Vol. III, No. 4
October 1995
Lobbying Disclosure Act Still Threatens
Nonprofits
As this newsletter goes to press, it is
unclear what will happen to the Senate-passed
Lobbying Disclosure Bill, which has not yet
been referred to a House committee.
It appears that the House GOP Leadership
may simply allow the Senate bill to pass and send it along
to the President. Previously, the House
Subcommittee on the Constitution was
expected to develop its own bill, to be sent to the full
Judiciary Committee, and then to the House. One insider
speculated that, regardless of the content, the Leadership
wants quick passage of the Senate bill to make the issue
go away quickly, and "get those
videos of lobbyists and Congressmen in Aruba" off the
news.
Congressman John Bryant
(D-TX) has initiated a formal discharge
petition which would require a House
vote on the Senate bill when 218
signatures of Members are obtained. Bryant is the former
Chairman of the House Judiciary's Administrative Law
Subcommittee, which reported out his own version of the
Lobbying Disclosure Act in the last Congress. Nonprofits are
concerned about the definition of lobbying
in the Senate bill, which (because it differs from the IRC
definition of lobbying) would increase the costs and
burdens of recordkeeping and
reporting, while discouraging elected and appointed
officials from taking telephone calls. Lastly, nonprofits
must be concerned about additional efforts to
restrict grassroots lobbying. We will alert you on
the status of the Lobbying Disclosure bill, and any
recommended action necessary on this bill.
NASCO Unresponsive To Nonprofit Communitys
Concerns
On September 12,
FSC wrote the
National Association of State Charitable Officers
(NASCO) to ask why it will exclude
all but a few hand-picked charitable
representatives from the annual National
Association of Attorneys General (NAAG)/NASCO
Enforcement Seminar. In the letter, FSC
also expressed its objections to NASCO's action, which
limited the number of non-NASCO members to 19, while over 90
non-NASCO members attended the 1994 seminar. FSC further
asked which members of the nonprofit community were invited
to the seminar, what criteria were used to select the
attendees, and which NASCO members selected the
invitees.
Reports on last year's seminar by FSC and
publications such as The Philanthropy Monthly
created controversy. For example, FSC reported that the
NASCO President, Steve Arter, had
informed the audience that he
advised Pennsylvanians not to give to nonprofits
that solicit through the mail or by telemarketing.
(Mr. Arter is no longer in his charitable
enforcement position.) FSC also reported that the
incoming head of NASCO, Pamela Mann, had told the
audience that regulators are not accountable to the
nonprofit community.
FSC's September 12 letter was addressed
to Ms. Mann (a former Assistant Attorney General in New
York), who by that time had been replaced as President of
NASCO. A response was received from the current President of
NASCO, David E. Ormstedt, Assistant
Attorney General of Connecticut. Mr. Ormstedt explained that
the non-NASCO attendees were limited and hand-picked due to
both the purpose of the seminar and certain space
and cost limitations. Mr. Ormstedt further
expressed that NASCO's exclusion of charitable
representatives from the seminar is not intended to express
an unwillingness by NASCO and NAAG members to consider
charities' points of view. Clearly, however, NASCO's action
does demonstrate that charities' views are not
assigned much importance by many regulators and
enforcers, as NASCO eliminated what has served as a
relatively convenient forum for representatives of nonprofit
organizations to express their concerns to regulators
nationwide.
It is unfortunate that NASCO has
responded to the controversy created by Mr. Arter and Ms.
Mann by restricting the nonprofit community's access to
state regulators, and to the information provided at the
seminar, rather than addressing the attitudes which created
the controversy. Clearly, the extreme views of Mr. Arter and
Ms. Mann are not held by all state charitable solicitation
officers, yet NASCO has chosen to reduce, rather than
expand, communication between its members and nonprofits.
Such disregard for the nonprofit community can only serve to
create greater mistrust between the regulators and the
regulated.
Postal Service Changes Eligibility For Special
Nonprofit Rates
FSC recently
distributed to its members
copies of Postal Service
Publication 417, the brand-new
collection of postal rules
governing eligibility for mailing at the
special bulk third-class rates. FSC also
provided its members with an overview of
the eligibility rules prepared by
FSC counsel, discussing the new
"content" rules that became effective on
October 1, 1995.
That overview cautioned FSC members to
be careful in interpreting the new postal
rules. Reliance on Publication 417
or on any general treatment of these
complicated third-class eligibility rules
could be costly. (See, e.g., the
"grocery store" illustration on page 18 of
Publication 417, which, on the information presented, is, at
best, difficult to comprehend.)
Status Of Istook Amendment
An amendment to the Fiscal 1996 Treasury
Department Appropriations Bill sponsored by
Congressman Ernest Istook (R-OK), would
have greatly limited lobbying done by nonprofit groups
receiving federal funds. As this newsletter goes to press,
the Istook amendment will not be in the Treasury bill, but
majorities in both houses can pass such a measure
again.
The initial Istook amendment adopted a
new definition for advocacy, terming it "political
advocacy." To be consistent with current law, the
act should have adopted the definition contained in the
Internal Revenue Code, applicable to all not-for-profit
groups which must file IRS Form 990s annually. If the Istook
Amendment is adopted in its present form, presumably a new
bureaucracy in GSA or OMB or some other federal agency would
draft regulations to determine what, from the legislative
history of this bill, is meant by "political
advocacy."
The FSC is in contact with Hill
staff concerning this matter and will seek clarification of
this issue. Finally, we understand that if the
amendment passes, there may be a court challenge to it.
There have been conflicting legal opinions rendered by
counsel to certain nonprofit groups as to the
constitutionality of the Istook proposal. We will keep you
informed.
FTC Regulates Charitable Phone Solicitation To
Death?
According to one lobbyist for the major
telephone marketing retailers, business
interests were far more pleased with the
final Federal Trade Commission telemarketing
regulations than they have said publicly. Most
agree that it could have been much worse.
However, there was no satisfaction
to express for those nonprofits that
communicate with their supporters and the public by
telephone in an effort to mobilize contributions. The new
FTC regulations that will go into effect on December 31 will
require elaborate disclaimers from
commercial solicitors employed by charities to contact
prospective donors disclaimers that would, in the minds of
many, eliminate the practicality of telephone soliciting.
Some still hope that the FTC or Congress will recognize the
legitimate, legal, and non-fraudulent nature of most current
telephone charity solicitations and revise these
restrictions.
Seeking Access To Nonprofits Membership, Other
Confidential Records
One of the sharpest attacks
on the First Amendment in recent memory is
occurring in a federal court in New York
state. The plaintiffs in a lawsuit (the
estates of two persons killed with
handguns), are suing 52 defendants (accused of
wrongful death liability for cooperating in
the improper distribution of handguns). However, plaintiffs
have subpoenaed the membership and
other confidential records of an association that
is not a defendant the American Shooting
Sports Council, Inc. (ASSC).
In this case, Hamilton, et al.
vs. Accu-Tek, et al., the plaintiffs have argued
that the defendants are liable for the
death of two people because, in
lobbying Congress and state
legislative bodies regarding proposed gun-related
legislation, they presented material that was allegedly
false. The plaintiffs who apparently are attempting to hold
the firearm industry liable for the
criminal acts of third parties are now
seeking evidence relating to alleged industry-wide efforts
to combat legislation which would have affected the
distribution of handguns, to try to back up their
allegations.
The plaintiffs have subpoenaed
records (e.g., tax returns, membership
lists, budgets, internal policy discussions, and legislative
activities) from and sought to depose
non-parties such as ASSC, an Atlanta-based
trade association representing the firearm industry.
ASSC objected to the
subpoenas on a number of grounds, principally its
First Amendment privilege to
petition the government for redress of
grievances; it has asked a federal court in Georgia
to quash the subpoena. Noting that
"political forces are instrumental in driving the
litigation," ASSC argues that invasion of its First
Amendment rights should not be permitted.
Even if ASSC were a
defendant to the litigation, its
membership and other confidential files protected
by the First Amendment should be
virtually immune from disclosure. We are
optimistic as to the outcome, but this lawsuit confirms that
eternal vigilance, coupled with an
uncompromising defense of First
Amendment rights, is the price of
liberty.
AICPA Ignores Flood of Objections, Moves To Adopt
New Joint Costs Rule
The Association of Independent
Certified Public Accountants (AICPA) has
ignored an overwhelming
number of objections and is poised
to adopt its Exposure
Draft, which would modify the
existing rules (Standard Operation
Procedure 87-2) governing the allocation of joint
costs by nonprofit organizations where
fundraising is part of the expenditure. The
AICPA is in the process of forwarding the Exposure Draft to
the Financial Accounting Standards Board
(FASB) for publication as a new
accounting standard.
In 1993, the AICPA
circulated the Exposure
Draft for comment, and by early
1994 received more than 300 sets of written
comments in response. Reportedly, 90 percent of the
individuals and organizations (and 98
percent of the nonprofit organizations, including
FSC and many of its members) filing comments generally
opposed the Exposure Draft.
Incredibly, despite the
overwhelming opposition to the proposal and
the long passage of time without any
action, the AICPA is still pushing the
revision and will forward it to the FASB,
who could still refuse to adopt it as an accounting
standard.
The nonprofit community
is upset in response. Much of the
opposition to the Exposure
Draft reflected concerns that it
would make financial statements misleading.
Some nonprofits are considering a legal
challenge to any such new accounting standard,
although it is not clear at this time how much
financial support is available for such a
lawsuit. FSC will be writing to the FASB,
and will continue to keep members posted on
developments.
The Free Speech Coalition, Inc. is a
nonpartisan, nonprofit 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. For information on FSC legislative programs
and membership, please call 202-544-1114.
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