Senators Grassley and Baucus looking for greater tax-exempt transparency

In the past week, Grassley and Baucus sent a letter to Treasury Secretary Henry Paulson laying out changes they’d like to see in the 501(c)(3) reporting and disclosure requirements (centered around Form 990 and supplemental disclosures), and asked for a response within 30 days.

They hit a number of points in their letter, mostly urging greater disclosure on Form 990 so that problematic arrangemments would be brought to light.  In the Senators’ more colorful language:

While we always hear that sunshine is the best disinfectant, sunshine can’t do its work unless we open the blinds.  The sooner we open those blinds, the better.

The areas of particular concern highlighted in the letter are the following:

• Executive compensation
• Endowments
• Related organizations
• Joint ventures
• Governance
• Dollars raised vs. dollars for charity
• Hospitals

With respect to hospitals, a category of tax-exempt organization that has held their interest lately, the Senators stated that all of the concerns about public charities, generally, applied to hospitals.  They also noted with approval the Catholic Health Association’s approach to reporting hospital charity care and community benefits.  Grassley has been trying to get the IRS to mandate the CHA approach to reporting since last fall.

A word to the wise: the closer all tax-exempt hospitals hew to the CHA approach, the less likely is will be mandated by the IRS, and it’s always easier to deal with a voluntary standard than a mandatory one.

— David Harlow