A recently passed law in Oregon is targeting nonprofits that spend too little on their mission, subjecting them to financial punishments.
According to a report in The Star Tribune, House Bill 2060, which was signed by Gov. John Kitzhaber last month, will eliminate state and local tax subsidies for organizations that spend less than 30 percent on program services over a period of three years. The bill not affect federal tax-exemption on contributions.
The law was previously reported in an earlier article in The NonProfit Times.
Jim White, executive director of the Nonprofit Association of Oregon, told The Tribune that the law is the first of its kind in any state. "We're the first in the country, and we should be proud of that," he said.
The state's Office of the Attorney General has already identified 20 charities that all spend less than 30 percent of their budget on programs and services. All of the organizations on the list are based in states other than Oregon include a Troy, Mich.-based "Law Enforcement Education Program" that spends just 2.7 percent of its $2.2 million in annual expenditures on programs and services. The names of these charities were not revealed in the AG Office's list.
Oregon and other states had similar laws in past years that stopped charities from soliciting donations if they were spending too much on themselves and their fundraisers. Those rules were overturned in 1980 when the Supreme Court ruled they were a violation of a nonprofit's First Amendment Rights.
A spokesman for the Department of Justice indicated that the law is not in similar danger, as it does not restrict a charities right to fundraise.
You can read the full story in The Star Tribune.