Ready for 2008?

Thinking about making advocacy your new year’s resolution?

From new lobbying and ethics rules (effective January 1st!) to a redesigned form 990 information return, stay up-to-date on how these and other changes may affect your organization in 2008 by signing up for AFJ’s Nonprofit Advocacy Network.

And as we bid farewell to 2007, we leave you with these thoughts:

For last year's words belong to last year's language
And next year's words await another voice.
And to make an end is to make a beginning.

-T.S. Eliot

News Clips 12/28/2007

The Washington Post follows-up on the investigation into the spending habits of several tax-exempt churches, noting "the probe by Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, has brought new scrutiny to the underlying belief that brings in millions of dollars and fills churches from Atlanta to Los Angeles - the "Gospel of Prosperity," or the notion that God wants to bless the faithful with earthly riches."

News Clips 12/27/2007

Thanks to a recent ruling by city officials, the New York Times is reporting that Mayor Michael Bloomberg hopes to expand his charitable giving options, noting "the mayor will select one or more investment firms to oversee his personal and charitable foundation’s investment strategies, and then recuse himself from any city business involving those firms."

After being taken by police following the aftermath of Hurricane Katrina, the NRA is hoping to return "hundreds" of firearms to New Orleans by hiring private investigators to locate the original owners. According to an article in the New York Times, the investigators are assisting the NRA in an effort to include multiple testimonies in a lawsuit filed against Mayor Ray Nagin and Police Superintendent Warren Riley.

News Clips 12/26/2007

With several key primary races just around the corner, the Washington Post examines the potential consequences of the battle looming over the FEC involving, among multiple guidance issues, the controversial nomination of Hans von Spakovsky. The article goes on to note that without the confirmation of several pending nominees, the FEC "will, for all practical purposes, shut its doors on New Year's Eve," leaving politicians and organizations alike in the dark.

An article in the New York Times brings to light a new trend in the world of philanthropy - banding together to support the growth of groups with a proven track record of effectiveness. The articles goes on to write "the issue of helping successful nonprofits become virtually self-sustaining through the greater efficiency that size can bestow is gaining prominence as donors increasingly demand more for their money."

Lobbying Disclosure Guidance Released by Secretary of Senate & Clerk of House

In September of this year, President Bush signed into law the Honest Leadership and Open Government Act of 2007 (HLOGA) which amended the federal Lobbying Disclosure Act of 1995. In addition to lowering the lobbying registration threshold and changing the reporting requirements to quarterly, the law also adds a semiannual requirement that lobbyists report their political contributions and requires organizations to certify that their lobbyists comply with the Congressional ethics and gift rules.

The Secretary of the Senate and Clerk of the House recently issued guidance on the scope and breadth of these changes to federal lobbying disclosure. Similar to the Federal Lobbying Disclosure Act of 1995, the Secretary and Clerk do not have any authority to issue regulations interpreting HLOGA. In lieu of regulations, the guidance is critical to an organization’s compliance and understanding of their new obligations which go into effect on January 1, 2008.

Alliance for Justice will continue to inform you of new guidance by the Secretary of the Senate and the Clerk of the House. In the interim, if you have any questions concerning HLOGA, please contact us for technical assistance at advocacy@afj.org or call toll free, 1-866-NPLOBBY (866-675-6229) to speak to one of our attorneys.

Understanding the New Electioneering Communications Rules

The Federal Election Commission ("FEC") adopted regulations that implement the Supreme Court decision in FEC v. Wisconsin Right to Life and issued an Explanation and Justification (E & J) to explain the new regulations. Earlier this year, the Supreme Court determined that the “electioneering communications” ban that prohibits corporations from airing broadcast ads which refer to a federal candidate within 30 days of a primary or convention and 60 days of a general election is unconstitutional as it applies to grassroots lobbying communications.

The new rule allows corporations (including 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s) to air ads that mention federal candidates as long as the ad serves a purpose other than encouraging people to vote for or against a federal candidate. It creates a “safe harbor” for ads that do so. The safe harbor permits corporations and unions to run ads that:

(1) Do not mention any election, candidacy, political party, or voting;

(2) Do not take a position on any candidate's or officeholder's character, qualifications, or fitness for office; and

(3) Either:

• Urge a candidate to take a particular position or action with respect to the matter or issue;
  
• Urge the public to adopt a particular position and to contact the candidate with respect to the matter or issue;
• Propose a commercial transition (such as purchase of a book or movie). This safe harbor protects the broadcast of grassroots lobbying ads.

Ads that fall outside the safe harbor may still be allowed. The FEC will look at several factors to determine whether, on balance, the communication is susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified federal candidate. Only those communications susceptible of such an interpretation can be prohibited.

The E & J includes examples of electioneering communications that satisfy the safe harbor, those that do not fall within the safe harbor but are still allowable, and those that corporations and unions cannot run.

Corporations and unions that spend more than $10,000 in a calendar year on electioneering communications must adhere to disclosure rules. The rules require disclosure of the names of donors who contribute $1,000 or more for the purpose of furthering electioneering communications; general donors to organizations need not be disclosed. A law suit has already been filed challenging the applicability of the disclosure rules to corporations and unions that make permissible electioneering communications.

Alliance for Justice will continue to keep you updated on further developments on this issue.

Technical Assistance Question of the Week

Q: Our non-profit is sponsoring state legislation and we also publish a quarterly newsletter. In that newsletter we discuss our plans for this legislation, however we do not devote the entire newsletter to this topic. If we encourage our members to support our legislation by contacting their lawmakers in such an article, does that mean the entire cost of producing the newsletter (printing and postage) must be considered as a lobbying expense?

A: The scenario described above involves allocating costs for a mixed purpose expenditure. A Mixed Purpose Expenditure arises when you have a communication which includes lobbying but might also solicit funds for an organization, or involve other issues not related to lobbying. The regulations provide complicated rules for allocating the costs of mixed purpose communications among their various functions. The applicable rules depend generally on the interplay of two sets of factors: (1) how you classify the message (that is direct lobbying versus grassroots lobbying, non- lobbying or a mixture) and (2) how you classify the audience (are they members, nonmembers, both). It sounds like the newsletter will go to only members and will include some grassroots lobbying expenses. As such, the regulations provide that you may make a "reasonable " allocation of costs between the non- lobbying and lobbying purposes. You may want to calculate the cost of creating and mailing the entire newsletter and then divide that cost by the number of pages in your newsletter. You can allocate the cost of the pages dedicated to grassroots lobbying for your grassroots lobbying expenses/expenditures. In other words, if the newsletter costs $100 to create and mail out (unlikely I know), and there were 10 pages total but only two pages were for grassroots lobbying, then $20 should be reported as grassroots lobbying expenditures for this communication.

Remember the Membership Rule however, if a communication asking individuals to contact their legislators to express a view about legislation with a call to action (normally grassroots lobbying) is to members only, it can be counted as direct lobbying. A Member is anyone who contributes more than a nominal amount of time or money to an organization.

To summarize, if the newsletter with the grassroots lobbying page was sent to members only, the cost of creating that page would be attributed as a direct lobbying cost. If however, the newsletter went to the general public, the cost of the page would be counted as grassroots lobbying.

To take advantage of Alliance for Justice's free technical assistance on this or other issues related to nonprofit advocacy, click here to submit a question, or call 1-866-NPLOBBY during regular business hours.

Charities Snowed-In as IRS Unveils New Form 990

What's the best gift of the holiday season? Is it a Nintendo Wii, or perhaps an iPod Touch? Maybe it's something that comes in a small package, all shiny and sparkly. Better yet, maybe it's more traditional like a sweater or scarf, a box of chocolates or even a fruitcake.

Just when you thought you had received every holiday gift imaginable, along comes the IRS with its new 990. Stay tuned to AFJ's Nonprofit Advocacy Network as we pull back the wrapping and provide analysis of how these changes will affect advocacy organizations.

News Clips 12/21/2007

With a score of new changes to the IRS' final redesign of its form 990, an article from the Chronicle of Philanthropy reports today that many smaller nonprofits are breathing a sigh of relief by noting "groups with annual revenue of $25,000 to $1-million and those with assets of less than $2.5-million will have the option of filing the Form 990-EZ for the 2008 tax year."

An article appearing in the New York Times puts the spotlight on Holden Karnofsky and Elie Hassenfeld, two of today's youngest and most influential philanthropists, noting "Mr. Karnofsky and Mr. Hassenfeld, both 26, are the founders and sole employees of GiveWell, which studies charities in particular fields and ranks them on their effectiveness."

Arizona senator and Republican presidential hopeful John McCain is questioning the legality of one nonprofit group's effort to use "push polling" as a means of discrediting certain potential candidates in New Hampshire, writes the Washington Post.

News Clips 12/20/2007

According to an article appearing in the New York Times, a nonprofit organization in Connecticut was stunned last week when "more than a dozen Kevlar-armored agents" from the U.S. Department of Health and Human Services stormed the office of the New Haven-based Community Action Agency for allegedly providing aid to undocumented immigrants to help with the rising cost of heating in the state.

The Hill is reporting that several government watchdog groups "sent a scathing four-page letter to the House ethics committee Tuesday, arguing that its interpretation of new rules restricting members from participating in parties at national political conventions renders the rules "meaningless.""

With less than two weeks before the new year, the Chronicle of Philanthropy reports today that the IRS has announced the release of the final redesign of its form 990 information return to the public, noting that "the tax agency made several changes to the draft in October after it received more than 650 public comments about the proposed form."

News Clips 12/18/2007

An article appearing in today's New York Times sheds light on how the current migration out of New Orleans by hurricane victims is playing out in recent voting trends, noting that "while 113,000 voted [in New Orleans] in May 2006, only 53,000 did last October."

BNA's Money & Politics Report continues its coverage of the ongoing battle over, among other issues, the controversial FEC chairman nominee Hans von Spakovsky, pointing out "the Federal Election Commission wrapped up the year with a final open meeting Dec. 14, approving new officers and meeting dates for 2008 without mentioning serious questions that lingered over the agency's future," (subscription required).

Roll Call provides an overview of 2007's reader-submitted questions on this year's new lobbying and ethics rules, describing some of the regulations as "an avenue to subject Members and staffers to criminal penalties for corrupt violations of the gift rules, particularly when the violations involve lobbyists."

News Clips 12/17/2007

Roll Call gets into the holiday spirit today with an article that notes "that roly-poly, red-suited fellow who usually jollies up the annual U.S. Chamber of Commerce Christmas blowout? He got the ax, thanks to the new ethics rules governing gifts from lobbyists to lawmakers and their staffs."

The Chronicle of Philanthropy provides an update on the progress in New Orleans, noting "three major national foundations are donating $17.5-million to improve New Orleans schools two years after Hurricane Katrina."

News Clips 12/14/2007

The Washington Post's Trail Blog notes today that "Citizens United has hired James Bopp, the Indiana lawyer who successfully argued a recent challenge to the 2002 McCain-Feingold campaign finance law" to aruge a new case against the Federal Election Commission's recent ruling on electioneering communications.

The New York Times reports in an article today that the IRS "will audit more tax-exempt organizations in 2008 as well as start a new compliance program to help groups maintain their tax-exempt status."

Sarbanes-Oxley, Proposed 990 Changes Already Impacting Nonprofit Communities

This year marks the five-year anniversary of the passage of the Public Company Accounting Reform and Investor Protection Act of 2002, more commonly known as the Sarbanes-Oxley Act, named for its respected sponsors - Senator Paul Sarbanes of Maryland, and Congressman Mike Oxley of Ohio.

Established with the intention of creating a new set of accountability standards for corporations in the era of Enron and WorldCom, supporters of Sarbanes-Oxley contend that the legislation places much-needed controls on corporate accounting practices (for a full description of H.R. 3763, “Sarbanes-Oxley Act” click here).

However, an article appearing last week in the Chronicle of Philanthropy examines how the effects of Sarbanes-Oxley have extended beyond the private sector, noting that “nonprofit groups have adopted policies and procedures consistent with the law, even when they are not required to do so.”

The article goes on to report that an astounding 87 percent of nonprofit groups participating in an annual study on nonprofit governance had voluntarily implemented new governance and accounting policies “in the last few years,” with a double-digit increase in the number of organizations implementing policy changes from 2006 alone.

If this alarming new trend has created unnecessary burdens for nonprofit groups in both compliance and expense, the question remains – why now?

Well, according to the Chronicle, these changes are being made “not only [in response] to Sarbanes-Oxley, but to new and proposed changes in the Form 990, the information return tax exempt groups must file each year.”

On June 14, 2007, the Internal Revenue Service released for comment a draft redesign of its 990 tax return form. Noting the potential impact of these changes, Alliance for Justice (along with several other advocacy organizations) submitted comments questioning, among other issues, the legality of the IRS to influence the internal governance and management practices of tax-exempt organizations.

“While we are in favor of good governance policies by nonprofit organizations, the professionals advising nonprofits--to include auditors, accountants and some attorneys--are treating these recommendations as if they are legal requirements,” says Liz Towne, Director of Advocacy Programs at Alliance for Justice. “It is disingenuous for anyone to suggest that public charities who forego creating these policies are acting illegally when in fact the groups are acting in the letter and spirit of existing state and local law.”

To read Alliance for Justice’s full comments on the proposed changes, click here.

The IRS is expected to announce further changes to the proposed form 990 later this month, and as always, Alliance for Justice will keep you updated on any further developments.

News Clips 12/13/2007

After weeks of anticipation from nonprofits on both sides of the political spectrum, today's BNA Money & Politics Report writes that "the Federal Election Commission is expected to finalize at a scheduled Dec. 14 meeting a new rule for funding "electioneering communications"--targeted political ads on television and radio that mention federal candidates in the final weeks before an election," (subscription required).

An article appearing today in The Hill examines the latest guidance issued from congressional officials on new lobbying rules set forth by this year's Honest Leadership and Open Government Act, noting specifically the "long-awaited guidelines on member attendance at events taking place during the party conventions."

Lobbyists rejoice! Congressional Quarterly provides an update on the new twin electronic filing forms for the House and Senate. The article goes on to write "beginning this month, lobbyists can fulfill their disclosure duties for both chambers with a click of an online registration button, using a password set up under the Senate’s system to provide a digital signature."

News Clips 12/12/2007

With little more than two weeks before the start of 2008, Clerk of the House Lorraine Miller and Secretary of the Senate Nancy Erickson released for public viewing guidance on the new lobbying and ethics rules associated with the passage of 2007's Honest Leadership and Open Government Act (HLOGA), reports BNA Money & Politics. In addition to providing guidance on new reporting and disclosure requirements, the article goes on to note that "the guidelines discuss the impact of a newly required certification that each lobbyist and lobbying organization has not provided gifts in violation of congressional ethics rules." (subscription required).

The Chronicle of Philanthropy reports today that "more than 60 organizations involved in health, education, and other causes have come together to form America Forward. The coalition seeks to introduce the presidential campaigns to the work of social entrepreneurs and encourage them to adopt new approaches developed by social entrepreneurs and to support policies that encourage new approaches to difficult social problems."

News Clips 12/11/2007

An article in today's BNA Money & Politics Report sheds light on one aspect of the Senate's new lobbying rules by pointing out that "nonprofit organizations will be able to take senators on privately sponsored trips, but they will not be able to buy the lawmakers alcoholic drinks during the trip, according to newly released regulations and guidelines from the Senate Ethics Committee," (subscription required).

An Op-Ed appearing in today's Washington Post offers insight into the controversy brewing at the FEC by posing the question "what if we had deregulated politics -- including the sort of presidential campaigns that produced 33 presidents (including some pretty good ones -- Lincoln, TR, the sainted Coolidge, FDR, Truman, Ike) before the Federal Election Commission was created in 1975?"

News Clips 12/10/2007

"It may not have been unusual to hear Jennifer Howse, president of the March of Dimes, delivering a radio address supporting the extension of the federal Children's Health Insurance Program. But it was surprising that her speech was the formal Democratic Party response to President Bush's weekly radio address," reports the Chronicle of Philanthropy (subscription required).

"So seldom is there good news out of New York’s state capital that when something like the new Project Sunlight Web site emerges, the instinct is to wonder how soon before the forces of darkness will try to kill it. Until they do, the new site from Attorney General Andrew Cuomo’s office gives ordinary New Yorkers the ability to see information about their state that should have been easily accessible in the first place," notes the New York Times.

"For the first time, Gov. Arnold Schwarzenegger released a list of the millionaires and billionaires who pay to send him on lavish overseas trips, offering a glimpse into the elite business and social circles that critics say have unfair access to his power," writes the New York Times.

News Clips 12/6/2007

The Hill reports this week that "the Federal Election Commission (FEC) has agreed to consider the legality of a new 527 organization, SpeechNow.org, which aims to erode key campaign-finance restrictions ahead of the 2008 election."

An article in today's Washington Post examines how the wealthy determine charitable giving trends. The article notes that a recent report shows "the "very wealthy," households with a net worth above $50 million, donate more money than other affluent households to every type of organization except disaster relief groups."

Can You Hear Me Now?

Tiresome, am I, of the rising level of voices implying the need to reveal the “secret donors” of the nonprofit sector, particularly those engaged in election year advocacy.

Take today’s Washington Post article for example, which discusses the activity of a number of 501(c)(4) social welfare organizations all conducting perfectly legitimate and legal election activity. In the article, Michael Toner, a former Federal Election Commission chairman says of these 501(c)(4)s, “You can do many of the same things you can with a 527 while also shielding your donors, and that is very attractive to the organizers and their backers.”

Not to pick on Mr. Toner because he is one of many voices drawing attention to nonprofits and the anonymity of their donors, but has anyone heard of NAACP vs. Alabama? A history lesson from 1958: The state of Alabama sought to compel the NAACP to reveal the names and addresses of its members, to which the NAACP rightfully refused for fear that the revelation of donors to a “controversial” group may in fact cause significant reprisals to the members and have a serious chilling effect on the right of the NAACP’s membership to assemble. Alas, the Supreme Court agreed that the NAACP’s right to keep its membership private was indeed guaranteed by our constitution.

And so, given that there is no compelling government interest to justify the violation of this constitutional right, today 501(c)(4)s, among others, can keep their members and donors to themselves. Groups on the right and left have relied on this protection of members and donors across a spectrum of groups advocating on “controversial” issues. So yes, Mr. Toner and the chorus of others implying some ill-intent of this constitutionally protected anonymity, it is as legal to suppress one’s donors and members as it is legal for 501(c)(4) organizations to engage in certain political activity provided it is not their primary purpose.

It is my strong belief that we as a society benefit from the discourse of a variety of voices in an election year—to which I say to my nonprofit friends, let me hear you now.


Liz Towne
Director of Advocacy Programs
Alliance for Justice

News Clips 12/5/2007

Today's BNA Money & Politics Report touches on a familiar topic by noting "Americans United for Separation of Church and State told the Internal Revenue Service Dec. 4 that Liberty University Chancellor Jerry Falwell Jr. violated federal tax law by using school resources to endorse Republican presidential candidate Mike Huckabee. In a complaint filed with the federal tax agency, Americans United said Falwell hosted the candidate at Liberty University and then sent an e-mail message on Liberty University letterhead endorsing Huckabee," (subscription required).

It's that time of year again! Roll Call reports today "’tis the season for standing up at parties, eating with toothpicks and getting the menu vetted by an ethics expert. At least, it is if you want to invite Members of Congress and staffers to holiday shindigs this year, the first under tougher new ethics rules."

"The Federal Election Commission has received sharply conflicting advice in detailed public comments regarding how to implement new disclosure requirements for "bundled" campaign contributions. Political reformers who backed the passage of a new lobbying and ethics law in Congress have key differences with some top Democratic Party lawyers and others about the new law's implementation, according to comments received by the FEC and made public Dec. 4," writes BNA Money & Politics (subscription required).

News Clips 12/4/2007

In an article from the Los Angeles Times detailing the potential changes to California's state registration and reporting requirements, the paper notes "under a proposal made Monday by the state's ethics watchdog, detailed public disclosure of who benefited from such [campaign] spending would be required of state officeholders, if given final approval next month. In addition, certain nonprofit groups involved in political campaigns would be forced to reveal their donors under a separate proposal by the Fair Political Practices Commission."

The Chronicle of Philanthropy is reporting that "strategic philanthropists, a new breed of wealthy charitable donors, are increasingly judging the return on their contributions by examining measurable performance results."

An article from today's New York Times writes "the Internal Revenue Service issued a ruling on Friday that clears the way for the settlement of a long-running dispute between Tennessee and Mississippi over a private foundation. Under the settlement, the Maddox Foundation of Hernando, Miss., will transfer $54 million to the Dan and Margaret Maddox Charitable Trust in Nashville over the next 60 days, and then the two organizations will go their separate ways."

News Clips 12/3/2007

Today's BNA Money & Politics Report writes "critics of the Federal Election Commission--led by Rep. Christopher Shays (R-Conn.) and campaign reform groups--remain locked in a drawn-out legal battle with the FEC over rules defining illegal "coordination" of campaign activities between candidates and outside groups." The article continues by pointing out "the FEC has long had rules attempting to limit the ability of outside organizations to aid candidates through coordinated activity, which critics say can thwart any limits on direct contributions to candidates. Yet, the commission has rarely enforced such restrictions," (subscription required).

An article appearing in Roll Call today notes "Sen. Trent Lott (R-Miss.) is likely the last lawmaker to spin through the revolving door to K Street before the new ethics law slows it down. Last week, he announced he would step down by the end of the year, presumably to avoid tough restrictions on Members-turned-lobbyists that will kick in when this session adjourns. But Senators left behind with dollar signs in their eyes shouldn’t fret: The new law is not as restrictive as it looks."

Roll Call is also reporting today that "a quartet of Senate Democrats continues to stonewall a controversial Republican Federal Elections Commission nominee, setting the stage for a potential shutdown of the elections agency in the days before the presidential nomination process begins in Iowa."

Technical Assistance Question of the Week

Q: I’ve heard that the IRS does not allow nonprofits to provide links from their 501(c)(3) websites to websites that endorse candidates. Is this true?

A: As we draw closer to many local elections, political primaries, and the general election this fall, more and more nonprofits are leading the charge to register, educate, and motivate voters. This nonpartisan voter mobilization is a perfectly valid – and certainly needed – 501(c)(3) charitable activity.

Nonprofits must remember, though, that 501(c)(3)s are prohibited from directly or indirectly supporting or opposing candidates for public office or political parties. This means that information provided on or through a 501(c)(3)’s website should not support or oppose candidates. For example, a nonprofit may provide contact information and website links, without commentary, for every candidate in a race – this is fair and nonpartisan voter education; a nonprofit should never link only to Democratic or Republican candidates.

Last year, the IRS produced a new fact sheet on election year activities for 501(c)(3)s, available online here. This guidance includes a section about websites, including some example fact situations.

For answers to other questions like this, please call Alliance for Justice’s toll-free technical assistance hotline at 866-NPLOBBY or email us at advocacy@afj.org. Our Attorney of the Day is available to answer questions about advocacy from all nonprofits free of charge.

News Clips 11/30/2007

Today's BNA Money & Politics Report notes "as questions continue to linger about the future of the Federal Election Commission, the agency is set to take up a series of rulings in the first half of December that could answer key questions about how federal candidates can raise and spend money," (subscription required).