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The IRS Scandal And Real Non-Profit Lobbying We Should Worry About

May 14, 2013

By Howard Husock

It is reassuring, to say the least, that President Obama would denounce as "outrageous" the Internal Revenue Service targeting of conservative tax-exempt non-profits for the possibility that they engaged in inappropriate politicking or lobbying. All non-profits should abide by such legal restrictions—but none should be subject to stricter scrutiny because of the nature of their views or mission. Good to see, in other words, that the President said, of such practice, "I’ve got no patience for it. I will not tolerate it."

One hopes, at the same time, that the Administration will not only call the IRS off groups on the right pushing for less government spending (among other things) but that it will, itself, refrain from encouraging groups on the liberal left to promote higher taxes and spending, including spending on government contracts with nonprofits. The record on this count, it’s worth remembering as we focus on the IRS, is not altogether reassuring.

Consider the events surrounding the so-called fiscal cliff, as the impending increases in tax rates and cuts in federal spending loomed this past December.

In its effort to ensure that Congressional action included an income tax hike on top earners, the White House actively called on non-profits to push for such an increase. As the Chronicle of Philanthropy reported on December 7, "White House officials hosted a conference call at 11 a.m. Friday to instruct nonprofit officials on how best to pressure Congress into supporting the president’s plan to raise taxes on the wealthiest 2 percent of earners. A second call was held at 3 p.m. with foundation leaders. Both were led by Jonathan Greenblatt, director of the White House Office of Social Innovation and Civic Participation."

Notably, a White House meeting of 13 leaders of nonprofit coalition groups bore fruit, as a number indeed went on to endorse the income tax increase. Among the most prominent was Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, who put the issue firmly in the context of a trade-off on an issue historically crucial to all nonprofits: a continuation of the charitable tax deduction. Said Dorfman: "If nonprofit leaders don’t want changes to the charitable deduction, it is imperative that we get behind the President’s call for higher tax rates on the wealthy."

That all this was, like the IRS’ action, a departure from historic norms was made clear by the reactions of other nonprofit leaders who attended the White House gathering. "My organization has never taken a position on tax rates," Steven Woolf of the Jewish Federations of North America told the Chronicle of Philanthropy. "We always try to take policy positions based on the best interests of our stakeholders rather than on partisan politics."

The fiscal cliff showdown was not the first time in which the traditional distance between nonprofits and government narrowed during the past four years. A minor but revealing flap developed last year regarding Center for Disease Control grants to state and local public health agencies which appeared not only to permit lobbying but to require it as part of the terms of the grants—aimed at influencing change in state and local laws in order, for instance, to discourage the location of fast food restaurants near schools or encourage taxes on soft drinks. Congressional hearings at which Health and Human Services Secretary Kathleen Sebelius was asked about such grants led to an HHS Inspector General’s report expressing concern about them. Inspector General Daniel Levinson wrote that the federal grants "appear to authorize, or even encourage, grantees to use grant funds for impressible lobbying".

The broadest lesson here involves much more than any one Administration, however. The fact that nonprofits might be pressured, or directed in their activities, by government reflects the reality that what was once a third, independent sector in American life—complementing government and private business—has, to a significant extent, become a contractor dependent on government funding. The Urban Institute Center on Nonprofits and Philanthropy has estimated that "federal, state and local government agencies have about 200,000 formal contracts and grant agreements with about 33,000 human-services groups that total $100 billion." What had once been philanthropically supported work is now deeply supported by government, which can decide what to fund and what the priorities should be. Advocates for such contracting have believed that such funding can come without significant strings attached.

Nonprofits should and must steer clear of lobbying, as per the tax laws. But it’s just as wrong to encourage them to push for higher taxes or new legislation as it is for the IRS to engage in the politicized audit process the President has rightly denounced.

Original Source: http://www.forbes.com/sites/howardhusock/2013/05/14/the-irs-scandal-and-real-non-profit-lobbying-we-should-worry-about/

 

 
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