Policy Report II: The
States Actions
Moderator:
Mike Beard
Executive Director, Coalition to Stop Gun Violence
Thomas Hart, Esq.
Slevin & Hart, P.C.
The Jurisdiction of States to Regulate Out-of-State
Nonprofits
Mack Canter, Esq.
Copilevitz and Canter
Testing the Constitutionality of State
Regulations
Richard Steinberg, Ph.D.
Center on Philanthropy, Indiana University
Fundraising Costs and Rational Economics
MIKE BEARD
EXECUTIVE DIRECTOR, COALITION TO STOP GUN VIOLENCE
MR. BEARD: Ladies and gentlemen, we're
ready to begin. Welcome back this afternoon. We have one
more panel with four white males. That seems to be the order
of the day. I hope next year we will be a lot more inclusive
in preparing for these panels.
My name is Mike Beard. I'm President of
the Coalition to Stop Gun Violence, which is a 21-year-old
coalition with some 44 national organizations working toward
legislation to ban the manufacture and sale of hand guns,
and for other restrictive measures on hand gun violence in
our society.
I'm glad to be able to follow Larry
Pratt. I am very honored to be here. One of the great things
about this event is our opportunity to share, as we've all
said throughout the day, a wide variety of ideas.
I get the feeling this week that things
had gone a little bit too far when I found myself on the Pat
Buchanan radio show promoting a book by Wayne LaPierre,
President of the National Rifle Association. I think that's
about as far as we can go with this issue.
As you know, we've been talking for the
last part of this program about the federal actions
affecting non-profit groups. Now, for the next 45 minutes we
want to concentrate on states' actions.
To begin the discussion, I'd like to
introduce our first panelist Thomas Hart. Tom is a
Washington, D.C.-based attorney with Slevin and Hart. They
specialize in the representation of non- profit
organizations and employee benefit plans. They have been
doing so since 1974.
Tom is a Member of the District of
Columbia and the Commonwealth of Pennsylvania Bars. He has
litigated numerous cases in Federal, District, Bankruptcy
and Appellate Courts, as well as before the United States
Supreme Court.
He also served as a Professional Staff
Member of the House of Representatives' General Subcommittee
on Labor. Tom Hart.
THOMAS HART, ESQUIRE
SLEVIN AND HART, P.C.
MR. HART: The topic that I've been given
today is to sort of create a framework to discuss what is
going on out in the states and what are the limitations, if
any, that are imposed on what the states are trying to do?
Now, if you don't mind, I'd like to take an informal poll of
you all for just a moment.
I assume that everybody out here in the
audience are advocacy groups, but how many of you use the
mails? Would you raise your hand?
(Show of hands.)
Almost everybody. How many of you use the
phones, too, to raise money?
(Show of hands.)
Still a very good number. How many use --
stations?
(Show of hands.)
A few.
Well, as you know, that when you're going
out and soliciting donations or interest around the country,
it is not very long until you start buying into the various
Attorneys General around the country; all of whom feels that
they've got particular expertise and interest in regulating
your activities.
Sometimes these regulations aren't
particularly onerous. Although in the aggregate, little
regulations can add up to one very big headache. But in a
number of cases, they get to be really pretty startling. In
some places, professional fund-raisers, for example, have to
post extremely large bonds; and not in even the kinds of
jurisdictions you'd expect.
There are, I understand, there's a county
in Florida that is requiring special fund-raisers to post
large bonds for that county. You think about this for a
minute, and as I said, you know, little problems can become
big headaches; big problems become even bigger ones.
Think about it for a minute as to what
would happen if jurisdictions all around the country started
asking you to do similar, forgetting about the money that it
would cost you to do these sorts of things. Imagine what it
would cost you just to fill out this piece of paper that
would be required to go through all of this.
Well, what we're going to be talking
about in this panel, is what kinds of limitations, if any,
are there from the states to make you all do this sort of
thing? Now, let me start off by saying that while there is a
fair amount of law on certain aspects of what the states can
and can't do, as I was starting to look into this, I was
kind of amazed to realize how many areas are really up in
the air, where there really are no clear -- there is no
clear delineation as to what the states can do and what they
can't do.
Indeed, there are a lot of Constitutional
principles which don't seem to have been addressed either by
the Attorneys General's at all in thinking about these
regulations, and have not yet come through the various
courts systems challenging them.
Let me just start off for a minute by
saying, by addressing one issue. Do the states have any
legitimate interest in regulating non- profit organizations?
Well, I don't think there is much argument that they do have
some. The question, of course, is how much?
Traditionally, almost since the
beginning, since the founding of this country, the States
Attorney Generals have had a large hand in regulating
charitable institutions within their states. Obviously, in
the early days of this country, there wasn't much mailing
from one state into another for this sort of thing.
But, there's been a long tradition of
Attorneys Generals feeling that they not only have the right
as sort of parents patriae to regulate these things but, in
fact, a duty as sort of a super-trustee. Well, one can make
an argument that they do have a legitimate interest in
making sure that what you think of as the traditional
charities, I think the word is eleemosynary institution. I
have been looking for an excuse to use that word for awhile;
you know, the traditional charities, money for medical
research, providing Bibles, or whatever. But the kind of
tradition that led to a lot of this kind of regulation
really isn't applicable to the kind of group that's
represented by the people sitting in this audience.
Most people here are really associated
with what are really corporate forms of political
organizations. So, the first question comes up that you ask
is, do the states really have much of an interest, a
legitimate interest, I should say, obviously, they think
they have one, in regulating what is, essentially, political
activity?
As I'm looking at the cases and preparing
for this, and much to my amazement, there really isn't very
much thought given to this; although there is a little bit
that gives us some hope. The Supreme Court in the
Massachusetts Citizens for Life Case which dealt with the
right of a state to limit political activities, seemed to
make a great deal out of the fact that Massachusetts
Citizens for Life, which was a pro-life organization, was
really an incorporated political organization.
It was not really a corporation against
whom the kind of anti- fraud laws that were enacted into the
election laws was aimed. So, that's really the only thing
that I could find. Perhaps Mack, who has studied it more
closely than I do, may have some other instances, but one at
least has a hope that maybe the courts will start looking a
little more carefully in making the distinction between the
traditional type of charitable institutions and what are,
essentially, political advocacy organizations.
Now, another issue that sort of comes up
as part of this is, well, if they do have some interest in
regulating political advocacy organizations, what is it? I
guess there's still the basic issue that they have a right
to be concerned about fraud. But how the heck do you
determine that there is fraud in a political
organization?
About the only thing that I can think of
is that the solicitor isn't really representing the people
that they say they are. I mean, what else is the fraud; that
you don't really mean what you say?
(Laughter)
Then, the next question is, well, if you
don't mean what you say, who is going to determine that?
There basically are two kinds of restrictions that are out
there on non-profit organizations in the states. The first
deal principally with restrictions on solicitations.
As I indicated a few minutes ago, most of
these sort of derive out of the old concern with charitable
solicitations in the states. There are generally four kinds
of these requirements that create problems for us
here.
First is, that there are registration
fees. Again, they may not be very much for one state but you
magnify these by 52; or as the Supreme Court pointed out in,
I think it was, the Riley case, there are some 6,000 taxing
jurisdictions in the United States. Think about filing 6,000
registration fees.
Another issues that's particularly
vexatious to groups here are that many of these groups are
-- and some of them quite significantly. A lot of them have
disclosure requirements. A lot of them have mandatory
disclaimers and things of that nature.
The second form generally is on political
activities, the contribution limitations, and the
disclosures of contributions. Well, the Attorneys General in
their zeal to regulate all of these things and to sort of
protect "their constituents," basically lose sight of their
limitations on what they do. I think that we are going to
find that a lot of these limitations are going to be
enforced and litigated.
Sort of to paraphrase something I once
heard that many of these Attorneys General think that the
U.S. Constitution is a loophole to their charitable
solicitation laws. The United States Constitution does
impose a lot of restrictions upon what the states can do.
Again, Mack, I understand, will go into a lot more of these
things in detail and tell you about current litigation
that's going on.
There are really five basic restrictions,
most of which I'm sure you all are familiar with. First, of
course, is the First Amendment guarantees free speech. At
what point does the effort to control fraud trample upon the
right of free speech? There are basic due process issues.
Can the states regulate them all?
There are equal protection issues, which
I'm not going to go into here. Surprisingly enough, there
are a lot of issues that relate to the old commerce clause.
To what extent is regulation of kinds of activities that we
do here create an impermissible burden on interstate
commerce in violation of the Constitution?
Due process is pretty much I think a dead
issue constitutionally these days because the Supreme Court
has now said that if you basically target the residents of a
state so that a state has jurisdiction over you for purposes
of due process. [sic]
The free speech issues, I think you
probably heard a lot about this morning, and so I won't go
into them in any great detail, but the commerce clause is
one area that I find particularly intriguing. And that is,
to what extent are these regulations burdening free
speech?
You remember a minute ago I said that
these little registration issues and bonding issues may not
be a problem when you look at them individually, but when
you look at your activities across the whole country, they
are a tremendous impediment in getting across your message
and raising funds.
The Supreme Court in other areas has
talked about that these are things that you can look at. For
example, why would the analysis as to the activities of our
kinds of organizations be significantly different than, say,
a mail order company?
It is now well-established that mail
order companies cannot be compelled to simply mail in, and
solicit by mail, or otherwise into a state, cannot be
compelled to collect use taxes or sales taxes from people in
a particular state.
Well, those same kinds of analysis I
think can be applied to the sorts of things that we do.
Generally, in order to pass muster under the commerce clause
there has got to be a meaningful nexus between the entity
that is being regulated and the state. That any kind of tax
or fee has got to be fairly proportionate.
In the case of taxes or levies, they have
got to be fairly related to the services that are provided
by the states. I can see that already, I've been too
ambitious about what I want to say. I'm going to try to
summarize real quick.
There is a lot that's clear now as to
what our kinds of organizations can do constitutionally as a
result of the Shamburg, Munson, and Riley trilogy. But there
are lots of issues, a surprising number of issues that are
still open dealing with the issues of bond
requirements.
Finally, all of these issues can't really
be looked at in isolation. They all kind of interact and
interrelate with one another. So that an issue of, say, bond
requirements also involves issues of chilling free speech.
If you have got a high bond requirement, does this
effectively chill your rights to free speech; in addition to
the fact that it creates an improper restraint on interstate
commerce? The same kind of issues deal with all of these
issues: registration fees.
In fact, you could even make an argument,
although I'm not going to be presumptuous enough to make it
at this point, that merely requiring lengthy registrations
may have that kind of effect. I guess Mack, who is now out
there actively litigating these kinds of cases is going to
talk a little bit more about some of these.
I'll turn it over to Mack.
MR. BEARD: First of all, as you know we
are all up here suffering under the same problem that all of
you are suffering under and that's lack of time. I'm sorry
that we have to keep rushing people along.
Our next presentation will be from Nolan
McKenzie Carter, III. I always love to say that. Mack is a
lawyer with a firm that represents over a hundred non-profit
organizations, as well as professional fund raisers and
other vendors who provide services to non-profit
organizations.
Mack is the co-editor of the Federal Tax
Update and is a Certified Professional Educational Lecturer
for Virginia's Institute of CPAs and the Maryland
Association of CPAs in the area of tax- exempt
organizational law. Mack has a sort of rare mix in his
background.
He is a graduate of Randolph Macon
College. He received his Master's Degree from George
Washington University, and his Master's of Divinity from
Yale University and Oxford University, and a law degree from
the University of Virginia. Mack Canter.
MACK CANTER, ESQUIRE
COPILEVITZ AND CANTER
MR. CANTER: Thank you very much. Let me
first make one slight modification about what Tom said about
the trilogy, Shamburg, Munson, Riley. We call that the holy
trinity because really you begin with those three cases.
They laid the frame work for understanding the limits upon
state regulation of solicitations and charities.
It is important to first of all note
that, and I'll repeat this several times. It is so
important. A charitable solicitation is not commercial
speech. Justice Rhinquist, Chief Justice Rhinquist, who
descended in the Shamburg, Munson, and the Riley decisions
has been diligent in descent in arguing that asking for
money makes a communication commercial, despite the fact
they are sent out on behalf of an advocacy organization or
on behalf of a charity.
So far, the federal courts have held the
line. Restrictions which can be imposed, in fact, are
imposed in great volume on commercial speech and do not
pertain to protected speech; that is the, First Amendment
speech. That means to charitable contributions and
solicitations asking for those contributions.
That's a very important distinction
because a state has to meet a fairly low threshold in order
to regulate the content of commercial speech. Simply if the
regulations are reasonably pertinent to a legitimate
government interest; and that's a fairly low standard which
is generally upheld by the state and federal courts.
There is in contrast a much higher
standard, if you have what is called fully-protected
constitutional First Amendment speech.
Because of the holy trinity, there is no
doubt that at the present time, a solicitation sent for
charitable purposes, and for political purposes, is
fully-protected, is as protected as a novel, or a play, or a
screen play, or a movie.
It demands and receives the highest
protection available under the First Amendment. What that
means is before a state can put its hands on your
solicitation and blue pencil it, it has to meet a much
higher standard. It has to show that in fact there is a
compelling governmental interest involved, and that the
state has adopted the least intrusive means reasonably
tailored as narrowly as feasible to accomplish that
compelling state interest.
The burden of proof is on the state to
establish that the statute, or the ordinance in the case of
a country, or the regulation in fact meets all those
criteria. I can tell you, given the number of state
legislatures that have consistently ignored the holy
trinity, that from a lawyer's point of view, we are living
in a target, rich environment.
Consistently, repeatedly, in fact in a
vary recalcitrant manner, you find states and counties
ignoring three very clear emphatic and consistent Supreme
Court decisions. What we have done in the last six months as
a law firm is to puncture and to destroy some of these more
ludicrous statutes.
In the material in front of you, I have
summarized a few of the more recent decisions. I think these
are helpful in putting context, in filling out the frame
work, and flushing out the frame work that Tom has
articulated previously. Let me give you a good example of
why it is important.
First of all, test case litigation is
extremely important to the non-profit community. It is our
means of fighting back when the weight of Big Brother comes
to visit your organization. And test cases which are used to
shape and clarify issues involving the Constitution have in
many ways been the battle lines drawn to protect the First
Amendment in the context of solicitations and also seeking
contributions to political action committees. First of all,
there are several principles which you can derive very
readily from the holy trinity. First is, in a content-based
regulation there is strong presumption in validity. If the
regulation issue, the ordinance, the statute is based upon
the content of speech, there is a very slight chance that it
is going to pass muster on the First Amendment.
A good example occurred this past summer.
The State of Georgia, in its infinite wisdom, passed a
statute called the Law Enforcement Integrity Act of 1994.
This was a euphemism for protecting the home boys and girls
in the state police organizations.
The statute said that if you come in to
the state using any what are called law enforcement
terminology, that is to say that you go to a state in a
telemarketing outfit and you raise funds for the, in this
case, American Association of State Troopers, which is our
client, if you use any term such as "State Trooper," or
"Sheriff," or "Police," these types of so-called law
enforcement terminology terms, in the State of Georgia this
was a felony, which would send you to jail for one to five
years.
Now the steps to that major problem, it
was based in terms of content. It proscribed the use of
certain plain old vanilla English words. Because the State
of Georgia has a legislative finding that held that these
terms were used in a solicitation whether telephonically, or
on television, or by in person, or by mail, that would
confuse the public.
Therefore, rather than going to the more
detailed case-by-case, painstaking, and perhaps laborious
manner of investigating actual fraud, Georgia simply cut
through the whole problem, and just made it illegal to use
certain terms, unless you got prior permission from the
State Officials of Georgia to use those terms.
Well, the Federal Court in Georgia had
little difficulty in declaring the statute, on its face,
unconstitutional, because it was based upon a content based
regulation of speech, which flies directly into the face of
the First Amendment. So, if you found a statute, a
regulation, which has as the core's operating principal, the
prohibition of a certain type of speech, that ladies and
gentlemen is a very tempting target for a lawsuit.
Let me also stress in terms of picking
lawsuits that it is far, far, far better to pick your own
battle ground. You can do that very readily in the case of
challenging these state statutes of filing an action for
what is call declaratory, injunctive relief. That makes you
the plaintiff. That allows you to pick the issue, the
jurisdiction, the defendant and the target. That allows you
to conserve resources and to focus your money.
Money for non-profits is a precious
commodity; to focus that money to where you are going to do
the best good; where you chance of succeeding is enhanced
because of that jurisdiction's own precedents. So, test case
litigation is often very fruitful with any type of content
based regulation.
Let me give you an example of another
type of regulation which is, I guess, the flip side of
prohibiting certain types of speech. The First Amendment
also bands a state requiring speech. The next case I want to
discuss briefly is a case called Kentucky State Police
Professional Association v. Gorman. Mr. Gorman is the
Attorney General of Kentucky.
In this case what was involved was a
mandatory requirement that Kentucky imposed upon
telemarketers. The statute said that if in fact the funds
going to the charity are going to be less than 50 percent of
the funds raised in campaigns, or conversely, if the
solicitor will keep more than 50 percent, the person making
the solicitation to the consumer must disclose that at the
point of solicitation.
Those of you who are lawyers will
recognize that, that provision in Kentucky law directly
contradicts the second holding of the Riley decision where
the Supreme Court struck down a North Carolina statute which
required exactly the same thing. Kentucky just tried it
again. We filed a lawsuit in Federal Court in
Kentucky.
We are at the level of seeking a
preliminary injunction against enforcement. The Court in
Kentucky, Federal Court, said, yes, we are going to grant
the injunction against enforcement which put the statute out
of operation about six hours before it was scheduled to take
effect in Kentucky.
That case is now on cross-motion for
summary judgment. It has been briefed by both Kentucky and
by the plaintiff. Eventually, it will be decided on the
merits and probably the appeal. What the Gorman case does is
to raise one more time the same identical issue which was
decided in the Riley case.
In the Riley case, the Supreme Court said
certain things. But for purposes here today, in regard to
this case, what the court said was, is that North Carolina
cannot require a solicitor to disclose before the
solicitation is made the percentage of funds actually paid
to the charity over the prior 12 months. That was said by
the Supreme Court to be an intrusion, which was not
necessary and not reasonably calculated to serve the
interest in North Carolina from preventing fraud.
Since Riley, there has been some, what I
would call, not erosion, but some change in moderating an
environment; in two other decisions that are upheld by the
State, this situation in West Virginia, the Famine Relief
Fund case and in the Commonwealth of Virginia in the Telco
case.
In both of those decisions the Fourth
Circuit, United States Court of Appeals, held that a state
can require a solicitor to disclose where about the
availability of financial information, if the consumer first
request access to such information. So, you have to first be
invited to dance. That's the rule of law.
You cannot require the solicitor to
affirmatively volunteer the information. If the law says
that if the consumer asks the organization soliciting, the
solicitor can be required to provide information as to the
availability of that data. Let me just briefly bring this to
close. In one final case in Florida, there is a statute
prohibiting any solicitation made by a non-profit firm after
eight o'clock at night. This statute did not ban
solicitation of a commercial nature. So, the pest control
exterminator could call you at nine o'clock at night and it
would be perfectly okay.
If the Red Cross calls you at eight
o'clock at night, it was a crime in the County of Pennillus,
Florida. We also succeeded in knocking down that statute.
The basis there was, again, content based speech. The law
did not apply to commercial solicitors. It did apply if you
are a charity. That distinction, in terms of being under
inclusive, made the statute repugnant to the First
Amendment.
Let me go ahead and defer to Richard at
this time.
MR. BEARD: Our final presentation is from
Dr. Richard Steinberg. Rich is Associate Professor of
Economics, Philanthropic Studies and Public and
Environmental Affairs at Indiana University, Purdue
University in Indianapolis. He is Co- President of the
Association for Research on Non-Profit Organizations and
Voluntary Action.
Rich has written extensively on public
policy in the non-profit sector and on regulation and
fundraising. Rich is a graduate of MIT, with a Bachelor's
Degree in Economics. He has received his Doctorate in
Economics from the University of Pennsylvania. Rich
Steinberg.
RICH STEINBERG, Ph.D
CENTER ON PHILANTHROPY
MR. STEINBERG: Thanks a lot. As an
academic, I'm supposed to be neutral, and objective, and let
you think that; both sides. It is a wonderful chance to
speak to an audience of advocates who actually understand
the academic approach because we have conservatives and
liberals here.
Nonetheless, I'll start off with some
rhetoric. I'm not as good as you people at it, but it is my
only chance. The speech rights of non-profit organizations
are under attack around the world. In a study by Harry --
named the number, not the word six -- and Diana Lee
documented the erosion of speech rights, the taxation of
organizations that speak in different ways around the
world.
It does seem that the rest of the world
is following American trends. The same sorts of factors
behind that erosion, politicians upset that some tax-exempt
organization helped their opponent get elected. Attorney
Generals looking for publicity. Large charities protecting
their turf, and people just finding an excuse to tax.
Then we have around the world a lot of
people who sincerely believe that they are doing good to all
of these things and are misinformed, as we say. I think
given these world trends, given that we are supposedly the
birthplace of the First Amendment, although the French argue
with us, we have a special obligation of leadership and we
are not doing a very good job.
What are Poland, and Slavenia, and
Russia, and Serbia to make for the recent history in the
United States? They are not trying to form a civil society
in which there is a protected space to *descent from the
state and to argue with the state. They view us as the
model; what they were fighting for. Solidarity got that, and
now what are they trying to do; pass a law to regulate
charities and when they can have tax-exemption modeled on
the United States.
We've got calls from non-profit
efficiency and accountability; if you fight government,
we'll tax your donors. If you raise funds for yourself
instead of using government money, and if you have an
unpopular cause, we will tax you. This seems like a problem
that's going to last and that we have to vigilant
infighting.
I want to point out that the attack on
free speech of non-profits is not just an attack on advocacy
organizations. We need every kind of organization to be in
this fight because -- and it is also not just an attack on
the free speech rights. It is an attack on freedom of
assembly and an attack on what the non-profit sector is
supposed to be here for.
The role of the non-profit sector is not
to provide public services efficiently and accountably.
That's what government is here for. It is not
professionalism. It is to allow the expression of the
voluntary impulse and to form a space between the government
and the individual.
In America, any idiot should be allowed
to form a non-profit. You shouldn't need to be a tax
accountant to be on the board of directors and know what is
legal and what is not. Quite a few things organized as
non-profits ought to be governed and organized as
associations. When we make it expensive to raise the funds
for these things, we impair the freedom of assembly.
I'd look at intermediate sanctions. I got
a chance to use my rhetoric in the last session. But the
point is, is that if the board members can face sanctions
for making a good faith mistake, and the government says,
oh, we won't do it if it's good faith; if they can do it
with this kind of a vague standard, then it chills
membership on boards. It distracts the board from the
attention to delivering service that should be its primary
focus.
Let's see, am I don't with the rhetoric
part? Yeah, pretty much. Time for a joke. I don't have any
good jokes that will compete, but I will tell you one
example that perhaps leads to a call for state regulation. A
gentleman in the 1950's successfully collected money for the
Fund for the Widows of the Unknown Soldier.
(Laughter)
I just have to say that Attorney Generals
and the government are lazy and egoistic. They can call me
names too. They will. Some of them are in it for headlines
and other reasons. Some of them are in it to do good. They
think they are catching the bad guys. They are sincere. They
are smart. They say, it's hard to catch them abusing the
drug laws. So, we are going to catch them in something else.
And that's where they are lazy.
They have been rebuffed by the Supreme
Court three times and they still keep trying the same things
instead of thinking carefully about how they can narrowly
tailor and actually catch bad guys, rather than catch
something that both bad guys and good guys engage in, and
use their judgment in each case.
We can't prove fraud, but we know it is
there, is what they say. Well, we couldn't ban all guns on
the basis that we can't prove murder, but if you own a gun,
you must have done it. There has to be a fairly tight nexus;
especially given the nature of the speech issues. Too many
non-profits today also feel that they can cut their losses
by supporting simplistic notions that others are guilty, and
just trying to distinguish themselves from the
scapegoats.
One-by-one they might, as the political
climate change, need the help of those scapegoats when they
are attacked. So, now I have to turn to being an academic
again. Two minutes? Oh, well, good. You were saved from all
two minutes of it. My research on non-profits and
fundraising, the regulation of fundraising, long preceded
any advocacy that I did within the area. So, it was nice and
neutral. I have looked at the issues about whether a
fundraising share is germane and narrowly tailored to
regulating non-profits for any legitimate state
interest.
One, I argued that the share is not
correlated with efficiency. An unpopular cause will have a
higher cost for its fundraising than an inefficient but
popular cause. By looking at cost, we cannot ascertain the
efficiency. United Way of America, remember, has advertised
that they are efficient, but their fundraising and
administrative costs are much lower than the competition,
and it is.
But they managed to do according to the
newspapers, which I don't trust on these matters, they
managed to do quite a lot of things that were inefficient.
On this matter, by the way, I take on the independent sector
again who joined with the three health charities arguing
against an amicus curie brief on United Cancer
Council.
If an organization can't survive without
having high costs, since we think high cost is fraud, then
that organization, if there is no way then can do it
non-fraudulently, they should go out of business. Well, the
independent sector usually stood for pluralism. So, I'm very
confused. An organization should go out of business because
it is unpopular and therefore its fundraising costs are high
is not what -- wrote about.
Second, I would argue that share is a bad
measure of cost. Fundraising is an investment. To do the
measurement of the fundraising share properly, you should
advertise prospecting cost. It is not done. The accounting
standards for fundraising allow enormous variations. The
high share might be the honest organizations and the low
share are the ones that twist the accounting rules.
Fundraising has side effects that should
be included as benefits and not just contributions,
volunteers, advocacy, education. Since I'm running out of
time, I think that the two most important things here are:
one, fundraising share has nothing to do with advancing the
charitable purpose. How can organization best advance its
purpose? By spending the most money on its purpose.
If the purpose is to help poor people,
how much they spend on fundraising is irrelevant to how many
poor people than can help, as long as the dollar more than
pays for itself. So, I argue that the right measure is
dollars raised, minus the cost of fundraising. If you can
maximize that, you are best serving your charitable
purpose.
Others argue that that's bad for donors.
I argue against that. There is no time to discuss it, but
I've written this. It is in writing. You can read. A simple
example; we could have a ten percent fundraising share and
raise $100 or we could have a 50 percent share and raise $2
million. The starving millions might prefer the second
option.
The last thing is, if we really are faced
with what happened in the United Cancer Council where they
couldn't directly regulate fundraising, so they withdrew tax
exemption, and they might be able to get away with that on
constitutional grounds in light of Ridlin v. Taxation With
Representation. That denial of a tax benefit is not the same
as impairing free speech.
If they do all of these things, then how
can an organization cut its fundraising costs? Lie. If you
do fraud, if you do high-pressure stuff, you can cut your
costs and raise your rates. Stop going for the little man.
Go for only major donors. Eliminate the participation of the
masses. All of these will cut your share and they are
counterproductive for any legitimate state interest.
I'll do one last thing. That is, I'll
preach. Probably this is the best group I could preach to.
Probably you guys are for free speech wholeheartedly and
always. But when you go back to your role in an advocacy
organization fighting the other side, I hope you are for
free speech always.
When we think about the political
correctness debate in which the right is saying the left
isn't paying attention to the First Amendment, and then we
think about the flag-burning controversy where the left says
the right isn't paying attention to the First Amendment, I
think we should all be very careful to carry this ethic into
our working life. Thanks.
MR. BEARD: Once again, time has caught up
with us and been a slave to us all. We have time for just
one question, I think.
PARTICIPANT: I wanted to ask Mack, in
light of the Riley and Kentucky cases you were speaking
about, what would be your view of the constitutionality of
the rule that Congress recently passed that IRS is
enforcing? That where gifts of $250 or more are made to a
charitable organization, it is necessary for a charity, in
order to avoid a fine, to make a distribution of information
about the amount that was contributed, the kinds of property
that was received in return, and the value of that kind of
property. Do you thin it is possible that, that is in firm
under the Constitution?
MR. CANTER: This question goes to the
required information given by the charity for accounting
purposes. When the gifts exceed $250 I think it is probably
going to be constitutional. I think they can impose that.
That is again imposed as a condition of being a (C)3.
If you have filed a (C)3 status, you have
attained a privilege and can be conditioned upon certain
record keeping requirements.
PARTICIPANT: It is sort of beyond record
keeping. It is a requirement that you communicate that to
the donor. In a sense, it is mandatory speech.
MR. CANTER: It is also tied to a
privilege status. As Rich mentioned in the Tax With
Representation case, there is a distinction between a
privilege granted by government, which can be conditioned by
meeting certain criteria. First, a fundamental First
Amendment right. We all share the First Amendment. Not all
of us are exempt. That's the distinction.
So, this really relates to status as
opposed to the First Amendment right. I think it probably
would be upheld by a federal court.
PARTICIPANT: If I could add a comment
though. The Regan case is still very confused because of
unconstitutional deductions of unconstitutional conditions.
Even if it is a privilege, if it is a privilege that is
withdrawn on content base, it may be found
unconstitutional.
MR. BEARD: We have time for one last
question in the back.
PARTICIPANT: This is a question for Mack.
Do you view the new rules regarding what is required, well,
not required, what is prohibited on envelopes on the
government look-alike envelope issue, either the prohibition
of using those words, or symbols, or logos, with a
disclaimer that is clear that says that this is not printed
at government expense and not related to any government
organization, do you view those as restraints?
MR. CANTER: That's a very good question.
I could argue it both ways. I could argue it well both ways.
I think probably that would be upheld by a federal court.
They would uphold the statute, would be my guess.
MR. HEART: I'm very much like Mack. I
think it is an awfully close case. It is very difficult to
know. I think what may help is to see how the statutes are
enforced and make a decision later as you see. It really is
close. It seems on the surface -- it is very obnoxious on
the surface, but it is not so far over the line that I can
feel comfortable predicting it would be struck down if it
ever was a test case.
MR. BEARD: Thank you all very much.
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