The U.S. House Ways and Means Committee on July 22 marked up and voted 23-15 to advance legislation led by U.S. Rep. Lloyd Smucker (R-PA) that would protect legitimate charities by promoting transparency, reinforcing responsible stewardship, and ensuring that bad actors cannot undermine public confidence in the nonprofit sector.
The Fiscal Sponsorship Transparency Act, H.R. 9721, which Rep. Smucker sponsored on July 16 to require reporting by certain charitable organizations relating to fiscal sponsorship arrangements, now heads to the full chamber for action.
“Fiscal sponsorship arrangements play an important role in America’s charitable sector and the vast majority are operated responsibly and in good faith,” Rep. Smucker said. “Congress should strengthen public confidence in these arrangements by ensuring greater transparency and accountability whenever taxpayers provide generous tax benefits for charitable giving.”
Fiscal sponsorship allows established charities to accept tax-deductible donations on behalf of projects or organizations that have not yet obtained their own tax-exempt status. There are currently no uniform public reporting requirements for these arrangements, making it difficult to identify abuse.
If enacted, H.R. 9721 aims to rein in bad actors who exploit charitable organizations to collect tax-deductible donations without public accountability by requiring public disclosure of fiscal sponsorship arrangements, preventing abusive conduit arrangements, and establishing penalties for organizations that improperly funnel charitable donations to non-exempt entities, according to a bill summary provided by the congressman’s staff.
“Tax-exempt status is a public trust, and taxpayers deserve confidence that charitable dollars are being administered consistent with charitable purposes,” said Rep. Smucker.