The Senate Finance Committee, which this summer plans to draft legislation to curb abuses at charities and foundations nationwide, today released recommendations calling for big changes in the way conservation groups operate.
The actions came as the committee released a report on the Nature Conservancy, based on a detailed, two-year investigation of land sales and other deals at the nation's wealthiest conservation organization. The report called on the conservancy to take action to ensure that it is following tax laws and urged the Internal Revenue Service to crack down on conservation groups.
Sen. Charles E. Grassley, an Iowa Republican, who is the committee's chairman, said in a written statement that the investigation of the Nature Conservancy demonstrated that "current law has not kept up with the sophistication and complexity of many of today's charities." As a result, he said, "there are legitimate concerns being raised that more and more charities may not always be acting as Congress originally intended and in a manner that justifies their tax-exempt status."
The Senate committee plans to hold a hearing on Wednesday to discuss the Nature Conservancy report and to examine charitable donations of land to all types of nonprofit organizations. In his statement, Senator Grassley said he and the committee's senior Democrat, Sen. Max Baucus, of Montana, intend to introduce legislation soon that "will encourage land donation while addressing the abuses."
The two lawmakers are also expected to propose legislation that would cover a range of practices at charities and foundations, such as governance, public disclosure, and spending on salaries and travel.
Two-Year InquiryThe Senate committee began its examination of the Nature Conservancy in July 2003, following a series of reports in The Washington Post that outlined the organization's land transactions and its relationships with for-profit businesses. The newspaper said that in some cases the charity had purchased environmentally sensitive land, placed development restrictions on it, and resold it to trustees and supporters at a reduced cost. The purchasers then gave the conservancy cash donations that were about the same size as the discount they received -- an approach that allowed them to take income-tax deductions for their charitable contributions,
The Nature Conservancy has said the newspaper articles were not entirely accurate, but it has also said that since the stories appeared and the congressional investigation began, it has made dozens of changes to strengthen its governance, accountability, and transparency. In a statement released today, the Nature Conservancy said it will study the new report carefully to determine if further changes are necessary.
But, the statement said, the organization "remains confident that all of our work is, and has been, in compliance with the law and in furtherance of our mission. Not everything we tried succeeded, and on occasion we made mistakes, but all of our work was done in good faith and was undertaken to accomplish significant conservation goals."
The Senate Finance Committee studied Nature Conservancy documents and deals going back to 1993, reviewing the cases summarized in the newspaper accounts and many more.
The report noted that the Internal Revenue Service is auditing the organization, and said it would let the tax agency determine whether the organization's activities violate tax laws. But the report says some Nature Conservancy pursuits "are potentially inconsistent with the tax-policy considerations" behind the rules governing tax-exempt status and charitable deductions.
The report asserts, for example, that the charity's Trade Land program, in which the organization solicited and received donations of land that had no connection to the charity's conservation mission and then sold the land to raise cash, may have had tax implications that the conservancy recognized, but ignored. The report also rebukes the Nature Conservancy for not exercising sufficient due diligence to be certain that all of its transactions are consistent with its tax-exempt status.
But while the report scolds the conservancy in parts, it praises it, too. It commends the charity, for example, for adopting a new policy to require that all of its properties be made available for sale to the general public. In the past, many transactions were made with charity board members or major donors, raising concerns that people with ties to the charity were getting inappropriate financial benefits and and that the organization was not receiving the optimal sale price for the land, the report said.
However, in Mr. Grassley's statement, he urges the organization to make additional changes to how it handles transactions with people with ties to the charity.
Among the report's recommendations about actions the IRS should take:
Consider revoking the tax-exempt status of conservation organizations that fail to properly monitor and enforce conservation easements or making it impossible for donors to deduct their gifts to such organizations. In addition, laws should be amended to allow the tax service to impose penalties on charity officials and board members who fail to adopt policies to assure proper monitoring and enforcement of easements.
Examine the arrangements charities, such as the Nature Conservancy, make with businesses that allow the companies to receive credit under a federal antipollution program in exchange for cash provided to the nonprofit group.
Modify the Form 990 informational tax return filled out by charities to require more details about a charity's programs; its transactions with trustees, donors, and other "insiders"; its relationships with other nonprofit or for-profit entities; and its joint-venture arrangements.
Update its forms on which donors declare the value of noncash gifts they are writing off on their income taxes and Congress should pass a law imposing stiff new penalties on charities that sign inaccurate or incomplete forms.
The report is available at http://finance.senate.gov/sitepages/TNC Report.htm.