Will The Foreign Grant Reporting Act Have Unintended Consequences?
Rep. Lloyd Smucker. (Photo courtesy Smucker’s congressional office)
(ANALYSIS) A new piece of legislation introduced earlier this month would require not-for-profit organizations to report grants they make to foreign entities.
The Foreign Grant Reporting Act (H.R. 8290) is authored by Rep. Lloyd Smucker (R-Pa). He says his goal is to bring more transparency into the growing tax-exempt sector.
The bill would require that nonprofits provide basic information about foreign recipients of grants just as they do about domestic recipients: Name, address, the aggregate amount and whether the entity is a charity.
In his remarks during a hearing of the House Committee on Ways and Means, Smucker said the bill arose out of a discussion of “how foreign money can influence U.S. elections and domestic policy.”
He also noted that “tax-exempt organizations such as National Students for Justice in Palestine and American Muslims for Peace are currently under investigation for possibly providing material support to Hamas, which is a designated Foreign Terrorist Organization.”
The committee unanimously reported the legislation out of the committee favorably.
However, the Evangelical Council for Financial Accountability raised a concern that the bill might inadvertently impact missions organizations.
“Christian ministries supporting evangelism in countries with governments closed to the Gospel could find themselves in a bind under the current requirements of this bill,” Ted Batson, partner and tax counsel at CapinCrouse, told ECFA.
“Thwarting support for terrorists and other similarly problematic organizations is certainly laudable, but the risks of serious harm to ministries and their workers in dangerous regions abroad are very real if they are exposed.”
MinistryWatch has written about the need for Christian groups working in closed countries to balance security and transparency.
From her experience in many closed countries while reporting for WORLD News Group, author and former senior editor Mindy Belz told MinistryWatch there is a spectrum of ways she has seen organizations protect their workers. Rarely does it require a total blackout.
The most deference should be given when an individual’s life or livelihood is in danger, Belz said, but moving up the chain, institutions are less vulnerable than individuals.
The Form 990 reporting requirements should not put any individuals in danger.
MinistryWatch President Warren Smith believes the Foreign Grant Reporting Act may have the inadvertent impact of driving Christian ministries who carry out humanitarian relief overseas into seeking classification as a church, thus avoiding the requirement to file a Form 990.
There appears to be a growing trend toward Christian ministries seeking IRS classification as a church, thus no longer being required to complete a Form 990. Voice of the Martyrs, Compassion International and Ethnos 360 are a few groups who work internationally that no longer file public Form 990s with the IRS.
“Organizations that work in closed countries are not compromised in any way by the information on a Form 990. Nothing on a Form 990 would put people on the ground in closed countries at risk,” Smith said.
“To claim security concerns as a reason for not releasing a Form 990 is an excuse, not a valid reason,” he added.
As a watchdog for ministry transparency and accountability, MinistryWatch believes all 501(c)(3) ministries should file Form 990s with the IRS.
“Christian organizations should set the standard for transparency. That should include releasing the Form 990 to the public,” Smith said. “Christian organizations already face a credibility crisis — a failure to release Form 990s further damages our credibility with a skeptical public.”
The Form 990 looks like a tax return, and it includes important information about the organization, including annual revenue, salaries of key employees, names of board members and large contractors, and the amount of money the organization spends on its core mission. It also highlights amounts a nonprofit spends on administrative and fundraising. This information is valuable to donors wanting to assess the effectiveness of a ministry.
Rep. Smucker’s office did not reply to a request for comment by MinistryWatch about the possibility of ministries moving to a church classification before time of publication.
This piece is republished with permission from MinistryWatch.
Kim Roberts is a freelance writer who holds a Juris Doctor from Baylor University. She has homeschooled her three children and is happily married to her husband of 25 years. In her spare time, she enjoys reading, gardening and coaching high school extemporaneous speaking and debate.