On April 28, a coalition of conservative groups sent a letter to Senate Majority Leader Bill Frist (R-TN) objecting to the Senate Finance Committee's effort to tighten rules governing charities. Shortly after that, the Independent Sector Panel on the Nonprofit Sector released its second set of draft regulations for review and comment by the sector. The conservative coalition appealed to Frist to block Finance Committee Chairman Charles Grassley's (R-IA) efforts, which they said threaten the role of charities to further social and educational goals. "We request that, as majority leader, you do not allow proposals of the Senate Finance Committee staff or similar proposals, the effect of which would be to undermine the role of charities in American public life, to come to the floor of the United States Senate." The groups cited proposals that would limit non-cash contributions and add new paperwork requirements for small nonprofits. They also criticized proposals to limit donations and impose new requirements on the way foundations and other charities are run, saying they would hamper many charities that are not involved in abuses. Since Grassley's staff released a paper on ideas for changes in tax law last year, many charities have formed coalitions and hired lobbyists to slow down or influence the legislation. The largest effort has been undertaken by Independent Sector, which organized the Panel on the Nonprofit Sector to develop specific recommendations. The Panel issued a first round of recommendations and appears focused on tinkering with the proposals that might appear in Grassley's legislation. The coalition letter takes a different approach by demonstrating that religious and conservative groups oppose Grassley's efforts. Sen. Rick Santorum (R-PA), who publicly stated his opposition to the reform measures at a Finance Committee hearing on nonprofit accountability, has been working to shore up opposition to the bill. In March, Santorum sent a letter to Adam Meyerson, president of the Philanthropy Roundtable, a consortium of conservative foundations and donors, asking it to convene a group to respond to Grassley's proposals. Santorum also asked the Philanthropy Roundtable to provide his office with "specific facts, specific situations and possible 'unintended consequences' of the published proposals, as well as your suggestions for any alternatives to the existing proposals". Santorum is concerned a number of proposals in a Joint Committee on Taxation (JCT) report and the Finance Committee's staff discussion draft would impose too onerous a burden on small nonprofits. He has encouraged the committee to push for enforcement of current laws before enacting new legislation. Santorum is not alone in his concerns. At the same Finance Committee hearing, Sen. Charles Schumer (D-NY) said the $300 billion in tax revenue that goes uncollected each year due to tax avoidance and evasion could be collected through better enforcement of existing laws, without new legislation. Grassley has postponed introducing his bill, which was reported to look similar to the staff committee draft, in response to members' skepticism and pressure from outside groups. At the same time, the Panel on the Nonprofit Sector, formed by Independent Sector in October 2004 at the request of the Senate Finance Committee, announced its Phase II recommendations hoping to influence the outcome of whatever legislation is introduced. The Phase II recommendations, following the publication of the interim report in March, delve into issues that the Panel thought too technical for its initial report. Among the Panel's Phase II recommendations are:

• Disclosure of the services provided by board members in return for compensation on the Form 990 or 990-PF by any organization that provides compensation to board members
• CEO compensation should be reported on the Form 990 or 990-PF, and nonprofits would be required to report whether they followed the "rebuttable presumption" procedures in determining compensation
• A minimum of three directors on the board of every 501(c)(3) organization, and periodic reviews of board size and structure
• A definition of "independent" board members incorporated into the tax code, and a requirement that one-third of the board be "independent"
• A best practices policy regarding payment and reimbursement of travel expenses, and Form 990 disclosure of such policy
• Legislation defining a "donor advised fund" and authority to the secretary of treasury to exclude specific types of funds
• Require every supporting organization to provide its supported organizations with its governing documents, Form 990 and an annual report of its activities
• Make tax-exempt entities subject to the same reporting requirements as taxable entities
• Require 501(c) applicants to provide more detailed information, and
• Require that the standards regulating non-cash contributions be strengthened and clarified.

Comments on the Panel's Phase II recommendations are due May 19, and can be submitted online. Additional recommendations regarding performance data of charitable organizations' activities and suggested revisions to Forms 990 & 990-PF will be forthcoming from the Panel.