Bill Could Challenge Investigations of Charity Fraud, Critics Argue

Fighting charity fraud could become more difficult under a bill that, if it becomes law, would prohibit the Internal Revenue Service from collecting the names of top donors to charities and other nonprofit groups, Reuters reports.

Currently under consideration in the House of Representatives, the bill would protect the privacy of wealthy donors who make anonymous gifts to politically active groups and eliminate a decades-old IRS donor-disclosure requirement for a range of organizations, including hospitals, universities, and community and sports organizations. In a related development, a post on the White House Office of Management and Budget website says the IRS is planning to propose new regulations that would eliminate donor-disclosure requirements for most tax-exempt organizations.

According to Rep. Pete Roskam (R.-IL), the author of the measure, the bill would protect donors from having their identities leaked by the IRS. "The IRS is ill-equipped to deal with sensitive data, and there's a great deal of vulnerability," Roskam told Reuters. "Confidentiality breached chills First Amendment rights."

However, critics of the proposal argue that it would negatively affect state regulators, who sometimes review charities' Schedule B forms for conflicts of interest, questionable movements of money, and in-kind donations between charities. "It's important forensic data to us state regulators," Hugh Jones, deputy state attorney general in Hawai'i, told Reuters. "It's evidence we can consider using in an investigation to determine whether a charity’s board has breached its fiduciary duty."