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Strange Silence: Attorneys General Reaction to The Internal Revenue Service’s Corporate Governance Initiative

Fishman, James J.

These are hard times for charities, and regulators at all levels are not making it easier for nonprofits to perform their missions. Recent regulatory efforts, most notably the Internal Revenue’s “Corporate Governance Initiative” (CGI), have caused a diversion of board and staff energies from mission attainment and fundraising to a focus on formalism and process, which may have little to do with preventing fraud or even improving governance. This paper argues that the CGI not only is flawed but also represents an improper preemption of state law. I believe attorneys general should consider this misguided effort’s impact on the charities in their state and serve as a buffer, by pushing back against the IRS’s suggestions, and attempt to ease the burdens for smaller charities, which I arbitrarily define as organizations eligible to file Form 990–EZ and below. The paper also urges attorneys general to exercise regulatory prudence by channeling their limited enforcement resources into scrutiny of larger charities and areas of common abuse–such as nonprofits established by sitting legislators and certain social services organizations where private inurement often exists – instead of facilitating an elaborate and expensive reporting system that affects most charities, innocent of such activities.

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Notes

Another paper from the same panel is available in Academic Commons.

"Exempt Entities as Government Contractors: Regulation Through Cooperative Federalism" by Frances R. Hill - http://dx.doi.org/10.7916/D8FB50W2

Access all papers from the 2013 Charities Regulation and Oversight Project Policy Conference in Academic Commons
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