Overshadowed by debates on judicial appointments and other partisan bickering, both the Senate and House have opened investigations that may finally expose a massive legal tax loophole for what it has become and not what it purports to be.  Many politicians at all levels have been aware for years that registered non-profits often shelter massive redistributions of grant money and at the same time do little if anything to follow those dollars and verify if they justify tax exempt status and do the public good their proposals promised.

 

These conduits for vote-buying have multiple examples in our city and recently the poster-child for just how blatantly they are used by our politicians came to light with disclosures regarding Senator Vince Fumo, the titular head of the Philadelphia Democratic Party.  Documents released to the Philadelphia Inquirer seem to verify what had been reported elsewhere that Senator Fumo “suggested” to several major corporations that giving large grants to non-profit entities in his district might result in an abrupt end to investigations he might initiate into their bill ing practices on consumer accounts.  These “donations” totaled millions of dollars into several non-profits, but the issue does not end there.  How non-profits use those grant dollars is where the picture gets very fuzzy, as the requirements for reporting what those legal entities do with the funds are minimal and there is apparently no consistent guidelines for enforcement.

 

So widespread and accepted is the process, that when Senator Fumo was questioned on local television about the allegations, he brushed it off in the most cavalier manner with the following statement: “the only reason these issues are being brought up is that the other politicians are jealous that they did not think of it first and get some money for their people”.  Actually, many have reason to believe that virtually every politician in Philadelphia is well aware of this process and use it regularly; but possibly not in a manner as directly obvious as the Senator.  Some of the less visible lay under the radar often covered with multiple layers of affiliates and sub-corporations with even cloudier ownership. 

 

Non-profits are required to file federal forms called 990s on a regular basis, but many are years behind and it seems no regular process exists for review. If regulators do stumble over violations, the penalties are brushed aside and the legitimacy of the organization is rarely questioned.  Making matters worse, the 990s themselves require little detail in many areas that virtually paves the way to redirecting grant money to affiliated entities that are far from non-profit.

 

Last June Senators Grassley (R-Iowa) and Baucus (D-Mont) initiated efforts to crack down on abuse and rewrite disclosure requirements and follow-up procedures.  Grassley is quoted “It is obvious from the abuses we see that there’s been no check on charities. Big money, tax free, and no oversight have created a cesspool in too many cases.”  Senator Baucus follows up:  “These actions are immoral and inexcusable - - and threaten to taint the reputation of all charitable organizations”.  One of their proposals includes a requirement that non-profits attach to their 990 report a document that is available to the public showing the organization’s relationship with its exempt and non-exempt affiliates.

 

Of course, this Senate investigation began a year ago and reforms in the laws themselves could be years away, as many will vote them down to protect their involvement and misuse of the system.  Purportedly the fraud involved here could far exceed all previous scandals, both public and private, but few think any real attempt will be made to tally it up.

 

However, since all politics is local, and our city is the nation’s most noted for municipal corruption, it might make sense to take steps locally to flush out abuse by forcing public awareness through grass roots action.  Individually, or through community groups we should demand our Senators, Representatives, Mayors, Councilpersons disclose the non-profits operating in their districts and who funds them.  Most of that funding is initiated or approved through the political system and those taxpayers who want to know why theirs continue to increase might just want to know who does not have to pay and why.

 

Jim Foster

Mt. Airy