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Bill Would Eliminate Sales Tax Exempt Status For Charities That Spend Too Much On Overhead

Many people may not realize how little of a charitable donation goes toward fighting the cause at hand.

State Rep. Tony DeLuca (D-Allegheny) found this to be a problem for some his constituents who were solicited by charities seeking donations to fight cancer. In some cases, as little as less than 1 percent of money raised goes toward aid.  

“A majority of the money is being spent on administration,” DeLuca said. “People are donating their money and thinking that it’s all going to the causes, but some of these charities, you’re lucky to get 25-30 percent and that’s ridiculous.”

That prompted him to write House Bill 2409 that would revoke a charity’s state sales tax exempt status if it spends more than 40 percent of its income on administration and fund raising. DeLuca said he would have liked to set the bar even higher.

Charity ratings agencies acknowledge that administrative costs for some endeavors will naturally be higher than for others. However, such variations do not account for some charities spending nearly all of their money on programs while another spends most on fund raising.

For example, according to the non-profit rating group Guidestar, Pittsburgh-based Brother’s Brother Foundation spends less than 1 percent on administration and fund raising, while the PA FOP Foundation spends about 85 percent of its income on non-program related expenses. 90.5 WESA, which is a nonprofit, spends 20 percent of its income on administrative and other expenses. 

“The middle class are the ones who contribute most of this money,” DeLuca said. “(They) think all their money’s going for the cause and a lot of it is going for administration and telemarketing and it’s not right.”

DeLuca said he doubts the bill will get passed this session but he wanted to begin the conversation as soon as possible. He said he’ll reintroduce the bill in 2017 and “put a full press on it.”

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