The Magazine

Non-Profits Without Honor

Senator Grassley tackles the trillion-dollar tax-exempt sector.

Dec 10, 2007, Vol. 13, No. 13 • By JOHN J. DILULIO JR.
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The key nonprofit distinction is not religious or secular, large or small, national or local. It's who really serves disadvantaged members, nonmembers, or the public at large, how, and how much. It is time to consider revamping federal, state, and local laws governing nonprofit organizations so as to restrict full-fledged tax-exempt status to organizations that predictably and reliably produce significant nonmember benefits.

Ask not what nonprofit organizations do for their employees or members. Ask instead what they actually do for their local communities and for their country. Ask how much, all sanctimonious or self-serving rhetoric aside, they dedicate in money, manpower, building space, or other resources to producing these benefits. Some well-endowed private universities will come out looking great and deserving almost every break in the book; others will come out looking .  .  . well-endowed. Some grassroots ministries will prove to practice even better than they preach while others will scream Elmer Gantry, or worse. And so on.

Or simply ask what would happen if given nonprofit organizations disappeared tomorrow. Ask whether, in fact, organizations within the tax-exempt sector need all the subsidies and breaks they get in order to survive or thrive.

Tax-exempt for what and for whom?--those are the fundamental questions to begin asking in earnest, and they will rapidly take us well beyond concerns about the nonprofit sector's vulnerability to gross mismanagement, ethical lapses, dirty deeds, or felonious actions.

The next president, Democrat or Republican, should have a "philanthropy czar" in the West Wing whose only job is to report objectively on how the nation's massive nonprofit sector serves the public interest (or not), and to recommend legislative and other reforms to improve the sector's self-governance and call it to public account the way that government once called for-profit corporations to public account. I hereby nominate the steadfast Senator Grassley.

John J. DiIulio Jr., a contributing editor to THE WEEKLY STANDARD, is the author of Godly Republic: A Centrist Blueprint for America's Faith-Based Future.