Watchdog Urges Foundations to Curtail Tax Fraud

A key figure in Congress’s recent efforts to curb abuse in the nonprofit world says foundations need to become much more aggressive in stopping tax fraud.

Otherwise, foundations could soon be in the cross hairs of federal lawmakers.

Dean A. Zerbe, a former top aide to Sen. Charles Grassley of Iowa, said in an online discussion with Chronicle readers that some members of Congress are concerned about family foundations that are paying family members for administrative or board positions.

Mr. Zerbe, who stepped down from his Senate job last month to work as national managing director for Alliant Group in Washington, also said he is concerned that private foundations are being used as a tax shelter by some wealthy donors.

“There needs to be better leadership from the foundation community in this area overall to address these problems,” Mr Zerbe said. “The private foundations should come forward with their proposals of reform and not wait for Congress.”

During the hour-long discussion, Mr. Zerbe also answered questions about issues such as the Combined Federal Campaign, endowment spending by colleges, and the tax status of religious organizations.