FSC Member Scores Victory Against North Carolina
In the end, the state capitulated, demonstrating that the Commerce Clause can serve as a powerful weapon in the battle against overly burdensome state regulations.
The battle lines in Citizens United v. North Carolina Department of Human Resources were drawn last fall when an official of the Department's Solicitation Licensing Branch informed the Virginia-based Citizens United that the organization's license to solicit charitable contributions in North Carolina was not being renewed because Citizens United did business in Virginia with a fundraising consultant who was not licensed to do business in North Carolina.
In its petition seeking reversal of the agency's actions, Citizens United argued that it is a Virginia-based organization and that its only contacts with the State of North Carolina were through direct mail communications with its members and the public. The group also claimed that its fundraising consultant was a Virginia-based corporation with no direct contacts with the State of North Carolina. Indeed, the contract between Citizens United and its consultant was entered into in Virginia and all services by the consultant were fully performed in Virginia.
While the state generally did not dispute Citizens United factual allegations, it nevertheless defended the Department's actions on the grounds that North Carolina's state's charitable solicitation act prohibited charitable organizations from using the services of unlicenced fundraising consultants in connection with solicitations to persons in North Carolina. Interestingly, however, Citizens United consultant was licensed under Virginia's charitable solicitation laws.
At a December 11, 1996 hearing, North Carolina Assistant Attorney General June S. Ferrell said, "We have told Citizens United that, in order for them to be licensed, they must contract with licensed entities in this State, that are licensed by this State."
The state's position was that, although the fundraising consultant did not perform any services in North Carolina, at least some of the mailings involving the services of the consultant were sent by Citizens United to persons in North Carolina, and, therefore, the consultant's services could be regulated in North Carolina.
Citizens United, on the other hand, questioned whether the state had any authority to regulate solicitations sent by mail. In Quill Corporation v. North Dakota, 504 U.S. 298 (1992), and Bella Hess v. Illinois, 386 U.S. 753 (1967), the U. S. Supreme Court recognized that use of the U.S. mail is an exclusively interstate activity over which the states have no regulatory authority.
Citizens United also cited Healy v. The Beer Institute, 491 U.S. 324 (1989), to argue that even if North Carolina had authority to regulate solicitations sent by mail, it could not regulate business transactions between Citizens United and its fundraising consultant, when those transactions occurred wholly in Virginia. "The 'Commerce Clause precludes the application of a state statute to commerce that takes place wholly outside of the State's borders, whether or not the commerce has effects within the State.'" Healy, 491 U.S. at 336 (quoting Edgar v. MITE Corp., 457 U.S. 624, 642-643 (1982)).
Finally, Citizens United challenged the Department's actions on First Amendment grounds, arguing that the law, as interpreted by the state, imposed unduly burdensome restraints on its ability to communicate with its members and the general public.
In the end, the state decided that it was better to issue Citizens United a renewal license than risk a precedent-setting decision that could have ultimately brought down the state's regulatory regime. In March, state officials executed a settlement agreement, in which the Department of Human Resources agreed to renew Citizens United's license.
While the settlement has no legally
binding effect in future cases, the fact that the state
capitulated demonstrates that the Commerce Clause provides
nonprofit groups and their fundraising consultants with a
powerful weapon in the battle against overly burdensome
state laws which regulate charitable solicitations and
communications with the public.
McCain-Feingold: A Hidden Attack on Nonprofits
Under current law, express advocacy means
the explicit call for the election or defeat of any
candidate. McCain-Feingold, however, changes the Federal
Election Commission Act to include "express advocacy" to
Further, for the time periods more than 30 days before a primary and more than 60 days before a general election, McCain-Feingold adds a supposedly narrowing qualification to the above standard: and that is made for the purpose of advocating the election or defeat of the candidate, as shown by one or more factors such as a statement or action by the person making the communication, the targeting or placement of the communication, or the use by the person making the communication of polling, demographic, or other similar data relating to the candidate's campaign or election. [Emphasis added.]
McCain-Feingold would rely on the FEC as the "reasonable person" to interpret which communications that do not explicitly call for the election or defeat of any candidate should be viewed as "express advocacy."
The FEC's responsibility would include investigation into an organization's motive, as evidenced by statements, geographic targeting, and research &emdash; which could mean broad and intrusive subpoenas covering the private records of nonprofit organizations.
McCain-Feingold seeks to revive the FEC's failed efforts to expand the reach of the "express advocacy" standard. The "express advocacy" provision of McCain-Feingold &emdash; using the FEC as referee &emdash; would greatly limit the freedom of groups to communicate with their members and supporters as well as with the public. This interpretation of electioneering subject to regulatory restriction would encompass any public discussion of policy issues and candidates that might be viewed as having any impact upon voters' opinions. Such an approach would necessarily chill First Amendment rights and represents a grave threat to the free speech rights of nonprofit organizations.
McCain-Feingold is radical legislation.
It reflects beliefs that the courts who developed the
express advocacy standard are wrong, the FEC is right, and
the First Amendment can be, in effect, amended by
Doolittle Proposes Disclosure Without Regulation of
According to Kevin Ring, Legislative Director for Congressman Doolittle, the bill currently has 51 co-sponsors from both sides of the aisle, exceeding the number for H.R. 493, Shays- Meehan, the House version of the McCain-Feingold campaign regulation bill.
Of additional interest to nonprofits is
H.R. 965's passive acknowledgment of the unconstitutionality
of attempts to regulate issue advocacy. Unlike other
campaign "reform" bills, Doolittle's bill does not seek to
regulate or limit the amount or kind of issue advocacy done
by nonprofit organizations.
FSC Capitol Hill Legislative Breakfast with Sen.
Following Senator McConnell's speech, a
panel of four experts discussed the specific dangers to
nonprofits that McCain-Feingold would create for nonprofits.
The panel included:
Senator McConnell's speech and the panel
discussion can be heard by visiting policy.com on the world