June 28,2006

Grassley Wins Committee Approval of Non-Profit Improvements, Including Double Fines, Penalties for Non-profit Groups Engaged in Inappropriate Political Activity

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, today won
Finance Committee approval of several reforms to improve the transparency and governance of taxexempt
groups, including his proposal to double the fines and penalties for non-profit groups
engaged in inappropriate political activity.

“We’ve heard a lot about inappropriate activity by non-profit groups connected to Jack
Abramoff,” Grassley said. “The problem is much bigger than Jack Abramoff. We’re seeing more
and more charities used in the best interests of lobbyists and special interests, not the public. Some
people are exploiting vagueness in the laws or a lack of enforcement to enrich themselves rather than
serve the public. It’s unseemly for tax-exempt groups to function this way. It’s also unfair to the
taxpayers who subsidize that behavior. That’s why I continue to try to tighten the laws governing
tax-exempt groups and encourage the IRS to step up enforcement of the existing laws and go after
bad actors.”

Grassley today won unanimous, voice vote approval of several non-profit reforms via a tax
administration bill he put forth before the Finance Committee. In addition to the political activity
provision, the non-profit reforms include greater disclosure by non-profits to the public about their
activities. These reforms include requiring electronic filing of non-profits’ tax returns, for ease of
IRS processing and review, and requiring organizations that do not have to file tax returns at all to
provide the IRS with general information every three years. (For more detail, see JCX-28-06:
Description Of The Chairman's Modification To The Provisions Of S. 1321, The "Telephone Excise
Tax Repeal Act Of 2005" And S. 832, The "Taxpayer Protection And Assistance Act Of 2005,"

Grassley has been conducting a broad look at abuse of tax-exempt groups, enacting reforms
as they become necessary. On the politically connected charities front, his committee staff has been
reviewing the documents on charities connected to Jack Abramoff given to the Finance Committee
from the Indians Affairs Committee. In addition, he is looking at problems raised by the charitable
foundations of Fannie Mae and Freddie Mac and a group called the Association of Community
Organizations for Reform Now (ACORN), which some allege sets up non-profit groups to receive
federal grants and engage in political activity.

On June 1, Grassley asked the IRS to describe plans to step up enforcement in the various
areas of concern in the tax-exempt arena. He expects a response in the next several days that will
help him determine next steps in this area. He also is pursuing the enactment of a package of
charitable giving incentives and governance improvements included in the Senate-passed tax relief
bill earlier this year but dropped in a House-Senate conference committee with the understanding
that it will be considered as soon as possible in the next logical vehicle, possibly the pension reform
conference committee agreement.