Grassley: Treasury Misses the Mark on Chance to Shut Down Charitable Loopholes
M E M O R A N D U M
To: Reporters and Editors Re: Study on asset-housing tax-exempt structures Da: Tuesday, Dec. 6, 2011
The Treasury Department this week released a study on supporting organizations and donor-advised funds that was mandated by the Pension Protection Act of 2006 at the behest of the leaders of the Senate Finance Committee and House Ways and Means Committee. Sen. Chuck Grassley, as chairman of the Senate Committee on Finance in 2006, championed this study to understand what issues still needed to be addressed after the Pension Act curbed only the most blatantly abusive transactions. Grassley has long been concerned about abuses of tax law through tax-exempt organizations such as donor-advised funds and supporting organizations. In October, Grassley highlighted how the George Kaiser Family Foundation converted from a private foundation to a supporting organization about ten years ago and as a result, likely had more money to invest in the failed Solyndra energy company than it otherwise would have. Taxpayers lost money through the government’s $535 million loan guarantee for Solyndra and also on the tremendous subsidy the government provided the George Kaiser Family Foundation through the charitable contribution deduction. In October, Grassley cited that example in a letter to the IRS and Treasury, urging completion of the study mandated in 2006. Grassley made the following comment on the newly released study, which is available here.
“The study is disappointing and unresponsive. It doesn’t advance the ball in closing abusive loopholes. If anything, it gives abusive organizations cause for celebration. The Treasury Department seems to be forgetting that for years, supporting organizations and donor-advised funds were on the IRS’ annual ‘Dirty Dozen’ list of tax scams. Even the current list includes ‘abuse of charitable organizations and deductions.’ Yet the Treasury study discusses the status quo and pay-out rates as if there’s no cause for worry. Treasury apparently thinks Congress fixed problems with supporting organizations and donor-advised funds in 2006. In fact, Congress fixed a limited area and asked the IRS and Treasury to help us fix the rest. The study doesn’t offer any kind of road map about problems.
“It’s also disappointing that the study used 2006 data. The IRS went to the trouble of revising the Form 990 in 2008 to glean more data from charitable organizations, yet none of the new data was used in this study.
“The study describes average pay-out rates but doesn’t highlight how many of these entities pay out nothing or whether the pay-outs were to other supporting organizations and donor-advised funds. There’s no information on how much money is getting to those who really could benefit from charitable work, which is especially critical in these tough economic times. The superficial review misses the point of trying to determine whether Congress and the IRS should change the distribution rates and tax benefits that apply to these organizations.
“While the Administration continues to complain about millionaires and tax breaks for the rich, with this report, Treasury is in effect signing off on sweetheart tax breaks for billionaires. The Administration had a chance to help the poor here but instead signed off on the status quo to the benefit of billionaires.
“Treasury and the IRS missed an opportunity to shed light on loopholes that taxpayers heavily subsidize yet result in financial gains for a few principals and very little money for charities. Unlike the Obama Treasury Department, those of us who want to close loopholes will have to keep drilling down.”