Assessing the Legal and Regulatory Frameworks for U.S. Civil Society

• In Event: Repression to Regulation: The State & Civil Society Around the Globe

Abstract

Abstract
Through a comprehensive review of relevant literature, interviews with scholars and practitioners, and research conducted by the authors, we assess empirical evidence on the operations and impacts of the nonprofit regulatory framework in the United States, summarize expert commentary on how to improve regulatory oversight, and identify research gaps that limit our knowledge of how regulation affects civil society organizations in our pluralistic democracy.
Research Questions
Questions that this paper addresses are: 1) What does empirical research reveal about the operations and impacts of the regulatory framework on civil society organizations; 2) what are the changes recommended by experts and practitioners to improve the regulatory framework; 3) what are the major gaps in the empirical research? Specific questions include:
• How effective is current regulation at preventing fraud, enforcing regulations and laws?
• Does current regulation promote public trust and strengthen civil society and its organizations?
• What changes will improve oversight and the operations of nonprofit organizations?
• What empirical research is necessary to inform changes in the regulatory framework?
Methods
This paper is based on an analysis of a comprehensive annotated bibliography, a state-by-state legal compendium of laws affecting nonprofits, a survey of state charity offices, and interviews of officials and experts conducted by the research team. The authors draw on a multidisciplinary bibliography of 200 articles on nonprofit regulations which includes empirical and legal research, expert commentary and recommendations for improvements and reforms.
Discussion
Three major themes emerge from this research: regulation is 1) complex, 2) fragmented and, 3) has limited published empirical research, but numerous recommendations for improvements and reforms. There are three different types of law—trust law, common law at the state level, and corporate law, with a heavy reliance on tax law at the federal level. Oversight is accomplished by multiple agencies across the states and by the IRS as the lead regulator at the federal level. Congressional oversight of nonprofits is episodic, characterized by periodic hearings to illuminate problems and hone new regulations. As a result, fragmented and overlapping laws and regulations characterize requirements at the national, state and local levels. Certain types of activities are regulated by different agencies of government, such as political and election related activities regulated by the Federal Election Commission and some commercial activities by the Federal Trade Commission.

Complexity and fragmentation are magnified by legislative barriers to information sharing between the IRS and state charity offices, which impede collaboration in oversight efforts. Finally, there is limited empirical research on the regulatory framework for nonprofit organizations, especially on the structure and efficacy of oversight, enforcement efforts, and impacts and costs of different types of disclosure and regulation. Surveys and interviews of state regulators (Lott, et al. 2016), analyses of fundraising solicitations (Barber and Farwell 2016), use of big data in regulation and (Mayer 2019) are among the few empirical studies.

The burdens of regulatory complexity and fragmentation on nonprofits are real and costly. Charities that operate in different jurisdictions and solicit donations across state lines must register in multiple states that have different reporting requirements and disclosure rules. Organizations that advocate for change and engage in civic activities face vague and confusing requirements that may chill their activities. Yet, research that documents the costs and benefits of disparate regulations is virtually nonexistent. Recommendations for change note that the regulatory regime does not adequately oversee a growing and more diverse civil society that increasingly relies on technology and social media in a polarized society (Owens 2017). The need for additional empirical research into the operations and impacts of the regulatory framework that oversees civil society organizations is an overarching finding of this analysis.
References
Barber, P. and M. Farwell, (2016). “Charitable solicitations regulation and the principles of regulatory disclosure.” Nonprofit Policy Forum, 7(3), 311–338. https://doi.org/10.1515/npf-2015-0017
Lott, C., and E. Boris, K. K. Goldman, B. Johns, M. Gaddy, and M. Farrell. 2016. State Regulation and Enforcement in the Charitable Sector. Washington, DC: Urban Institute.2016.
Mayer, L. 2019. “The Promises and Perils of Using Big Data to Regulate Nonprofits.” Washington Law Review 94.
Owens, M. 2017. “Challenged Regulators.” In Regulating Charities: The Inside Story. Myles McGregor-Lowndes and Bob Wyatt, eds. New York: Routledge. pp 81-96.

Authors

• Cindy Lott, Columbia University

• Elizabeth T. Boris, Urban Institute