Oregon House Bill 2060, signed by the Governor John Kitzhaber, will eliminate state and local tax subsidies for charities that spend more than 70 percent of donations on management and fundraising over a three-year period.
“No other state has done this. We’re the first in the country and we should be proud of that,” said Jim White, executive director of the Nonprofit Association of Oregon.
Some states, including Oregon, once had laws prohibiting nonprofits from soliciting donations if they were paying too much to themselves and their fundraisers, but the U.S. Supreme Court ruled in 1980 that restricting a charity’s ability to solicit donations violated their First Amendment rights.
Department of Justice spokesman Jeff Manning said Oregon’s new law would survive a legal challenge because it doesn’t restrict a charity’s ability to solicit donations.
Instead, donors to those charities can no longer claim a state tax deduction, and the charities lose their local property tax exemptions.
“These organizations have found the business model of using a nonprofit as a cover for what’s basically a telemarketing for-profit firm,” White said. “They’re giving charities and nonprofits a black eye and need to be gotten out of our midst.”
Officials estimate that fewer than 100 charities will be affected by the law in its first year. Of the 17,152 charities registered to solicit funds in Oregon, about 23 percent are based out of state.
The Oregon Department of Justice identified the 20 "worst of the worst" charities, including the Michigan-based Law Enforcement Education Program, which spent just 2.7 percent of its funds on programs over the past three years.
Other charities identified include California-based Shiloh International Ministries, which spent 3.2 percent of its funds on programs, and the Florida-based American Medical Research Organization, which spent 4.2 percent on programs.