NAICU Washington Update

Non-profit Reforms, Charitable Limitation Dropped from Final Finance Committee Health Reform Bill

October 08, 2009

The Senate Finance Committee completed consideration of amendments to health care reform legislation without adopting several amendments that would have affected both nonprofit governance and the charitable deduction. The bill now awaits final approval from the committee before moving to consideration on the Senate floor.

Earlier, Sen. Charles Grassley (R-Iowa) had filed two amendments to the bill that would have affected non-profits.  The first would have given the IRS authority to require tax-exempt organizations to report additional governance and management information on the Form 990, and would have protected the IRS from legal challenges to this new authority. 

The second Grassley amendment would have removed the safe harbor for tax-exempt organizations through their use of the "rebuttable presumption of reasonableness" in setting executive salaries.  It also would have required Form 990 disclosure of the comparative information used to determine an executive's compensation.

The American Society of Association Executives (ASAE) alerted the non-profit community about these amendments, calling them "a dangerous extension of IRS authority."  Many of the alerts reached state associations and institutions within the NAICU membership.  Sen. Grassley, who does not support the underlying health reform bill, ultimately withdrew his amendments.  However, he remains committed to enacting charitable governance reforms, and will likely file similar amendments to future Finance Committee bills.

Several amendments by other committee members, and supported by President Obama, would have paid for various health care-related changes through a cap on the charitable deduction.  These amendments likewise were defeated. 

At present, the bill lacks the votes to advance to the Senate floor.  When it does move forward, though, the entire Senate will have the opportunity to offer amendments.

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