A Michigan-based charity organization known as the Law Enforcement Education Program has spent a shockingly small amount of its money on programming over the last three years — 2.7 percent to be exact — and a shockingly large amount on fundraising and management. California’s Shiloh International Ministries did not do much better, spending only 3.2 percent on programs. The same can be said for the American Medical Research Organization in Florida, which spent just 4.2 percent.
Statistics like these, compiled by the Oregon Department of Justice, were the impetus for a new law making Oregon the first state to eliminate tax exemptions for charities that spend more than 70 percent on non-programming costs. After all, charities are effectively subsidized by taxpayers, who have a right to make sure that the money is not misspent or wasted. Under the law, the affected charities will not receive a local property tax exemption, and donors to 501(c)(3) charities will no longer receive a state tax deduction for contributions.
The Oregon law simply prevents taxpayers from subsidizing charities that do not spend the bulk of their funds on programming that directly benefits the public.
In the past, Oregon and other states have prohibited charities with high fundraising and management costs from soliciting donations. In 1980, the U.S. Supreme Court rightly ruled that these laws violated the First Amendment rights of charitable organizations. This time, however, Oregon got it right. Eliminating a mismanaged charity’s tax exemption does not infringe on that organization’s First Amendment rights. Instead, the law imposes common-sense regulations that protect the public. Other states should follow Oregon’s lead.