The IRS is seeking comments on ideas that U.S. charities might employ to prevent diversion of charitable assets to terrorists. In seeking comments, the IRS references guidelines issued by the Treasury Department last November that were published without public comment. In submitting comments to the IRS, OMB Watch calls for the withdrawal of these November guidelines since they do not reduce the risk of diversion of charitable assets to terrorists, are inconsistent with federal and state laws and place charities in a governmental role of collecting information and assessing potential for terrorist activities. In May, the IRS published Announcement 2003-29, dealing with “International Grant-making and International Activities by Domestic 501(c)(3) Organizations.” The IRS indicated it was seeking comments on “how new guidance might reduce the possibility of diversion of assets for non-charitable purposes while preserving the important role of charitable organizations world-wide.” The IRS Announcement references “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities,” a document released by the Treasury Department's Office of Foreign Assets Control (OFAC) in November 2002. The Guidelines, issued without public comment, cover governance, disclosure, transparency and financial practices and include procedures for groups that distribute funds to foreign organizations. The agency developing the Guidelines did not consult charities and apparently did not consult with the IRS office that deals with charities. Although labeled "voluntary best practices," the Treasury Department has authority under the USA Patriot Act to freeze or seize assets of charities. Moreover, it is likely that Treasury Department “best practices” will likely impose a standard for due diligence that U.S. charities must follow. Accordingly, the November Guidelines, which affect all U.S. charities, not just those making international grants, has enormous implications for all nonprofits. OMB Watch, along with other nonprofit leaders, called for the Guidelines to be withdrawn, in part because they are much broader than is necessary to prevent diversion of assets to terrorists, and in part because they are have not been subject to scrutiny by nonprofits. The Guidelines address areas generally regulated by the states or Internal Revenue Service. For example, Guideline I(B)(1) requires a board to meet at least three times a year with the majority attending in person. This would preclude the possibility of meeting via teleconference, webcasting or other alternatives used by organizations whose directors might be geographically distant. Compliance with the “in person” requirement could incur substantial travel costs, burdening the organization’s budget or the personal finances of the director. And what would be achieved? If an organization intends to divert funds for terrorism, meeting in person is unlikely to prevent it from happening." The Guidelines are also labeled "Best Practices," and the comments object to this characterization, noting the substantial difference between government standards and "best practices." While accountability demands that nonprofits follow best practices, it is not advisable that the government agency in charge of terrorism-related actions should be establishing such practices for all U.S. nonprofits. The nonprofit sector itself is the entity which should define its best practices, not government. Groups like the Maryland Association of Nonprofit Organizations have established a Standards of Excellence Program that promote best practices for the sector. Although the Guidelines focus on grantmaking organizations, they apply to all charities. OMB Watch's comments note the substantial difference between public charities and private foundations, and ask that any future Guidelines make a clear distinction between the two. For more information see the full text of the OMB Watch comments. Comments were also filed by INDEPENDENT SECTOR and the Council on Foundations.