Vol. III, No. 2 • June 1995

Congressman Bunning’s Hearings Against Nonprofit Mail “On Track”
Congressman Jim Bunning (R-KY) still plans to hold hearings on nonprofit organizations' mailing practices, although the hearings have been postponed from May to either June or July. The Free Speech Coalition opposes Congressman Bunning's attacks on nonprofits, and is concerned that the Congressman's hearings will challenge nonprofits' exercise of free speech, and result in the imposition of additional costly regulations. Beyond that, the topic for the hearings extends well beyond his subcommittee's jurisdiction.

Last March, the Free Speech Coalition first learned that Congressman Bunning, Chairman of the Social Security Subcommittee of the House Ways and Means Committee, had pledged to hold hearings on nonprofit organizations' mailing practices. He accused certain nonprofits of "demagoguing for dollars," and said reform of Social Security would never be possible if nonprofit groups were free to oppose proposals for change. Wholly without regard to the issues regarding the Social Security program, FSC defended the rights of nonprofits to participate in the political dialogue, and immediately urged Bunning to cancel plans for those hearings.

Recent conversations between FSC members and Congressman Bunning and his staff revealed that Bunning now will focus on the cost of nonprofit fundraising and on nonprofit mailing practices which allegedly cause nonprofits' letters to be confused with official federal government mailing. Current laws already prohibit "look-alike mail," and the use of words and terms describing federal agencies. Nevertheless, Bunning apparently wants to press the issue.

FSC believes that, at best, these hearings will not accomplish much. However, the hearings may encourage additional regulation, imposing additional costs on nonprofit groups. New and small nonprofits would be hit hardest by the imposition of additional regulation.

Congressman Bunning dismisses the effect of additional regulation on nonprofits' exercise of free speech. If his effort to silence certain nonprofits succeeds, the question arises how many more restrictions will be imposed by Congress and federal agencies in the effort to prevent Americans from hearing the viewpoints of organizations unpopular with those in power.

These hearings indeed may chill free speech, at least on the Social Security issue. But it is not yet clear whether other nonprofit organizations will also be caught in the net thrown out to silence debate.

Congressman Bunning's subcommittee currently lacks jurisdiction to regulate nonprofit mailing practices. Mailing practice reform is under the jurisdiction of the Postal Service Subcommittee of the House Government Reform and Oversight Committee. Bunning's subcommittee also lacks jurisdiction to change the tax treatment of nonprofit organizations, which belongs to the Oversight Subcommittee of the Ways and Means Committee.

FSC encourages nonprofit organizations to contact Chairman Bunning and other Members of the Social Security Subcommittee. Nonprofits are also encouraged to visit the Offices of Subcommittee Members to explain the practical and Constitutional concerns raised by Congressman Bunning's proposed regulation of nonprofits. FSC Legislative Director Howard Segermark will coordinate visits to the offices of Subcommittee members (202-544-1114). We hope all members and friends of the Coalition will make additional contacts.

Members of the Social Security Subcommittee: Republicans Jim Bunning (KY-4), Sam Johnson (TX-3), Michael "Mac" Collins (GA-3), Rob Portman (OH-2), Philip English (PA-21), Jon Christensen (NE-2), and Melton Hancock (MO-7); Democrats Andy Jacobs (IN-10), Barbara Kennelly (CT-1), Lewis Payne (VA-5), and Richard Neal (MA-2).

Congressman Mica Seeks to Strip Some Nonprofits’ Access to Federal Employees’ Payroll Contributions
Congressman John Mica (R-FL) soon may introduce legislation to restrict some nonprofits' eligibility to receive contributions from federal employees through the federal government's official workplace solicitation program. The Combined Federal Campaign (CFC) lists individual nonprofit charities which federal employees may select. The selected charities then receive donations usually withheld from the federal employees' payroll checks. The CFC requires that qualified nonprofits be tax-exempt under Section 501(c)(3) of the Internal Revenue Code, and meet other criteria such as a 25 percent limit on administrative expenses.

The Free Speech Coalition opposes Congressman Mica's proposed legislation, which would disqualify so-called "advocacy" nonprofits from future participation in the CFC. Congressman Mica wrote to Office of Personnel Management Director James B. King, stating that he was "deeply troubled" by the presence of political and ideological advocacy groups in the CFC. He would like to restrict CFC eligibility to so-called "traditional health and welfare groups." The Congressman, Chairman of the House Subcommittee on Civil Service, described the present operation of the CFC as a "travesty."

Congressman Mica's concern is curious. He says he wants "advocacy" groups banned. Yet, true advocacy groups are tax-exempt under IRC Section 501(c)(4), and do not qualify for the CFC under present rules. Further, even Mica's proposed restrictions on nonprofit charities listed with the CFC would not limit many health and welfare charities that spend large sums on lobbying Congress.

Congressman Mica identified several current nonprofits participating in the CFC which he would describe as "advocacy groups," including the NAACP Legal Defense Fund and the Heritage Foundation. Mica stated that these two groups, one considered liberal and one considered conservative, do not provide "human services" in his opinion.

The politics of these proposals are hard to read. After November's change in Congressional control from the Democrats to the Republicans, some nonprofit leaders believed that controls on nonprofits would not be tightened further, expecting that Democrat Congressional leaders' move to minority status would end the efforts in the last Congress to silence nonprofits. Recent initiatives suggest that Congressional hostility to nonprofits is non-partisan, and derives from the nature of Congressional power: Members don't like criticism. They blame those groups for the heat they receive. In the last Congress, one Member was said to have complained, "How are we supposed to govern with all this pressure?"

U.S. Supreme Court Refuses to Hear Center for Auto Safety v. Athey
The latest issue of Free Speech reported that the Free Speech Coalition filed a friend-of-the-court ("amicus curiae") brief in support of the Public Citizen Litigation Group's efforts to have the U.S. Supreme Court review the decision in Center for Auto Safety v. Athey. Recently, the U.S. Supreme Court announced its decision not to hear the Center for Auto Safety case.

State Charitable Solicitation Laws: Limited Relief in Sight
Utah's fingerprinting requirement, in effect for nearly a year, may be on its way out, according to Francine Giani, Director of Utah's Division of Consumer Protection. However, Ms. Giani, who developed these tough requirements and won overwhelming support for them in the state legislature, said that criminal background checks will remain in place. Ms. Giani said the checks have helped Utah catch several "crooks" operating phony fundraising scams (but she admits that the crooks were local outfits, not national professional firms).

Ms. Giani explained that Utah has targeted professional fundraisers with such tough laws because a growing number of scams have cheated unsuspecting consumers while claiming to fund charitable activity. While other professions, such as realtors, are also regulated, Giani identified fraudulent fundraising appeals as one of the easiest ways to defraud consumers, particularly the elderly.

Regulators in Kentucky apparently agree. Last July, the Bluegrass state passed a statute instituting mandatory background checks for all professional solicitors and fundraising consultants. Only two other occupations face similar checks for criminal convictions: child care providers and school teachers.

Kentucky officials said that the background checks enabled the state Consumer Protection Division to identify "about a dozen phone solicitors" with prior records of defrauding the public, according to Program Coordinator Jean Hanks. Ms. Hanks expressed her belief that "bad guys" would now steer clear of Kentucky.

However, Edythe Ledbetter of the Center for Marine Conservation warned that "Increasingly, the non-profit community must fend off significant regulatory challenges at the federal, state, and even local level." Ms. Ledbetter, who serves on the board of the Free Speech Defense and Education Fund (the educational and legal defense arm of FSC), stated that these challenges "have a chilling effect on our ability to express ourselves to our members, supporters, and the general public."

Current charitable solicitation laws impose growing volumes of often confusing and redundant paperwork, escalating bonding and registration fees, as well as criminal background checks. Yet there is hope.

Virginia recently modified its requirement that nonprofits submit both a certified financial statement and an IRS Form 990 when registering with the state, enacting a new statute in March. Now nonprofits may file either a certified financial statement or a Form 990. Earlier, in October 1994, FSC notified its members and friends when Virginia had solicited comments on the burdens of its current regulatory requirements. FSC requested that its members write the state Department of Agriculture and Consumer Services and request (among other items) that the state limit its annual submission requirements to a Form 990.

While FSC members cannot know whether these efforts helped lead to Virginia's most recent reduction in nonprofits' regulatory burden, the recent Virginia statutory change should encourage FSC members to contact those in state government and speak out whenever an unfair law is proposed or enacted. Likewise, FSC will continue to monitor activity at the national, state, and local levels, and issue a call for action when necessary.

AICPA Releases Exposure Draft of Proposed Audit & Accounting Guide for Nonprofits
The American Institute of Certified Public Accountants (AICPA) has released an Exposure Draft of a proposed Audit and Accounting Guide for nonprofit organizations. The Guide is intended to revise and supersede several AICPA Industry Audit Guides, as well as the AICPA's SOP 74-8 and SOP 78-10. The Exposure Draft incorporates new accounting and financial reporting requirements. Comments on the Exposure Draft are due August 14, 1995. We will report on this in the next issue of Free Speech.

The Free Speech Coalition, Inc. is a nonpartisan, nonprofit organization which educates, lobbies, and litigates to defend the rights of advocacy organizations and their members. FSC needs your support to continue its fight to protect the rights of citizens to associate together and exercise their First Amendment right to petition their government for redress of their grievances. Contributions to the Free Speech Coalition, Inc. are not tax-deductible. For information on FSC legislative programs and membership, please call 202-544-1114.