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." (www.politicsnow.com, 11/6/96). 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). Istook Amendment 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 (c)(3). 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 1997. Rep. Johnson's Hearings on “Core” and “Noncore” Nonprofits 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" strategy. 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. Other Matters 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 new Congress. Other bills that were previously introduced, but not enacted, include Rep. Charles Rangel's (NY) proposal to impose a "lobbying tax" on nonprofits. The Senate 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 dramatic. For example: • 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. McCain-Feingold 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 measure. 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 education. 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 Security” 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 violation. 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] policies." 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 regulations. 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.