Taxes and Transparency, from the Morning Call (21 Oct 2005)

As the former Director of Development at the State Theatre, I am proud to have overseen "Sadie's Challenge," the organization's effort to match a $100,000 challenge bequest, and to have established, in conjunction with Dr. Joseph Kline, the four-year $20,000 Scholarship to DeSales University now presented every year at the Freddy Awards.

Now, however, I write as a homeowner and taxpayer in the city of Easton. Like my neighbors, I have seen my property taxes and utility rates rise in the city's well-intentioned efforts to turn around its financial woes, which have been exacerbated not only by lawsuits against police department but by an ongoing struggle to attract and keep the property owners who can augment Easton's relatively static tax base.

Reports of discussions between council members and nonprofit officials have mentioned the striking of a deal that would cap the tax and remove the city's ability to re-examine it in the future, but before next week's vote Easton's council members should ask themselves if it is in the city's best interest to straightjacket themselves into a plan which may need to be adjusted every year. With fiduciary control and with a little luck, Easton's financial picture will improve and it may be possible to suspend or eliminate the Amusement Tax. On the other hand, if the city's finances continue to deteriorate, Council may be forced to lean more heavily on the Amusement Tax, or raise property taxes and utility rates even further—and risk the loss of even more taxpaying residents to other municipalities.

Make no mistake about it: Non-profit organizations, in Easton and elsewhere, are supported by the taxpaying public. I'm not talking about the generous donors who send their checks voluntarily to support their favorite causes, but by everyday taxpaying citizens who may never stand in line at a soup kitchen or see a show at the local performance space. As the community's number of tax-exempt properties increases, so too does the demand on the taxpayer's wallet. The elusive goal for any municipality is to find and maintain the right balance—if the city fails, taxpayers who shoulder too much of the burden will look for homes elsewhere, taking their valuable tax payments with them.

Right now, Easton's City Council has the unique opportunity to ease that very burden by implementing the Mechanical Devices and Admissions Tax. They make their crucial decision on October 26.

The Amusement Tax debate has also given Lehigh Valley citizens a fresh opportunity to examine the finances of tax-exempt organizations. In addition to requiring that non-profits with more than $25,000 in annual income file the Form 990 every year, the IRS further requires that a tax-exempt organization "make its annual information returns available for public inspection without charge at its principal, regional and district offices during regular business hours." Citizens and donors in search of this information need not search the depths of the internet nor contact Harrisburg; non-profits must provide it upon request—and in addition many even provide their annual reports and a list of their Board of Directors on demand at their offices and on their own websites.

This month, the NYU Robert F. Wagner Graduate School of Public Service reported that "public confidence in charitable organizations remains stuck at a contemporary low." Rather than being a nuisance, however, non-profit financial information such as the IRS Form 990 presents another way for non-profits to create an open dialogue within their communities, increasing their transparency and building trust in the face of this low public confidence.

In its Fall 2005 Nonprofit Observer, local accounting firm Concannon Miller & Co. P.C. says that the IRS Form 990 is "actually an opportunity to shine the spotlight on your non-profit and document how you use your funds," adding that a "not-for-profit's accountability to its donors, responsibility to the communities it serves and commitment to transparency also are embodied in the Form 990."

As we approach the holiday fundraising season and as Easton's City Council weighs next week's vote, we in the non-profit sector owe it to our donors, to our communities, and to ourselves to embrace transparency and accept public scrutiny as a way of life.

Richard Holland CFRE, is the Resource Development Manager at The Salvation Army in Allentown and has been a member of the Association of Fundraising Professionals since 1998. He received the Certified Fund-Raising Executive credential in June 2005, and was the Director of Development at the State Theatre.

Rick Holland CFRE
www.confidentphilanthropy.co.uk