Charles Grassley

December 8, 2009, The Wall Street Journal - A senior senator asked 33 nonprofit medical groups, including the American Medical Association and American Cancer Society, for information on the financial support they receive from corporations.

Over the past few years, Washington, D.C., has witnessed two explosive nonprofit scandals. In 2005, the board of American University received a letter from an anonymous whistle-blower alleging that the university’s president, Ben Ladner, was abusing his university expense account. A subsequent audit found that Ladner had indeed spent more than $500,000 of university funds on lavish personal expenses, including a $5,000 vacation in London and a $15,000 engagement party for his son. Already concerned about Ladner’s compensation—which was higher than those of all Ivy League college presidents—the board split over whether to reduce Ladner’s pay. The fracas filled newspaper gossip columns for months, sparked a congressional inquiry, and eventually led to Ladner’s termination. The board then required two years to rebuild itself and to name a new president.

In June, the Senate Finance committee — which oversees the Internal Revenue Service’s regulation of tax-exempt organizations — released a draft staff report suggesting many drastic changes in the law that governs charities. Sen. Charles Grassley (R-Iowa), the chairman of the committee, announced at press time that he intended to introduce bipartisan legislation this fall to incorporate some of these changes. Here is a condensed look at some of the more wide-ranging, proposed changes.