CoF Asks US Treasury to Withdraw CFT Guidelines

Leading a group of more than 40 U.S. charitable sector organizations, advocacy groups and advisors, the Council on Foundations (CoF) called on the Treasury Department to withdraw its latest version of "Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-based Charities." The Treasury Guidelines, revised for a third time since 2002 in September 2006, are intended to assist charities in preventing the misuse of their funds by terrorists.

While this new version of the Guidelines includes revisions that respond to some of the previous concerns raised by the Council-led Treasury Guidelines Working Group, the group is still concerned that if charities have to spend more of their limited resources on the administrative costs of complying with the Guidelines, they will have less to spend on program activities, many of which address issues of poverty and other factors that can contribute to the growth of terrorism.

"We appreciate that Treasury has made significant improvements to the Guidelines and we agree wholeheartedly with the stated purpose of assisting charities that operate in good faith to safeguard their assets from diversion to terrorism," said Steve Gunderson, president and CEO of the Council on Foundations, on behalf of the working group. "But we believe the practices suggested do not offer protection of charitable assets beyond what is already required by existing law, and in some respects may actually impede charities' efforts to combat international terrorism. For example, charities are already required by the Internal Revenue Service to take steps to ensure their assets are used for charitable purposes by partners and grantees."

In its letter to Treasury Secretary Paulson, the Working Group said the Guidelines significantly exaggerate the extent to which U.S. charities have served as a source of terrorist funding and continue to impose onerous information collection and reporting requirements that do little to protect charities from terrorist abuse. Not only would the collection of this information on grantees' employees and subcontractors, for instance, impose financial and administrative burdens on nonprofits and hinder their charitable activities, but the information itself will have little utility in preventing the diversion of charitable funds to terrorist purposes. In addition, while the Guidelines are characterized as voluntary by the Treasury Department, IRS agents ˆ both in the context of audits and exemption applications ˆ have questioned organizations about their compliance with the Guidelines. If the Guidelines are voluntary, they should not become a criterion for evaluating tax-exempt status. The Working Group asked the Treasury to use the group's own Principles of International Charity in lieu of the Guidelines.

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