The Senate Finance Committee, in part due to a widespread suspicion (not completely without merit) that many non-profits are sham organizations or run with disregard for donor intent and exempt purpose has had "reforming" (aka making more difficult and costly) the requirements for the tax exemption for some time. Make no mistake, when the friendly federal government convenes a panel on some financial issue, its with an eye on increased taxes and the findings will of course never disappoint the convening authority. This is coming at a time whern certain aspects of Sarbanes Oxley are being treated as "state of the art" for accounting purposes, even where the law doesn't apply.The short version is, keep your activities in line with donor intent and exempt purpose and keep good books produced with good systems. http://www.fei.org/news/nonprofit_panel_6-23-05.cfm

Thanks for the heads up on this one ---before any one panics on this, if you look at the website:http://www.fei.org/news/nonprofit_panel_6-23-05.cfmyou learn that this panel was formed at the request of the Senate Finance Committee to come up with "some recommended changes to the way in which nonprofit entities report their financial information and govern themselves." Before anyone panics, the fact that a panel comes up with some recommendations for some changes doesn't mean they'll ever be implemented by IRS or Congress.All that's really important is to stay between the lines and have a financial management system that's consistent with requirements such as those in FASB 116, 117 and 124.Even more important, I think there probably are more railroad museums, NRHS chapters etc. that *wish* they had a $1 million per year budget, than actually do !!!Bob H.

One can learn a great deal more about the current activity of Sen. Grassley's committee and its potential effects on museums at the American Association of Museums Web site (disclaimer--I am employed by AAM).http://www.aam-us.org/getinvolved/advocate/issues/tax/index.cfm

My wife has been following Sen. Grassley's efforts as part of her work. She sent me some information a while back, but I can't put my hands on it right now.Sen. Grassley's committee has some legitimate concerns:Overlarge "ceremonial" boards that under the law have a fiduciary responsibility, but which don't excercise it. (By "overlarge" I mean boards of 50+ people whose sole reason for being on the board is a donation or fundraising.) I believe Sen. Grassley wants to limit boards to 15 members.Private foundations that pay salaries out of line with the market, or provide perks like cars or office space, to people who aren't contributing to the work of the foundation, or who are disqualified (family members, for example). The IRS already polices this, but Sen. Grassley wants stronger penalties.Plus the "appraisal inflation" cited in Erik's link.I believe this same committee tried a couple of years ago to pass legislation that would exclude administrative expenses from a private foundation's annual 5% payout. That legislation failed. I don't know that this latest effort will be any more successful - it's been on the table for a couple of years, now, and doesn't seem to have a lot of support. The politics are pretty simple. If Sen. Grassley weren't a committee chairman, I don't think anyone would be championing this. On the other hand, private foundations (set up by wealthy people as a component of estate planning) would bear the brunt of the reforms, along with community arts initiatives (art museums, cultural organizations, etc.). Most railroad museums won't be affected because they are not fundraising machines like an opera or symphony, or because they are not funding outside programs like a community foundation. Given the common refrain here that museums should do a better job seeking donations, perhaps it is a "problem" to wish for.JAC

Gee -- just wonder if anyone on this list is going to a convention next week in Portland for an organization that has 170 chapters (or so) and each chapter gets one representative on the BOD.Sounds like that's greater than 50 ! <lol>Bob H

I've never read the NRHS by-laws, and just giving someone the title of "Director" is not the same as that person being on the Governing Board.But if they do indeed have one representative from each chapter on the Governing Board, then each of those 170 is held responsible for the financial activities of the organization. On the other hand, if those 170 are an "advisory committee" to a smaller board, they do not have that responsibility.If the IRS determines that e.g. the national NRHS organization has violated some provision of the Internal Revenue Code, it can hold directors personally liable, including fining them as individuals. Ditto the local art museum which helpfully appraises that painting for a little bit more than the donor could get on the open market, to help on his taxes.Or the organization which carries an unrealistically low asset value (say a piece of land) on its books to decrease its annual payout.Many directors of non-profits don't realize this when they accept their positions. Or they may plead ignorance when a foundation gets dinged because (to give a nearly-real example) the Executive Director leases a car for the original donor's great-nephew, using Foundation dollars, because said nephew helps make grant decisions a few times a year.JAC

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Oh, it gets FAR worse than that.At the NRHS annual meeting in Portland in a few days hence, there is on the agenda a MAJOR change to the by-laws of the NRHS which has attracted considerable attention from those having to deal with this stuff as Chapter National Directors, etc. If you're in an active NRHS chapter that pays attention to this stuff, or if you are an NRHS member that actually paid attention to your annual meeting proxy forms, you know what I'm talking about; if you're not an NRHS member this doesn't directly concern you. But you might be well advised to pay attention to the business meeting portion of the NRHS meeting in Portland, as it may well affect the future of the NRHS and railfan organizationas as a whole.