Online Compendium of Federal and State Regulations for U.S. Nonprofit Organizations
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Online Compendium of Federal and State Regulations for U.S. Nonprofit Organizations Current Issues: Easing the Regulatory Burden |
The current regulatory burden on nonprofit organizations operating nationally in the U.S. is tremendous. The mosaic of laws and associated regulations established by the federal government, states, and even smaller jurisdictions requires that NPOs devote much of their valuable resources both in staff and finances to establishing and maintaining registrations, providing reports of various events to regulatory agencies, insuring compliance in their operations, and monitoring changes to regulations in a timely manner. For instance, the cost per organization of full compliance with all U.S. government jurisdictions' charitable solicitation regulations has been estimated by one study to be as much as $25,000 annually for small organizations, and more than $150,000 for large NPOs. The magnitude of this burden is such that NPOs are forced to devote a significant proportion of their total resources to government paperwork rather than fulfilling their mission, and very small organizations are for all practical purposes barred from operating legally outside their home state. These costs are essentially a tax on charitable and other nonprofit organizations that is ultimately incurred by the public in the form of donations that end up paying for administrative operations instead of good works. Ironically, this is exactly the circumstance that some states have historically established regulations to prevent.
In this section of the Compendium, some of the major controversial issues currently associated with U.S. NPO regulation and operation will be presented. This is in no way a comprehensive list of all controversial NPO regulation topics. Topics were selected primarily because they are, should be, or will be relevent to all nonprofit organizations, they are made more complex or problematic by the Internet, or they involve regulations that are especially burdensome, or are of particular concern, to small organizations. The purpose of these texts is to help educate NPO administrators and the public about these burdens, and to promote actions that help relieve them.
To some extent, topics were selected for presentation here based on the page maintainer's interests and expertise. However, if you would like to contribute a presentation on a new topic to add to those here, please feel free to contact me. Also, I am including a list of "additional resources and reading" with the detailed presentation for each topic, and if you have published an appropriate writing online, or would like to publish one to this site, I'm interested in hearing from you. Although I'm contributing a lot of the material here at this time, I'd like to see this site develop as a collaborative effort in the longer term.
The development of the Internet as a new means for nonprofit organizations to extend their activities outside their home states is rapidly leading us toward a regulatory disaster. Thousands of nonprofit organizations, even some of the smallest, are now using Web pages to promote their activities and fulfill their missions over the entire nation, and some are also using their online presence to solicit donations in support of their work. The apparent cost of a nationwide solicitation campaign has suddenly dropped to a few hundred dollars annually, and nonprofit organizations are taking advantage of this tremendous opportunity. The question arises whether, as a result of these activities, such organizations are now subject to the laws of every jurisdiction in the U.S. that regulates nonprofit organization (NPO) operations, and those regulating charitable solicitations in particular. At least some government regulators have taken the stance that they are. Unfortunately, the current complexity and cost of registering as a charitable soliciting organization, in every jurisdiction that demands it, puts full compliance beyond the means of many NPOs, and probably constitutes an unreasonable burden on most of them. The days when one could justify this burden, by claiming that only very large organizations typically operate nationally, are over.
This combination of a huge burden of regulations, and the new ease of national operations, is likely to lead to a degree of widespread noncompliance and undercompliance that threatens to overwhelm any legitimate regulatory activity. Hardly anyone denies that some regulation of NPO activity is desirable. However, in a remarkably short time, the existing statutes and regulatory structures as they have been applied to date have been rendered inadequate to deal with this new reality. Unless significant changes are made to this regulatory environment, the ultimate outcome may be a set of laws and regulations that are arbitrarily complied with and apparently arbitrarily enforced.
The seriousness of these issues is widely recognized. There is clear movement in both the private sector and among government regulators to devise and implement new mechanisms that can ameliorate the burden of current regulations and that can cope with the impending explosion of small nonprofit organizations functioning on a national level. Although much of the past and present activity has focused on postal mail as the main mechanism for interstate solicitations, noone can afford to ignore the impending prevalence of solicitations presented through the Internet.
The document "Current Controversies: Out-of-State Solicitation and Regulation" provides a fairly complete presentation of the issues associated with regulating "foreign" charitable solicitors (i.e. those based outside the regulating jurisdiction), a summary of current developments in this area, and a set of potential outcomes. It presents arguments in support of minimizing and harmonizing state laws and regulations. This text is not a call for the abolition of regulation, but aims only to explore the available options for maintaining appropriate oversight while minimizing the burden faced both by nationally-operating nonprofit organizations and government regulators. The discussion sections refer to Internet-based solicitations somewhat more than postal mailings, since this new mechanism is not only likely to render postal mailings into a drop in the ocean of charitable solicitations very shortly, but has exacerbated the flaws and limits of the existing regulatory system.
The introduction for this topic is not yet written.
A full discussion of this topic will be presented on a separate page, which is not yet written.
The introduction for this topic is not yet written.
A full discussion of this topic will be presented on a separate page, which is not yet written.
Each of the topic pages above includes a "How You Can Help" section. A more general set of suggestions for how you can help ease the burden of NPO regulation, and help this site, is presented on a separate page.
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Main page | Legal basis for regulation | Tax-exempt status | Registration for soliciting | Charitable solicitations | Financial accounting | Other issues | Easing the burden | Glossary | Resources by state |
| Page maintained by: Eric Mercer <nporeg@muridae.com> |
Page last updated 28Jan99 |
| Online Compendium of Federal and State Regulations for U.S. Nonprofit Organizations |
http://www.muridae.com/nporegulation/ |