Nonprofit Leaders Fear IRS Scandal Fallout

Nonprofit leaders are worried about the negative impact on all tax-exempt charities from the IRS scandal over 501(c)4 social welfare groups. A recent article in The Chronicle of Philanthropy laid out some of the potential collateral damage from the scandal. For example, charities have wanted the IRS to beef up oversight of tax-exempt groups and give clearer guidance on "political activities" by charities and advocacy groups for many years, but that's unlikely until the political storm passes. Nonprofit leaders are also concerned that 501(c)3 groups, which cannot engage in partisan politics at all, will be tarred with same brush as 501(c)4 advocacy groups that can do politicking as long as it is not their primary activity. "All nonprofits are being smeared as though we are engaging in political activity," fretted Tim Delaney, president of the National Council of Nonprofits, in the article. One unhappy result may be that the non-political charities, who file about 60,000 applications for tax-exempt status a year, will face significant delays in approval as Congress reviews treatment of the 3,500 annual applications from advocacy groups. Without tax-exempt status, charities are significantly impeded; they may not solicit donations in several states and are not eligible for lower postal rates or most foundation grants. Charities now are also likely to shy away from anything that smacks of advocacy, including lobbying Congress on budget issues that affect them. For the whole story, see http://philanthropy.com/article/IRS-Tea-Party-Scandal-Could/139233/