Friday, September 25, 2009

Senator Grassley's EO Amendments to Health Care Reform Bill

As part of the health care reform legislation pending in the Senate Finance Committee, Senator Grassley, longtime advocate of exempt organization reform and oversight legislation, has proposed two amendments that would have an effect on all exempt organizations, not just health care entities.

Grassley Amendment #F-7 would amend IRC Section 6033(a)(1) to require that governance and management information to be reported on the Form 990.  This is an effort to head off legal challenges to the IRS’s authority to ask many of the question in Part VI of the new Form 990.  What? Doesn't the IRS have that authority now? It is unclear under current law (I think "Not." Many others, particularly within in the IRS, say "Sure.") and the question is batted around. Perhaps the amendment would clarify the law and prevent uncertainty.

Grassley Amendment #F-8 adds several changes to IRC section 4958 regarding the so-called "intermediate sanctions" rules. The senator's proposed changes would retain the due diligence requirements for determining reasonable compensation for executives and other employees and contractors, but remove the "rebuttable presumption" procedures as a safe-harbor by which an organization can establish that the compensation is reasonable unless the IRS can show otherwise. The amendment would also require organizations to disclose on its Form 990 a summary of the comparable information used to determine an executive’s compensation.  This is would be bad change in the law. Overall, I think the rebuttable presumption procedures have led to more careful consideration of executive compensation by nonprofit boards. Sen. Grassley seems to object to the procedure because organizations can use data from comparable for-profit as well as other nonprofit organizations. God forbid that, based on such data, someone in the nonprofit sector should make more than a senator or Hill staffer.

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