by Brett Rowland
Overregulation of charitable organizations can make it more difficult to get care to residents where they need it most, according to a new study from Philanthropy Roundtable, a Washington D.C.-based organization dedicated to protecting philanthropic freedom.
The group’s analysis classified state regulations of charities into five categories: start-up regulations, annual reporting requirements, rules for paid solicitors, audit mandates and oversight regulations. Pacific Research Institute economist Wayne Winegarden wrote the report, The 50 State Index of Charity Regulations, for Philanthropy Roundtable.
The five states with the friendliest regulatory environment toward charitable organizations were Montana, Wyoming, Nebraska, Delaware and Idaho. The five states with the most burdensome regulatory environment toward charitable organizations were Connecticut, Mississippi, New Jersey, Florida and Pennsylvania.
“While some regulations are needed to foster accountability, what this new research shows is that too much regulation inhibits Americans’ ability to effectively support causes they care about as donations are swallowed up by regulatory burdens,” said Elizabeth McGuigan, the senior director of Policy and Government Affairs for Philanthropy Roundtable. “This paper advances our understanding of the impact of regulations on the charitable sector and can inform states looking to improve their regulatory environment to better support people in need.”
Obstacles can run the gamut.
“This study found a strong correlation between heavier regulatory burdens and a lower number of charities in a state. Unfortunately, the most vulnerable in these states may find less support in a more limited charitable landscape,” McGuigan said. “Those interested in starting a charity may run into insurmountable regulatory obstacles or smaller existing charities may be forced to cut back on meeting their mission in order to comply with unnecessary red tape.”
Winegarden said more burdensome regulations require charities to spend more time, money and other resources complying with state mandates rather than fulfilling their missions.
“States with excessive regulations undermine the efficiency and effectiveness of the charitable sector,” Winegarden said. “States interested in making sure that charitable resources are available for those in need should streamline state regulations and eliminate the ones that are unnecessary or overly burdensome.”
State regulations can vary significantly, but the environment is different for charities than for businesses.
“Unlike with businesses, there are significantly fewer resources available that provide a comprehensive comparison of how state regulations impact charitable organizations,” according to the report.
The study did not look at federal regulations.
“While this study does not examine the effectiveness of each type of regulation, it is clear that more research is needed to help states streamline their regulatory regimes and best support a vibrant charitable sector,” McGuigan said. “At the federal level, this study is a cautionary tale that there are negative implications for imposing new burdens on charities.”
More research on these issues is warranted, the report says.
“While more research is required, this analysis shows the states imposing excessively burdensome regulatory environments may be paying a cost in terms of a less effective charitable sector,” the report concluded. “Promoting a more efficient charitable sector requires reforms, consequently, that streamline state regulations and eliminate those regulations that are unnecessary or overly burdensome.”
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Brett Rowland is an award-winning journalist who has worked as an editor and reporter in newsrooms in Illinois and Wisconsin. He is an investigative reporter for The Center Square.
Photo “A Group of Volunteers Assisting an Elderly Person in a Wheelchair for Charity” by RODNAE Productions.
