According to Linda M. Czipo, the President and CEO of the New Jersey Center for Non-Profits, the Republican tax-reform will have a “devastating impact on nonprofits and communities they serve.”

Both the House and the Senate tax plans would leave the charitable deduction in place and roughly double the standard deduction. According to the Tax Policy Center (TPC) this would dramatically reduce the number of individuals who itemize from 30 percent to 5 percent since itemizing only makes sense if your deductions exceed the standard deduction. In order to take advantage of the charitable deduction you must itemize.

While a tax break isn’t the primary reason that folks donate to charities, there is general agreement among economists that tax deductions increase charitable giving. According to the TPC, the House version of the tax-bill could reduce current giving by $12 billion now and $20 billion in 2018. The TPC estimates that fewer than 13 million would itemize under the House-bill versus 46 million under the current law.

In 2016 Americans contributed $281 billion to our nation’s 1.5 million charities (more than 30,000 of them in New Jersey and 2,500 in Mercer County). A $12-20 billion reduction in giving would be catastrophic to hundreds of thousands of high-quality charities that rely heavily on individual donors. Many excellent charities will not survive.

There are currently extremely low entry barriers for nonprofits (the IRS approves 99.5 percent of all applicants). As a result, it is very difficult for the public/donors to determine whether the loss of a particular charity will create a service void. This is why I would require new charities to do a comprehensive assessment of needs to ascertain whether there is a dearth of services in the geographic area they want to operate.

I would propose that charities be initially certified for five years and then be reviewed every ten years to determine whether they are functioning efficiently, effectively and ethically in the proceeding decade. This evaluate would include a review of financial management and controls, fundraising practices, governance, stewardship, and transparency. Further, charities would be required to provide empirical evidence that they are filling a service need.

There are various models that could be employed to periodically evaluate charitable entities. Health care organizations in the U.S. are accredited by JCAHO (Joint Commission on Accreditation of Healthcare Organizations), a non-governmental, private, non-profit organization that employs salaried individuals.

JCAHO evaluates the operational practices and facilities of hospitals against Joint Commission standards and elements of performance. Institutions of higher education are evaluated by three types of accreditation entities: regional, specialized and national. Volunteer peer evaluators, selected by the academic community based on their experience and credentials, examine on a periodic basis the entire institution, including its education programs and curricula, student achievement, faculty, facilities and equipment, school support services, recruiting/admission practices, the institution’s financial condition, administrative effectiveness, governing boards etc. These entities are recognized by the U.S. Secretary of Education to conduct accreditation activities for institutions of higher education.

As an alternative, a quasi-governmental entity along the lines of the Security and Exchange Commission, Consumer Protection Bureau or the British Charity Commission could be created to periodically evaluate charities. Unfortunately, the problem with this approach is that the entity would need to be completely politically independent, not which appears inconceivable in today’s ultra-politicized environment.

These suggestions would be anathema to Conservatives who worship the virtues of unfettered capitalism and oppose any sort of regulation. I’d point out to them that businesses are quite willing to restrict markets when it is in their self-interest. All kinds of franchise operations provide protected territories to their franchisee, e.g., McDonalds, Burger King, and Jiffy Lube.

And every major car manufacturer provides exclusive territories to their dealerships. The incredible franchisee values of the NFL, NHL, NBA and MLB are a direct result of inhibiting competition in their team’s protected territories. Further, companies throughout the nation are permitted under the law to have employees sign stringent non-compete agreements as a condition of their employment.

Likewise municipalities are permitted to thwart competition by limiting the number of liquor license and State Departments of Health routinely limit the number of hospitals that can do heart transplants or run a burn or neonatal center.

Charity sprawl needs to be reined in to reduce duplication and to improve the quality of services offered to those served by the charitable sector. This will become even more imperative when the GOP tax bill becomes the law and charitable giving plunges. With more and more of the burden for providing for the heath and human care needs of our citizens falling on to our nation’s charities, as government continues to extricating itself from the provision of key elements of the social services safety net, it is more imperative than ever that new charities be required to provide data as to whether the services they will provide are required or redundant.

Stoolmacher is president of the Stoolmacher Consulting Group, which advises charities in fundraising and strategic planning.

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