Vol. III, No. 4October 1995

Lobbying Disclosure Act Still Threatens Nonprofits
As this newsletter goes to press, it is unclear what will happen to the Senate-passed Lobbying Disclosure Bill, which has not yet been referred to a House committee.

It appears that the House GOP Leadership may simply allow the Senate bill to pass and send it along to the President. Previously, the House Subcommittee on the Constitution was expected to develop its own bill, to be sent to the full Judiciary Committee, and then to the House. One insider speculated that, regardless of the content, the Leadership wants quick passage of the Senate bill to make the issue go away quickly, and "get those videos of lobbyists and Congressmen in Aruba" off the news.

Congressman John Bryant (D-TX) has initiated a formal discharge petition which would require a House vote on the Senate bill when 218 signatures of Members are obtained. Bryant is the former Chairman of the House Judiciary's Administrative Law Subcommittee, which reported out his own version of the Lobbying Disclosure Act in the last Congress. Nonprofits are concerned about the definition of lobbying in the Senate bill, which (because it differs from the IRC definition of lobbying) would increase the costs and burdens of recordkeeping and reporting, while discouraging elected and appointed officials from taking telephone calls. Lastly, nonprofits must be concerned about additional efforts to restrict grassroots lobbying. We will alert you on the status of the Lobbying Disclosure bill, and any recommended action necessary on this bill.

NASCO Unresponsive To Nonprofit Community’s Concerns
On September 12, FSC wrote the National Association of State Charitable Officers (NASCO) to ask why it will exclude all but a few hand-picked charitable representatives from the annual National Association of Attorneys General (NAAG)/NASCO Enforcement Seminar. In the letter, FSC also expressed its objections to NASCO's action, which limited the number of non-NASCO members to 19, while over 90 non-NASCO members attended the 1994 seminar. FSC further asked which members of the nonprofit community were invited to the seminar, what criteria were used to select the attendees, and which NASCO members selected the invitees.

Reports on last year's seminar by FSC and publications such as The Philanthropy Monthly created controversy. For example, FSC reported that the NASCO President, Steve Arter, had informed the audience that he advised Pennsylvanians not to give to nonprofits that solicit through the mail or by telemarketing. (Mr. Arter is no longer in his charitable enforcement position.) FSC also reported that the incoming head of NASCO, Pamela Mann, had told the audience that regulators are not accountable to the nonprofit community.

FSC's September 12 letter was addressed to Ms. Mann (a former Assistant Attorney General in New York), who by that time had been replaced as President of NASCO. A response was received from the current President of NASCO, David E. Ormstedt, Assistant Attorney General of Connecticut. Mr. Ormstedt explained that the non-NASCO attendees were limited and hand-picked due to both the purpose of the seminar and certain space and cost limitations. Mr. Ormstedt further expressed that NASCO's exclusion of charitable representatives from the seminar is not intended to express an unwillingness by NASCO and NAAG members to consider charities' points of view. Clearly, however, NASCO's action does demonstrate that charities' views are not assigned much importance by many regulators and enforcers, as NASCO eliminated what has served as a relatively convenient forum for representatives of nonprofit organizations to express their concerns to regulators nationwide.

It is unfortunate that NASCO has responded to the controversy created by Mr. Arter and Ms. Mann by restricting the nonprofit community's access to state regulators, and to the information provided at the seminar, rather than addressing the attitudes which created the controversy. Clearly, the extreme views of Mr. Arter and Ms. Mann are not held by all state charitable solicitation officers, yet NASCO has chosen to reduce, rather than expand, communication between its members and nonprofits. Such disregard for the nonprofit community can only serve to create greater mistrust between the regulators and the regulated.

Postal Service Changes Eligibility For Special Nonprofit Rates
FSC recently distributed to its members copies of Postal Service Publication 417, the brand-new collection of postal rules governing eligibility for mailing at the special bulk third-class rates. FSC also provided its members with an overview of the eligibility rules prepared by FSC counsel, discussing the new "content" rules that became effective on October 1, 1995.

That overview cautioned FSC members to be careful in interpreting the new postal rules. Reliance on Publication 417 or on any general treatment of these complicated third-class eligibility rules could be costly. (See, e.g., the "grocery store" illustration on page 18 of Publication 417, which, on the information presented, is, at best, difficult to comprehend.)

Status Of Istook Amendment
An amendment to the Fiscal 1996 Treasury Department Appropriations Bill sponsored by Congressman Ernest Istook (R-OK), would have greatly limited lobbying done by nonprofit groups receiving federal funds. As this newsletter goes to press, the Istook amendment will not be in the Treasury bill, but majorities in both houses can pass such a measure again.

The initial Istook amendment adopted a new definition for advocacy, terming it "political advocacy." To be consistent with current law, the act should have adopted the definition contained in the Internal Revenue Code, applicable to all not-for-profit groups which must file IRS Form 990s annually. If the Istook Amendment is adopted in its present form, presumably a new bureaucracy in GSA or OMB or some other federal agency would draft regulations to determine what, from the legislative history of this bill, is meant by "political advocacy."

The FSC is in contact with Hill staff concerning this matter and will seek clarification of this issue. Finally, we understand that if the amendment passes, there may be a court challenge to it. There have been conflicting legal opinions rendered by counsel to certain nonprofit groups as to the constitutionality of the Istook proposal. We will keep you informed.

FTC Regulates Charitable Phone Solicitation To Death?
According to one lobbyist for the major telephone marketing retailers, business interests were far more pleased with the final Federal Trade Commission telemarketing regulations than they have said publicly. Most agree that it could have been much worse.

 However, there was no satisfaction to express for those nonprofits that communicate with their supporters and the public by telephone in an effort to mobilize contributions. The new FTC regulations that will go into effect on December 31 will require elaborate disclaimers from commercial solicitors employed by charities to contact prospective donors disclaimers that would, in the minds of many, eliminate the practicality of telephone soliciting. Some still hope that the FTC or Congress will recognize the legitimate, legal, and non-fraudulent nature of most current telephone charity solicitations and revise these restrictions.

Seeking Access To Nonprofit’s Membership, Other Confidential Records
One of the sharpest attacks on the First Amendment in recent memory is occurring in a federal court in New York state. The plaintiffs in a lawsuit (the estates of two persons killed with handguns), are suing 52 defendants (accused of wrongful death liability for cooperating in the improper distribution of handguns). However, plaintiffs have subpoenaed the membership and other confidential records of an association that is not a defendant the American Shooting Sports Council, Inc. (ASSC).

In this case, Hamilton, et al. vs. Accu-Tek, et al., the plaintiffs have argued that the defendants are liable for the death of two people because, in lobbying Congress and state legislative bodies regarding proposed gun-related legislation, they presented material that was allegedly false. The plaintiffs who apparently are attempting to hold the firearm industry liable for the criminal acts of third parties are now seeking evidence relating to alleged industry-wide efforts to combat legislation which would have affected the distribution of handguns, to try to back up their allegations.

The plaintiffs have subpoenaed records (e.g., tax returns, membership lists, budgets, internal policy discussions, and legislative activities) from and sought to depose non-parties such as ASSC, an Atlanta-based trade association representing the firearm industry. ASSC objected to the subpoenas on a number of grounds, principally its First Amendment privilege to petition the government for redress of grievances; it has asked a federal court in Georgia to quash the subpoena. Noting that "political forces are instrumental in driving the litigation," ASSC argues that invasion of its First Amendment rights should not be permitted.

Even if ASSC were a defendant to the litigation, its membership and other confidential files protected by the First Amendment should be virtually immune from disclosure. We are optimistic as to the outcome, but this lawsuit confirms that eternal vigilance, coupled with an uncompromising defense of First Amendment rights, is the price of liberty.

AICPA Ignores Flood of Objections, Moves To Adopt
New Joint Costs Rule

The Association of Independent Certified Public Accountants (AICPA) has ignored an overwhelming number of objections and is poised to adopt its Exposure Draft, which would modify the existing rules (Standard Operation Procedure 87-2) governing the allocation of joint costs by nonprofit organizations where fundraising is part of the expenditure. The AICPA is in the process of forwarding the Exposure Draft to the Financial Accounting Standards Board (FASB) for publication as a new accounting standard.

In 1993, the AICPA circulated the Exposure Draft for comment, and by early 1994 received more than 300 sets of written comments in response. Reportedly, 90 percent of the individuals and organizations (and 98 percent of the nonprofit organizations, including FSC and many of its members) filing comments generally opposed the Exposure Draft. Incredibly, despite the overwhelming opposition to the proposal and the long passage of time without any action, the AICPA is still pushing the revision and will forward it to the FASB, who could still refuse to adopt it as an accounting standard.

The nonprofit community is upset in response. Much of the opposition to the Exposure Draft reflected concerns that it would make financial statements misleading. Some nonprofits are considering a legal challenge to any such new accounting standard, although it is not clear at this time how much financial support is available for such a lawsuit. FSC will be writing to the FASB, and will continue to keep members posted on developments.

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.