Nonprofit Watch: The
HERE for TNC table of
Editorial by Bob Felton
Senate Finance Committee released yesterday
report of a 2-year investigation into the
The Nature Conservancy, finding
that the nonprofit operates little differently
than many large corporations.
WASHINGTON -- After two years dissecting The
Nature Conservancy, the Senate Finance Committee
reported Tuesday that large charities may need
stricter laws to prevent
regulate moneymaking ventures and open more
activities to public scrutiny.
Committee Chairman Charles Grassley said the
panel's report, to be examined in a Wednesday
hearing, shows The Nature Conservancy engaged in
planning to maximize tax advantages. It acted no
differently than many large corporations,
and such planning is probably widespread among
large charities, Grassley said.
"Current law has not kept up with the
sophistication and complexity of many of today's
charities," the Iowa Republican said.
some charities and whether they're acting as
lawmakers intended to provide the public good that
tax benefits were meant to reward,
Grassley said. [emphasis mine]
From the Committee's
TNC entered into a
number of arrangements with ďinsidersĒ or persons
who had some sort of affiliation or relationship
with TNC. These transactions included arrangements
with TNC Board members, affiliates of TNC Board
members, trustees or officials of TNC state or
local chapters, officers and employees, and in
limited cases, persons considered by TNC to be
The Committeeís focus with respect to these
arrangements was on the process undertaken by TNC,
including any relevant internal policies or
procedures, to ensure that the arrangement was
fair and reasonable to TNC, and consistent with
TNCís status as a tax-exempt public charity.
transparency. TNC generally
completely and clearly disclose and report many
of these related party or insider transactions.
In many cases,
impossible to determine the nature and material
terms of the transaction without looking beyond
TNCís descriptions contained in its Forms 990.
descriptions of its insider transactions on the
Form 990 suggests that the relevant insider
routinely recused himself or herself from
participating in or voting on the transaction.
Legal or tax
opinions regarding conflicts of interest or tax
did not seek
the advice of outside counsel to determine
whether such transactions were compatible with
tax law or internal conflicts of interest
requirements and state nonprofit laws,
or to obtain a tax opinion with respect to the
consequences of any of such transactions. Staff
recognizes that TNC is under no obligation to
seek outside guidance on the legal consequences
of any transaction, but notes that in the case
of highly complex, novel, or insider
transactions, this may be advisable.
Fairness to TNC.
Except in the case of certain of TNCís land
transactions with insiders, it appears that TNC
confirm that the transactions were done at terms
that were fair and reasonable to TNC.
regularly seek or obtain appraisals or fairness
opinions with respect to these transactions.
of Interest Policy extends to trustees of state
and local chapters of the organization, but does
not apply to members of the International
Morgridge / Cisco.
description of the Morgridge/Cisco transaction
was incomplete and vague, and did not describe
the role of the Morgridge Foundation in the
transaction. TNC did
not refer to
the Morgridge Foundation in the Form 990
disclosure of the transaction, or provide
details regarding the relationship of the
foundation to Mr. Morgridge or to
Cisco Systems, Inc. in its supplemental
response. The Staff did not determine the extent
to which the foundation might be using its funds
to benefit Cisco Systems, Inc.
GM Emissions Deal.
The GM emissions arrangement is an unusual
been more thoroughly and accurately disclosed by
TNC in its Form 990 reports. Mr. Smithís role in
the transaction should have been more accurately
described by TNC.
innately improper about a nonprofit doing business
like a business; I was once associated with a
nonprofit that didn't do business anything
remotely like an actual business - and the
needless and irreplaceable losses of goodwill and
were both terrible and enduring. But the operation
of nonprofits should be, literally, an open book -
and Congress shouldn't hesitate to demand that of
companies that enjoy tax advantages, and shouldn't
hesitate to punish severely those who use their
tax advantages for personal aggrandizement.
First and foremost, the income tax returns of all
nonprofits should be made available on the
Internet without charge or restrictions on use,
and without intermediaries such as
GuideStar, which has just adopted a policy
prohibiting publication of 990-Forms downloaded
from them on Web sites. It's public information,
and it should be in the public domain - and if
Congress did that, they'll find out in a hurry
that competitors will police each other far more
effectively than acres of bureaucrats.
Bob Felton blogs at