Commentary: Giving, not just receiving

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Here’s a most interesting piece of legislation, one that ought to go national: A new law just signed by Gov. John Kitzhaber makes Oregon the first state in the nation to crack down on charities that spend only a small fraction of the donations they rake in on actual charity.

House Bill 2060 will eliminate state and local tax subsidies for charities that spend more than 70% of donations on management and fundraising, rather than programs and services, over a three-year period. The law allows Oregon’s attorney general to disqualify charitable non-profits from receiving contributions that are deductible for purposes of the state’s income tax and corporate excise taxes.

And as someone who lived in that state for more than a decade, I can assure you Oregon has a hefty state income tax, since there is no general sales tax.

“No other state has done this,” Jim White, executive director of the Nonprofit Association of Oregon, told the Salem Statesman-Journal. “We’re the first in the country, and we should be proud of that.”

Actually a number of states, including Oregon, had similar laws prohibiting registered charities from soliciting donations if too big a percentage of those funds went to executive salaries and fundraising costs. But a 1980 Supreme Court decision ruled that state laws restricting a non-profit’s ability to solicit donations violated the First Amendment.

However, Oregon’s new law would survive a legal challenge because it doesn’t restrict a charity’s ability to do fundraising, according to Jeff Manning, an Oregon Department of Justice spokesman. Instead, donors to those charities could no longer claim a state tax deduction, and the charities would lose their local property tax exemptions.

“[Some of] these organizations have found the business model of using a nonprofit as a cover for what’s basically a telemarketing for-profit firm,” White said. “They’re giving charities and nonprofits a black eye and need to be gotten out of our midst.”

Amen, brother.

If only Oregon’s approach could be applied to such cheaters as the Humane Society of the United States, which according to the watchdog group HumaneWatch, gives less than 1% of its nine-figure annual fund-raising monies to the actual local pet shelters that carry its brand (though not its actual affiliation). They’re the hard-working, underfunded agencies whose dedication to rescuing unwanted and abandoned pets is the cover story HSUS uses to fleece its donors into thinking the checks they write are saving the animals.

All they’re really saving is a big tax bill a multi-million dollar organization the size of HSUS would otherwise have to pony up each April.

Following the funding

Meanwhile, the Oregon Department of Justice has already identified the state’s top 20 “worst of the worst” charities, including the Michigan-based Law Enforcement Education Program, which spent just 2.7% of its funds on programs; California-based Shiloh International Ministries, which spent 3.2% on programs; and Florida-based American Medical Research Organization, which spent just 4.2% on programs.

In fact, state data show that 153 charities—88 based in Oregon—spent less than 30% of donations on programs on their most recent single-year report, including the South Salem Seniors and the Everkids Charitable Trust, both of which spent nothing at all—zero—on programs or services.

In the wake of the recent investigations of the IRS over targeting of would-be non-profits applying for  tax-exempt status, while (allegedly) engaged in political activities generally disallowed by the rules governing 501(c)(4) applications, the notion that not every non-profit deserves to escape paying taxes has re-surfaced.

With a vengeance.

And that’s a good thing.

Too many non-profit groups spend their time and resources leveraging changes that align with their larger agenda, rather than responding to the many and varied needs of literally millions of families and children who need help, support, training and other services.

Even though most charities won’t end up being affected by Oregon’s law, since it requires that any tax-related decisions be based on a three-year average of an organization’s spending, its punitive potential sends exactly the right message: Tax-exempt status means that in lieu of paying your fair share, as businesses are required to do, you’d better be contributing directly to the betterment of the community and of society.

Not throwing fund-raisers as a means to support your next fund-raiser.

And your overpaid executives.

The opinions expressed in this commentary are solely those of Dan Murphy, a veteran food-industry journalist and commentator.

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Missouri  |  July, 08, 2013 at 10:05 AM

This would include Willie Nelson's "Farm Aid" Dan. Willie needs about 90% of the take to pay himself and other performers and staff and perks and all that or the concert can't go on. Then the remaining 10% Willie funnels to questionable front groups who also suck away about 90% of what Willie gives em. That's probably a good thing though because most of those groups are dedicated to attacking commercial agriculture in order to promote trendy alternative small hobby farm dreamers. So I agree Oregon's law should go national. All I know is Willie never brought any cash around to the farm here when times were so hard a few years back. Maybe he was too stoned to find the place and just drove on by, I don't know.

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