FSC Opposes IRS Proposed Intermediate
One of the Administration's intermediate proposals is the excess benefits tax. This provision would impose an excise tax on any "insider" or other disqualified person who received a benefit from an IRC Section 501(c)(3) or (c)(4) organization that the IRS found to be "excessive." It would also penalize any trustee or manager who approved excessive benefits.
The IRS already can punish excess
benefits by revoking the tax-exempt status of offending
nonprofits. However, the IRS requested the power to punish
nonprofits intermediate sanctions because, in the case of
"small" violations, where revocation would be excessive, IRS
imposes no sanction. Interestingly, the IRS did not request
a system of alternative sanctions in the case of excess
benefits, which could be a reasonable approach. Rather, the
IRS sought a system of double sanctions. Under the proposal,
the IRS can both revoke the organization's tax-exempt status
and assess the punitive excess benefits tax (this proposal
has been incorporated in recent legislation). If the IRS
want an alternative penalty, it should ask for just that.
The IRS should be barred from imposing double penalties on
Avrahami v. U.S. News & World Report: Direct Mail
Recipient Suffers Setback
In this case, Mr. Ram Avrahami, a U.S. News & World Report subscriber, received a solicitation from Smithsonian magazine, which received Mr. Avrahami's name through renting a subscriber list from U.S. News. Mr. Avrahami sued under a Virginia statute that most believed was originally intended to protect against the commercialization of a celebrity's name. He argued that the statute should be construed broadly to protect individuals from having their names placed on lists which are rented or exchanged without their permission.
The dismissal has not dissuaded Mr. Avrahami, whose attorney told the Free Speech Coalition that the case is about "protecting consumer's property rights" and "forcing companies to seek permission before they use someone's name." The case now shifts to a higher county court, where U.S. News seeks a declaratory judgment that its action was proper.
If Mr. Avrahami wins this suit, the court
decision could impose, by the back door, the kind of mailing
list regulation that has been discussed or adopted in other
states (see FSC Members' Memo of Feb. 12, 1996 on this
subject). A for-profit or nonprofit business operating in
Virginia that rents, exchanges, or even sells customer,
contributor, or other lists could be prohibited, or legally
liable, for using individuals' names without permission.
New Congressional Bill To Stifle Public Speech
One provision would greatly expand the Federal Election Commission's authority to govern advocacy. The term "express advocacy" is defined extremely broadly, to include voter guides, or any publication criticizing the public policy positions of an office holder or a candidate near an election.
Under another provision, an organization would be deemed to have made a "contribution" to a candidate if it surveyed a candidate on his or her position on the issues.
In the name of creating a "Clean
Congress," the bill's authors seek to grant the FEC two
broad powers which may lead to abuse. The Free Speech
Coalition will inform the House Oversight Committee, and the
Senate Rules Committee (both of which plan to hold hearings
on this legislation) on the inherent dangers in this
Lobbying Disclosure Act Becomes Law
The Act imposes new lobbying registration and reporting requirements. The scope of "lobbying" has been broadened to include contacts with congressional staff and certain executive branch officials. A "Lobbyist" is defined as someone who spends at least 20 percent of their time on "lobbying contacts" and lobbying activities, including time spent preparing research to be used for lobbying.
Lobbyists and lobbying firms must register separately for each client, filing a semiannual report with the Clerk of the House of Representatives and the Secretary of the Senate. Organizations must register and list the lobbyists they employ. If a lobbying firm works for a nonprofit, that firm must register and list the nonprofit as a client. However, nonprofit organizations do not have to register if all costs related to lobbying do not exceed $20,000 in the semiannual period. For outside lobbyists and lobbying firms employing a lobbyist, registration is required if expected revenues exceed $5,000 from lobbying each six-month period. In both cases, the registration requirements would be contingent on at least one individual working for a particular client/employer on lobbying activities at least 20 percent of the time spent for that client, and making more than one lobbying contact. Therefore, each registrant must file semiannual reports (February 14 and August 14) with the Secretary of the Senate and the Clerk of the House of Representatives on its lobbying activities during the preceding six-month period.
Organizations that fall under the
reporting and registration requirements must register within
45 days of making their first lobbying contact or when they
are hired to make such contacts. That means February 15,
1996, for all engaged in lobbying on January 1.
New House and Senate Gift Rules
New House Rule 52, which governs every Member, officer, and employee of the House, is even more strict. No gift (including meals) may be accepted unless it is a specific exception stated in the rule (e.g., hors d'oeuvres at a reception).
The new gift rules are intricate. It is
important to seek guidance whenever there is any question
regarding the propriety of a transaction. The best way to
get an answer to any question you may have is to contact the
House Committee on Standards of Official Conduct or the
Senate Ethics Committee, and ask for specific guidance.
Barriers to New Charities Almost Insuperable
The association needs a formal
organizational structure and, to limit the possible
liability of its volunteer workers, would usually
incorporate. Even nonprofit corporations are highly
regulated. Most associations must hire legal counsel for
advice regarding the organizational structure, and to draft
the legal documents (articles of incorporation, bylaws,
resolutions, etc.) involved.