofit world, and the agencies they will review, include:

Robert Beers, president, National Security Network. (Homeland Security Department)

Sylvia Mathews Burwell, president, global development program, Bill & Melinda Gates Foundation. (Federal Deposit Insurance Corporation)

Barbara Chow, director, education program, Hewlett Foundation. (Office of Management and Budget)

Bill Corr, executive director, Campaign for Tobacco-Free Kids. (Health and Human Services Department)

Stephen Crawford, deputy director, metropolitan policy program, Brookings Institution. (U.S. Postal Service and Postal Regulatory Commission)

Ivo Daalder, senior fellow, foreign policy, Brookings Institution. (National Security Council.)

Clark Kent Ervin, director, homeland security program, Aspen Institute. (Homeland Security Department)

Ralph Everett, president, Joint Center for Political and Economic Studies. (Commerce Department)

Alan H. Fleischmann, managing director, ImagineNations Group. (Inter-American Development Bank)

Michele Flourney, president, Center for a New American Security. (Defense Department)

Marilyn Golden, policy analyst, Disability Rights Education and Defense Fund. (National Council on Disability and U.S. Access Board)

David Hayes, senior fellow, World Wildlife Fund; senior fellow, Progressive Policy Institute. (Working group responsible for energy and natural-resources agencies)

Alan W. Houseman, executive director, Center for Law and Social Policy. (Legal Services Corporation)

Michele Jolin, senior fellow, Center for American Progress. (Council of Economic Advisers)

Deborah Jospin, nonprofit-strategy consultant and president, Daniel A. Dutko Memorial Foundation. (Corporation for National and Community Service)

Bruce Katz, director, metropolitan policy program, Brookings Institution. (Housing and Urban Development Department, Federal Housing Finance Board, U.S. Interagency Council on Homelessness)

Brad Kiley, vice president, finance and operations, Center for American Progress (on leave). (Office of Administration)

Jim Kohlenberger, executive director, Voice on the Net Coalition, and senior fellow, Benton Foundation. (National Science Foundation)

Nicole Lurie, director, Center for Population Health and Health Disparities, RAND Corporation. (Health and Human Services Department)

Amy Comstock Rick, chief executive, Parkinson’s Action Network. (Office of Government Ethics and Office of Special Counsel)

Mara Eve Rudman, senior fellow, Center for American Progress, Washington. (National Security Council)

Shirley Sagawa, nonprofit-strategy consultant and fellow, Center for American Progress. (Corporation for National and Community Service)

Phyllis Segal, vice president, Civic Ventures. (Federal Labor Relations Authority)

The full list of transition-team members is available on the president-elect’s Change.gov Web site.

— Suzanne Perry

November 17, 2008

Nonprofit Groups Press Congress for Continued Giving by Mortgage Giants

Nonprofit organizations in Washington are continuing their efforts to make sure that lending giants Fannie Mae and Freddie Mac can sustain their levels of charitable giving.

The two mortgage companies, which were taken over by the federal government this fall, donated $47-million to charities last year, according to the Center for Nonprofit Advancement, an association of tax-exempt groups. The association is coordinating its second campaign to press Congress to ensure that donations from the lenders don’t dry up in the current economic downturn.

Tomorrow, association members are being asked to e-mail their Congressional representatives about the matter. A similar effort was made in October, which resulted in a letter from six members of Congress to James B. Lockhart II, director of the Federal Housing Finance Agency. Mr. Lockhart is the conservator placed in charge of Fannie Mae and Freddie Mac after the U.S. Treasury Department bailed-out the troubled lenders in September. — Eric Kelderman

November 14, 2008

Philanthropy and an Obama Administration

This week Arabella Philanthropic Investment Advisors, a company that assists donors, had teleconferences to educate philanthropists about how changes likely to be advanced by the Obama administration should affect their giving to five causes: health, poverty, the environment, education, and global development.

For each phone call, the company gathered nonprofit experts to identify ways donors could collaborate with a new administration or support causes that it is likely to overlook.

To improve health, the Obama administration is expected to expand programs to help the uninsured, especially children. While a notable goal, even with insurance, minorities and impoverished people often have other barriers to getting access to quality health care, such as transportation problems and a lack of education about disease prevention, said the speakers. Philanthropy could help reduce these “non-insurance barriers to health care,” said Irwin Redlener, president of the Children’s Health Fund, in New York. In addition, Mr. Redlener and others said that foundations and charities could do more to teach Americans how to navigate the sometimes Kafkaesque health care system.

In education, the new president has said he will emphasize early childhood education, training teachers, making college more affordable, and helping school districts improve how they evaluate themselves. Philanthropy should support research efforts to find out what school programs are working and disseminate information about them, said Marshall (Mike) S. Smith, education program director for the William and Flora Hewlett Foundation, in Menlo Park, Calif. Mr. Smith also recommended that grant makers examine how the Obama campaign organized people through social-networking Web sites, text messaging, and other technological communication; similar tools could be used to organize parents and others to advocate for changes in public education, he said. “This is not easy for the government to do,” he said. “We’re missing the boat if we don’t try to do this with education.”

In foreign aid, Mr. Obama has pledged to double the budget for overseas assistance and set up new programs, such as one to educate women and girls worldwide. According to Arabella’s speakers, philanthropy should give to small charities on the ground in African villages and elsewhere. Often, the U.S. Agency for International Development and other agencies overlook these groups, said Ruth Levine, vice president for programs at the Center for Global Development, a think tank in Washington. “They’re the equivalent of biotech start-ups” doing innovative work, she said. Other experts suggested that donors should invest in small and mid-sized businesses in impoverished countries to create jobs, support programs that train women to be political leaders, and in nations where there are honest elected officials, work with state-controlled ministries instead of independent nonprofit groups.

On environmental issues, the experts said an Obama administration is likely to propose efforts to reduce greenhouse gases, make the country more energy efficient, and support the development of alternative energy sources. Tom Steinbach, environment program director at the Hewlett Foundation, said Hewlett saw opportunities to connect environmental work with economic recovery plans. Others encouraged donors to try and make impoverished neighborhoods more energy efficient, which would fight climate change and produce a costs savings for low-income families.

To fight poverty, the new president has proposed expanding the earned income tax credit, unemployment insurance, and support effective charitable programs. John E. Morton, managing director of the Pew Charitable Trusts, in Philadelphia, said now is the time for foundations to “think boldly” about antipoverty programs that may pay off three to five years from today. Under an Obama administration, he suggested philanthropies should influence federal policies to assist the poor. Robert Greenstein, executive director of the Center on Budget and Policy Priorities, in Washington, agreed, but encouraged donors to focus their advocacy efforts on state capitals. According to the center, in the next 2.5 years, states will be facing $200-billion to $250-billion in budget deficits, which could lead to big cuts in antipoverty programs at the state-level, he said.

Despite the expectations that Mr. Obama will make big moves in each of these areas, the experts admitted that the financial crisis will limit his ability to do as much as he promised during the campaign.

What’s more, several of them cautioned that despite the election of Mr. Obama, charity advocacy efforts need to continue

Jane Wales, president of the Global Philanthropy Forum, in San Francisco, warned that when Bill Clinton was elected president, foundations cut grant making for nuclear nonproliferation efforts believing — incorrectly — that the Clinton administration would handle the issue. Mr. Steinbach, of the Hewlett Foundation, echoed her comment: “We’re not in a situation that’s mission accomplished,” he said.

On its Web site, Arabella offers free audio files of the five sessions.

Read The Chronicle’s articles about Mr. Obama’s policies for the nonprofit world.

— Ian Wilhelm

November 13, 2008

Think Tanks Propose White House Office of Social Entrepreneurship

President-elect Barack Obama should create a White House office to highlight the important role social entrepreneurs and nonprofit groups play in solving the country’s social problems, according to two liberal think tanks that released proposals this week for reorganizing the federal government.

The Center for American Progress Action Fund, in Washington, and the New Democracy Fund, in New York, proposed that the Obama administration create a White House Office of Social Entrepreneurship. The office, it said, would “give social entrepreneurs and other nonprofit leaders a greater voice in the public policy debates of the day by being part of the White House domestic and economic policymaking processes.”

The proposal, written by Michele Jolin, a senior fellow at the Center for American Progress, was included in “Change for America: a Progressive Blueprint for the 44th President.”

While the recommendations carry no official weight, they are considered influential because John Podesta, who heads the Center for American Progress, is co-chair of Mr. Obama’s transition team (he is on a leave of absence from the center).

Mr. Obama proposed creating a Social Entrepreneurship Agency while he was on the campaign trail, but he envisaged it residing in the Corporation for National and Community Service, rather than in the White House.

The think tanks’ proposal said the White House Office of Social Entrepreneurship should ensure that all relevant federal agencies spend money to help successful social projects expand. It should also create an “Impact Fund” at the Corporation for National and Community Service to help nonprofit groups collect data and better evaluate their success, it said.

It also suggested that the office:

Create an annual multimillion-dollar prize for the most creative, high-impact solution to a defined social problem. It could also make “smaller, daily efforts” to boost innovative nonprofit groups, for example by creating a weekly “Changemakers” award.

Explore changes to the tax code that would reward partnerships between nonprofit groups and businesses, and encourage charitable giving that would help successful nonprofit groups grow.

Work with the U.S Agency for International Development to create an Innovation Investment Fund to support new approaches to global development, such as the Acumen Fund, which provides money to entrepreneurial anti-poverty projects.

Coordinate with the Commission on Cross-Sector Solutions to America’s Problems, a new entity that has been proposed by the Serve America Act, a bill to expand the country’s national-service programs. The 21-member commission would suggest ways the federal government can help nonprofit groups work more effectively.

(Learn more about what nonprofit groups think about a new agency to spur charitable activity and what philanthropy executives from around the country hope Mr. Obama will do when he takes office.)

— Suzanne Perry

November 10, 2008

Obama Expected to Overturn Restrictions on Family-Planning Groups

Many international charities are optimistic that President-elect Barack Obama will overturn the so-called global gag rule, which prevents government money from supporting family-planning groups that counsel women overseas about the availability of abortion.

An informal group of nonprofit organizations is working with Senator Obama’s transition team to repeal the rule, which was first implemented by President Reagan and later reinstated by President George W. Bush when he took office in January 2001.

“We’re confident that President-elect Obama recognizes that this is a destructive policy and is having a horrible impact on women’s health,” said Tod Preston, vice president of U.S. government relations for Population Action International, an advocacy group in Washington. “It’s not reducing abortion; if anything, it’s increasing the number of abortions and unintended pregnancies.”

Charities are also pushing Senator Obama to restore money for the U.N. Population Fund, which the Bush administration has withheld over disagreements surrounding the agency’s work in China.

Nonprofit officials say the so-called global gag rule, also known as the Mexico City Policy, has not only cut down on money, forcing clinics in places such as South Africa to close, but also reduced the supply of donated contraceptives.

Marshall Stowell, a spokesman for Population Services International, a Washington organization that provides health and family-planning services abroad, said that if the restrictions were overturned, his charity could expand its programs and forge ties with more grassroots groups and clinics in developing countries.

— Caroline Preston

Discussions About Philanthropy and the Obama Administration

Arabella Philanthropic Investment Advisors, a donor-consulting company, is holding teleconferences this week to educate philanthropists about how the incoming Obama administration will affect grant making.

The company will examine five topics: health, poverty, the environment, education, and global development. The first session is today.

There is no charge for joining the teleconferences.

— Ian Wilhelm

November 06, 2008

Foundations Get Help Vetting Foreign Grantees

The Council on Foundations announced today that a San Francisco nonprofit group has been picked to help private foundations in the United States ensure that recipients of grants to foreign charitable groups meet U.S. antiterrorism standards.

TechSoup Global, in the Bay City, is planning to become a repository of information about international groups, noting their purposes and activities, financial data, and copies of relevant foreign laws governing the organization.

Such information is necessary under Internal Revenue Service rules for U.S. groups that distribute grants to foreign organizations. Under the law, each group seeking to award a grant to a foreign group must get approval before doing so. The repository will help foundations by storing the documents, making it easier to navigate the approval process.

The council has been working on the repository project since 2007 with help from the Foundation Center, Independent Sector, and InterAction. The council is entering into a multi-year contract with TechSoup to build the repository.

—Eric Kelderman

November 05, 2008

Charities Benefit in Ballot-Measure Votes on Election Day

Charitable organizations that rely on state aid got a lift from Tuesday’s election as voters rejected measures that could have led to major cutbacks.

While the tax proposals on several state ballots were not aimed specifically at nonprofit organizations, the reductions in state revenue they would have prompted could have harmed charities that receive state and local grants and contracts to run arts, education, social-services, and other programs.

Among the proposals that were under consideration this week:

Massachusetts voters overwhelmingly defeated a measure to eliminate the state’s personal income tax, a proposal that could have reduced the state’s budget by an estimated 40 percent. Michael Weekes, president of the Massachusetts Council of Human Service Providers, said the tax cut would have slashed nearly $2.6-billion from nonprofit social services.

North Dakota residents rejected a ballot measure to cut the state’s personal income tax in half and reduce the corporate income tax by 15 percent[—]cuts that would have reduced state revenue by an estimated 17 percent. North Dakota residents also turned down a measure that would have placed some tax money tied to oil and natural-gas extraction in a trust fund, a move that would have reduced state general-fund revenue by as much as $125-million.

Oregon voters turned down a measure that would have allowed residents to deduct federal taxes from their state income-tax returns, trimming the state’s budget by about $1-billion.

Oregon residents also voted on a measure to bar automatic deductions from the paychecks of government employees. The measure was meant, in part, to prevent labor unions from collecting dues and using them for political purposes.

Nonprofit groups generally opposed the effort, fearing that donations to charities from government employees also could be prohibited. The measure passed by a very narrow margin. Oregon voters defeated three similar measures in recent years.

Minnesota voters, meanwhile, approved a constitutional amendment to raise the state sales tax by three-eighths of 1 percent for 25 years. The new money will pay for projects to protect wildlife habitats, clean up lakes and rivers, and promote the arts and cultural heritage. Minnesota Citizens for the Arts, an arts advocacy group, said the measure would raise about $58-million a year for arts and historical groups.

— Eric Kelderman and Suzanne Perry