ASAE Opposes Bill to Allow FTC Oversight of Nonprofits

A proposal to grant the Federal Trade Commission authority to regulate tax-exempt organizations would duplicate existing oversight by other agencies, ASAE said in a letter to a House subcommittee.

ASAE submitted written testimony this week in opposition to a House bill that would expand the Federal Trade Commission’s (FTC) oversight to 501(c)(3) tax-exempt organizations.

The bill (H.R. 5255) was one of 17 FTC-related measures considered May 24 by the House Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade. The package is aimed at bringing targeted reforms to the FTC and addressing some emerging technologies in the marketplace.

H.R. 5255 [PDF] was introduced by Rep. Bobby Rush (D-IL) to give the FTC jurisdiction to protect consumer interests when it comes to the nonprofit sector. For example, the commission has said it wants jurisdiction to pursue “bad actors” in the nonprofit sector who have deceptive data security or privacy practices.

ASAE’s testimony, submitted in a letter to subcommittee leaders, [PDF], argued that the FTC is not well-suited or designed to oversee nonprofits and that nonprofits are already regulated by other agencies.

“In times of limited federal resources, the FTC has plenty of entities that it must oversee, and creating a new regulatory structure dealing with the oversight of certain tax-exempt organizations is unwise, duplicative, and will create an unnecessary burden on our nation’s charities,” ASAE said.

The letter notes that the nonprofit sector is already regulated by the Internal Revenue Service and state offices and so additional oversight by another agency is unnecessary. The IRS likewise punishes nonprofits that engage in “trade” activities, which is the area the FTC is designed to oversee.

The FTC, which oversees businesses and for-profit corporations, is inexperienced in nonprofit governance and is not the correct agency to regulate the business practices of nonprofits, ASAE said.

“To suggest that the same commission can correctly regulate the business practices of major telecommunications firms and a community charity is puzzling,” ASAE said, “and it is a concern for organizations whose financial practices would be overseen by FTC employees inexperienced in nonprofit governance.”


Chris Vest, CAE

By Chris Vest, CAE

Chris Vest, CAE is vice president, corporate communications and public relations at ASAE. MORE

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