Vol. IV, No. 6
November - December 1996
Elections Bring New Challenges for Nonprofits
Free Speech Rights
Several high profile proposals which did
not pass in the 104th Congress will need to be dealt with
again. While Congress remains in Republican hands, and the
White House in Democratic hands, the real story is much
deeper. PoliticsNow has stated that "the shift in ideologies
is far more striking than the numerical change
[while] the Newt Gingrich-led House always seemed to
be passing more conservative bills [in the 104th
Congress] do not be surprised if Trent Lott's Senate
ends up being more conservative than the House."
In 1996, Republicans lost nine seats. With a thinner
vote margin in the 105th Congress, House Republicans are not
likely to present a comprehensive, aggressive agenda.
However, key players in issues important to nonprofits in
the last Congress were all re-elected, including Reps. Nancy
Johnson (CT), Ernest Istook (OK), David McIntosh (IN), Roger
Wicker (MS), Robert Ehrlich (MD), and Jon Fox (PA).
Rep. Ernest Istook (R-OK) was re-elected to his third
term. Congressman Istook is the past sponsor of the
Istook-McIntosh-Ehrlich grant reform amendment to the
Labor-Health appropriations bill. In addition to requiring
new disclosure rules, his measure would limit the use of
private funds for public policy advocacy if the entity
receives federal grant funds. New Republic said that Istook
"would cut off federal funding to any organization that
spent too much of its own money on what is vaguely called
_political advocacy.'" Some organizations have avoided the
potential problem associated with the Istook proposal by
having grant recipient (c)(4)'s simply spin-off the grant to
an already-existing or newly-created affiliated
While the measure passed the House in
1996 (211-209), it was removed from the bill by the Senate
and not included in the subsequent Conference Committee
report signed into law by President Clinton.
Bill Duncan, a legislative assistant for
Appropriations Committee issues for Congressman Istook, told
FSC on November 21, 1996, that Congressman Istook had not
yet decided whether to reintroduce his amendment in
Rep. Johnson's Hearings on Core and
Rep. Nancy Johnson (CT), chair of the Oversight
Subcommittee of the House Ways and Means Committee, was
narrowly reelected to a seventh term. The Wall Street
Journal (November 13, 1996) reported that she intends to
hold hearings attempting to differentiate between
nonprofits' "educational" and "advocacy" functions. Johnson
framed the issue by asking, "are we subsidizing activities
that are inappropriate for government to subsidize?" The
Chronicle of Philanthropy (Oct. 17, 1996) quotes Johnson as
saying she is "a big admirer of the phenomenal work the
non-profit human-service sector and arts organizations" do
and that the hearings will be "very in-depth." A date has
not been set for the hearings. Rep. Johnson's main concern
apparently seems to be the tax-exempt benefits that
nonprofit lobbying groups now receive.
New Republican members of the House Ways
and Means Committee are Wes Watkins (OK), J.D. Hayworth
(AZ), Jerry Weller (IL) and Kenny Hulshof (MO). New
Democratic members are Michael McNulty (NY), William
Jefferson (LA), John Tanner (TN), Xavier Becerra (CA) and
Karen Thurman (FL).
Congresswoman Johnson's proposed hearings
aimed at somehow picking and choosing among nonprofits could
divide the nonprofit community. Some in the nonprofit
community, for example, fear that health and artistic
nonprofits (Ms. Johnson's favorite nonprofits) may be
tempted to sacrifice the Free Speech rights of other
nonprofits, playing into a classic "divide and conquer"
The drive to "reform" the tax code as it
affects nonprofits may be an attempt to increase federal tax
revenues. As both political parties are committed (at least
rhetorically) to a balanced budget, Congress is in a
difficult situation. The Congress seeks to balance the
budget without either (i) raising taxes or (ii) cutting
programs. Some have suggested that recent attacks on
nonprofits' tax-exempt status are an attempt to capture
revenues on incomes that are currently not taxed. The move
to tax nonprofits will most likely be presented as closing
"loopholes" in current tax policy.
On November 19, former Iowa congressman
and current president and CEO of Goodwill Industries
International, Fred Grandy, told nonprofit leaders that the
challenge for nonprofits with the new Congress will be to
show how they are "accounting and accountable" to the
public. Grandy believes that this will be a "brittle,
divisive Congress" and that the nonprofit community needs a
"preemptive" strategy regarding the Istook and Johnson
initiatives. Other than favoring an educational effort to
show Members the value of nonprofits, he did not identify
any specific strategy.
The Postal Service Due Process Act (H.R. 3884 in the
104th Congress) would require the Postal Service to meet a
higher standard than simply "probable cause" in order to
impound mail for containing allegedly "false statements."
The measure was referred to the Subcommittee on the Postal
Service on August 1, 1996. Congressman Jon Fox's (PA) office
told FSC that Rep. Fox plans to reintroduce the bill in the
Other bills that were previously
introduced, but not enacted, include Rep. Charles Rangel's
(NY) proposal to impose a "lobbying tax" on
Political columnist Robert Novak said on November 19
that "a lot of the more aggressive legislation will be
coming from the Senate [in 1997] in a role reversal
from the last Congress." Republicans had a net gain of 2
seats. Since 1992 Republicans have gained 11 seats in the
Senate. But the ideological change in the Senate is
In Colorado, the moderate Republican Hank Brown
replaced by the conservative Republican Wayne Allard.
In Wyoming, the moderate Republican Alan Simpson
replaced by the conservative Republican Mike Enzi.
In Georgia, the moderate Democrat Sam Nunn replaced
by the liberal Democrat Max Cleland.
In Nebraska, the moderate Democrat James Exon
replaced by the conservative Republican Chuck Hagel.
Sens. John McCain (AZ) and Russ Feingold (WI) in the
last Congress proposed legislation (S. 1219) that would
define a nonprofit organization's reportage on the position
of candidates for public office as a political campaign
donation. With support for so-called "campaign finance
reform" coming from all sides, government suppression of
"candidate report cards," such as those used by the
Christian Coalition, could result from such a
Colorado Initiative 11
The initiative to tax nonprofits' tax-exempt real
property was crushed 83 percent to 17 percent. Unofficial
figures show proponents spending $7,000, while opponents
spent $650,000 (93 times what the pro-tax campaign spent).
Over 4,000 nonprofits were involved in some capacity. The
slogan against the initiative was "don't hurt the helpless."
This crushing defeat of those who seek to tax nonprofits
should dampen efforts to tax high-profile and popular
nonprofits like hospitals, the Girl Scouts and higher
Other State Initiatives
Every state that had an initiative on campaign "reform"
of some kind had some measure of success. Voters in
Arkansas, Californian, Colorado, Maine and Nevada all
approved limits on campaign contributions and an assortment
of other measures, such as bans on campaign fund transfers
between candidates, and voluntary spending limits.
Federal Government Bans Social
The Social Security Administration has
issued a cease and desist letter to a nonprofit
organization, telling it that it is in violation of Section
1140 of the Social Security Act, 42 U.S.C. 1320b-10 and
implementing regulations (Vol. 60, p. 582256 of the Federal
Register to be codified at 20 CFR part 496,100 et eq.). What
did the nonprofit do wrong? Its carrier envelope contained
the forbidden words: "Social Security."
The banned envelope states "Important
information on Social Security Enclosed." The oversize,
bright canary-colored envelope also has a prominent notice
stating, "Enclosed information not printed or published by
the U.S. Government or any government agency, nor is the
mailing associated in any way with any political party. Not
a government document." Nevertheless, the Social Security
Administration's cease and desist letter tells the nonprofit
that "section 1140 now mandates that the determination of
whether a violation has occurred is to be made without
regard to the inclusion of a disclaimer
" According to
the Social Security Administration (SSA), "such mailings
give the false impression of being authorized, approved, or
endorsed by SSA."
In other words, the mere use of the words
"Social Security," irrespective of the context or
disclaimers, on any envelope are now apparently banned.
According to an SSA attorney, the envelope was deemed to
look like government mail based on one complaint. The law
establishes civil penalties of up to $5,000 per violation,
and a criminal penalty of up to $10,000 or up to one year in
jail. Each piece of mail constitutes a separate
An August 1994 FSC member mailing warned
of the potential abuse of the Social Security Administrative
Reform Act of 1994. FSC identified then that the Act had
provisions that were "designed to stifle certain advocacy
groups which often criticize [government]
Government Plans to Put You Out of Business?
Know of a free speech abuse?
Bureaucratic red tape ready to drive you from the
marketplace of ideas? We would like to hear from all FSC
members and friends of their run-ins with regulators and
The Free Speech Coalition, Inc. is a
nonpartisan, nonprofit 501(c)(4) 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.