Vol. V, No. 1January - February 1997

Nebraska Repeals Solicitation Law
The State of Nebraska has repealed its Charitable Solicitor registration laws (Chapter 28, Article 14(g), Revised Statutes of Nebraska) in response to a State Supreme Court decision which invalidated large portions of them. Greg Lemon, Deputy Secretary of State, told FSC his belief that the court struck down the registration requirement for being too broad and vague. The repealed laws had required every nonprofit that solicited funds to register with the state and pay a registration fee. As of March 1, 1997 those who solicit in Nebraska are not required to register. That's the good news.

The bad news is that a state senator wants to re-regulate nonprofit solicitation. State Senator Dianna R. Schimek, of Lincoln, Nebraska (District 42), a former chair of the Nebraska Democratic Party, has introduced legislation (Legislative Bill 383) that would again require every nonprofit soliciting in the state to register.

According to Janet Anderson, an aide to State Senator Schimek, the purpose of re-registration is to "keep track of solicitors." However, the Nebraska registration law (still in effect until February 28, 1997) provides no real benefits to donors. FSC called the Nebraska Secretary of State to ask what information they had on certain nonprofits. In every instance, the only information disclosed was whether the nonprofit had registered with the state. Moreover, Ms. Anderson could not identify a single incident in which registration information had been used to prosecute fraud. Ms. Anderson said that she did not know what financial impact the proposed regulations would have on nonprofits. She further told FSC that she had "no intention" of learning what adverse impact registration would have on a nonprofit. However, Ms. Anderson promised to have Senator Schimek telephone FSC to explain why she believes the legislation is necessary. Despite two reminder calls to her office, Senator Schimek has not yet responded.

FSC members and friends should contact Nebraska officials (see below) and explain how state registration of charitable solicitation is unnecessary, expensive to administer, and wastes the scarce resources that donors give to nonprofits. The information that Sen. Schimek seeks to compile (and force nonprofits to provide) is already available to the public in a number of ways:

• Call the nonprofit directly and ask for a copy of their Federal Tax Return Section 1313 of the Taxpayer Bill of Rights 2 (Public Law 104-168, effective July 30, 1996) requires nonprofits to provide copies of their IRS Form 990 to any individual who asks (previously, nonprofits only had to allow inspection). Individuals who come to a nonprofit's office in person must be provided a copy "immediately." Requests in writing must be fulfilled within 30 days.

• Search the internet for a nonprofits' web site and/or other information.

Many nonprofits, as well as those who support and oppose them, maintain detailed information on the nonprofit's mission, purpose and finances.

If a prospective donor can't find the information they need, they can choose not to give. Ultimately, no amount of information may be sufficient to convince a prospective donor on a nonprofit's worthiness.

Diverting nonprofits' resources to comply with meaningless registration, and having over 40 state governments warehouse the same information, serves no purpose.

FSC members should write, call, fax or email members of the (unicameral) Nebraska Legislature and the Governor and tell them to leave nonprofits alone. L.B. 383 has been referred to the Committee on Judiciary chaired by Senator Kermit Brashear of Omaha, coincidentally a former chairman of the Nebraska Republican Party.

Senator Kermit Brashear
Chairman, Committee on Judiciary
Room 1515, State Capitol, Lincoln, NE 68509
tel. (402) 471-2621
email: kbrashear@unicam3.lcs.state.ne.us

Governor E. Benjamin Nelson
Executive Suite
State Capitol
P.O. Box 94848, Lincoln, NE 68509-4848
tel. (402) 471-2244

U.S. House Requires “Truth in Testimony”
Individuals from non-governmental groups testifying before U.S. House of Representatives committees will be required to disclose how much money in grants and contracts the group has received from the federal government in the previous three years. The "Truth in Testimony" rule &emdash; advocated by a group of nonprofits, headed by the Heritage Foundation &emdash; was adopted the day Newt Gingrich was re-elected as Speaker.

The rule, Section 10 of House Resolution 5, applies both to nonprofit groups that receive grants and businesses that have government contracts.

Noncompliance with the rule allows a chairman to hear objections "to including the witness' written testimony in the hearing record," according to the Congressional Record.

Committee chairmen are to require disclosure to the extent "practicable" from any nongovernmental witness "to the extent that such information is relevant to the subject matter." According to Dave Mason, a senior fellow with the Heritage Foundation who worked to establish the rule, the measure should not preclude or hinder anyone from testifying. Moreover, he told FSC that "testimony by government grant recipients is a necessary part of the hearing process. If a witness doesn't know if their grant is relevant to the issue before the committee, they should disclose it and let committee members evaluate the value of the information."

Menendez Bill Would Limit Nonprofits’ Compensation
Congressman Robert Menendez (NJ-13) introduced the so-called "Tax Exemption Accountability Act" (H.R. 239) on January 7, 1997. If enacted, the measure would:
• Limit the compensation of officers of nonprofits.
• Create a federally funded "clearinghouse" offering copies of tax returns.
• Ban managers of nonprofits from selling or leasing property to the organization.

In a statement before the U.S. House, Congressman Menendez said, "Given the current events [apparently Speaker Gingrich's House Rules Violation], we need greater accountability by tax exempt organizations because they control substantial 'public wealth' and offer temptation that some have been unable to resist manipulation [sic]." FSC opposes H.R. 239 in that it contains unnecessary and restrictive burdens on nonprofits.

Hearings a Prelude to Punishing Nonprofits’ Advocacy?
Representative Nancy Johnson (CT-6) plans to hold hearings and introduce legislation that could radically redefine (and potentially damage) the operations of nonprofit advocacy groups. Johnson chairs the powerful Oversight Subcommittee of the House Ways and Means Committee. She has indicated that she seeks legislation that would attempt to differentiate between nonprofits' "educational" and "advocacy" functions.

Free speech supporters should contact Congresswoman Johnson and express their opposition to any legislation that takes away a nonprofit's tax status simply because it exercises its First Amendment rights. Congresswoman Johnson can be reached at: 343 Cannon House Office Building, Washington, D.C. 20515, tel: (202) 225-4476 fax: (202) 225-4488.

McIntosh Bill Would Close “Loophole” in Lobbying Disclosure Act
Congressman David McIntosh (IN-2) has proposed legislation (H.R. 233) to end an alleged loophole in the Lobbying Disclosure Act of 1995 (2 U.S.C. 1611). Under McIntosh's bill, "an organization described in section 501(c)(4)... which engages in lobbying activities or affiliated organizations shall not be eligible for the receipt of Federal funds constituting an award, grant, or loan." Chip Griffin, a legislative aide to Congressman McIntosh, told FSC that the bill closes a loophole in the Simpson/Craig Amendment which prohibited IRC Section 501(c)(4) nonprofit advocacy groups from receiving federal grant funds. Some nonprofits created IRC Section 501(c)(3)s to accept grant funds and then use those funds to pay overhead expenses for the advocacy group, evading the purpose of the Simpson/Craig Amendment. Mr. McIntosh's bill precludes not only 501(c)(4)s from receiving federal grant funds, but also 501(c)(3)s that are "affiliated" with an advocacy organization.

FSDEF Rescues Christian Action Network’s Lawsuit
The Free Speech Defense and Education Fund, Inc. rescued the Christian Action Network (CAN) when it looked as if CAN was unable to pursue its appeal after the case was accepted by the West Virginia Supreme Court. FSDEF asked free speech supporters to fund costs associated with the appeal. FSDEF agreed to contribute $5,000 to complete the appeal.

As previously reported in FREE SPEECH, the State of West Virginia successfully sued the Christian Action Network (CAN), an IRC section 501(c)(4) organization incorporated in Virginia, seeking a court order to force CAN's compliance with the state's Charitable Solicitation law. Donations to CAN are not tax-deductible and the organization conducts a vigorous lobbying program. Nevertheless, a state trial court decided that CAN is a charity, because it "is, or holds itself out to be, an educational, religious, philanthropic, benevolent, or patriotic organization." The court also ruled that the state could mandate a government written "disclosure statement" allegedly because it promotes the government's "substantial interests." Finally, the court ruled that the state can force CAN to supply its solicitation materials to the government so they can somehow "ensure" that funds are appropriately spent.

CAN's attorney, David Carroll, Esquire, presented his case before the West Virginia Supreme Court on January 22, 1997. A written decision will be forthcoming. The Free Speech Defense and Education Fund, Inc. is a 501(c)(3) nonprofit. Contributions to FSDEF can be sent to 8180 Greensboro Drive, Suite 1070, McLean, VA 22102-3860.

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.