Nonprofit Law Podcast #20: voter registration and GOTV

Nonprofit Law Podcast #20 concludes the month-long series on election season and nonprofits with an overview on voter registration and get-out-the-vote activities. Check out the shownotes and resources at nplawcast.com!

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Comedy Central: Colbert run legal

The corporation that airs Stephen Colbert's television show is confident that his run for president on the South Carolina ballot will not violate federal election law prohibiting corporate contributions to a federal candidate. I'm pretty much begging for this to end up at the FEC, if only for the sheer entertainment value...

A recent poll suggests this comedic stunt might be doing more than generating buzz on blogs...

In one match-up, Clinton gets 45% to Giuliani's 35% and Colbert's 13%.

Rasmussen notes that Colbert gets 28% of 18-29 year olds in this match-up, more than Giuliani does! Same in the race with Thompson. It thus appears that young Republicans are abandoning their party for Colbert. Is this a reflection on the fact that they do not want to vote for the Republican after 8 years of Bush, but are weary of voting for a Democrat, so they jump on whoever runs as a three-way candidate?

Colbert's character lampoons conservative talk show hosts. Interesting to see how and from where he draws!

More on Colbert's run

Slate has this piece on the potential election law hurdles facing one Stephen Colbert.

All Saints and a political IRS?

Donald Tobin at Ohio State wrote an interesting column on the law school's election law blog regarding the All Saints church in Pasadena's claim that political influences via the Justice Department intervened to control the IRS investigation against them.

While I think All Saints played its hand almost flawlessly in this controversy, I think it has overplayed its hand with regard to the alleged political intervention by the Justice Department. There is simply no evidence that the Justice Department attempted to influence this case for political reasons. But thanks to All Saints Church's decision to make all documents public, you can decide for yourself.

I have, for years, stated that the IRS was politically insulated when it comes to nonprofits and particularly their audits. All Saints' claim seems to suggest otherwise, but I think Don has it right... we have a rare opportunity to see the documents in an otherwise closed process, allowing the public to determine where the truth lies.

Colbert '08

This isn't really directly relevant to nonprofits per se, but most readers of this blog know I'll delve into campaign finance and election laws from time to time since these laws can impact nonprofits.

Ok, that was a prime example of a sentence that rocks the circular logic. In any event, the Stephen Colbert presdential candidacy (a fake news guy running for real in South Carolina) has created an interesting bit of analysis amongst election law commentators. First was this piece in Politico, and now, a post from Bob Bauer... best line:

All of this, from an election lawyer’s point of view, would be highly entertaining. And perhaps good for more than just a laugh.

All well worth the read... Colbert's candidacy could force the FEC to confront some pretty big issues. Since Colbert seems intent on running for real, this could be interesting.... But if Colbert thinks he'll get the coveted Chuck Norris endorsement, he's sadly missed out.

Nonprofit Law Podcast #19: ballot measures

Nonprofit Law Podcast #19 continues the month-long series on election season and nonprofits with a surface-scratching review of ballot measures. Check out the shownotes and resources at nplawcast.com!

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Federal lobbying disclosure briefing

This just hit my mailbox... if you are out of DC, you can call in. This is a very confusing new law, particularly as it applies to nonprofits... I plan on attending!

Nonprofit and Foundation Advocacy Speaker Series

Join Alliance for Justice for a briefing on how recent changes to federal lobbying disclosure, gift and travel rules impact nonprofits.

Mike Trister and Holly Schadler from Lichtman, Trister & Ross will discuss changes to the federal lobbying disclosure under the Honest Leadership and Open Government Act of 2007 as well as new congressional gift and travel rules.

Tuesday, October 30, 2007
2:00-3:30 p.m.

Location: TBD, Washington, DC

Space is limited so please RSVP by calling Jeff Prior at 202-822-6070 or sending an e-mail to jeff@afj.org

This briefing will be made accessible to participants outside of D.C. only via a conference call. Call-in information will be provided via e-mail prior to the event.

FEC hearings begin today

CQPolitics has the story... it's a busy day in DC today, as the Attorney General nomination hearings are happening at the same time. More coverage on the FEC hearings in the blog tomorrow...

Pay out requirement for colleges and universities?

The Senate Finance Committee is considering adding a pay-out requirement to colleges and universities following news of wildly successful endowment fundraising at some of the nation's top universities. The AP has the story here. The payout provision would be similar to private foundations, which are required to spend a certain percentage of their assets every year toward their exempt purpose. Currently, educational institutions are considered public charities, and do not have this requirement.

Nonprofit Law Podcast #18: Renting mailing lists

Nonprofit Law Podcast #18 continues the month-long series on election season and nonprofits with a look at renting mailing lists. Check out the shownotes and resources at nplawcast.com!

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WRTL and the FEC

Two great articles today on the upcoming FEC hearings on how it will handle the WRTL ruling on electioneering communications (Chronicle of Philanthropy || The Hill). You'll recall that the law limited nonprofits (amongst others) from broadcasting communications featuring the name or liekness of federal candidates near primary or election time. Confronted with a case where ads designed to lobby federal officials who were also running for reelection, the Court held that unless an advertisement can only be seen as an attempt to influence the election, campaign finance laws can't regulate.

The FEC needs two days to hear from all of the parties on this one... the Court's opinion leaves open a question on whether these ads still trigger disclosure requirements. I may try to sit in on some of the testimony, but I'll certainly post about it next week.

ORU update

ORU officials are denying allegations made by former professors (see my earlier post for details). Interesting development according to this CNN piece is that the IRS has already begun investigating whether the 501(c)(3) university engaged in illegal electioneering...

Claim Democracy 2007 Conference

University of DC's College of Law is hosting an election reform conference November 9-11... the speakers will assuredly have a lot to say about nonprofits' roles in election activity, so it might be worth the time to check out.

Details are at claimdemocracy.com.

Oral Roberts University in big trouble?

Hot off the election law listserve... a pointer to a Tulsa World article regarding a lawsuit by professors that allege facts that, if true, could be a major problem for Oral Roberts University. The lawsuits suggests that university leaders forced professors to work on a mayoral campaign and that someone has filed a complaint with the IRS. The IRS won't comment on the complaint (they never do as a matter of internal policy), but you can bet they'll take a look to see if there's fire where that smoke is...

Colleges and universities like ORU are 501(c)(3) public charities, prohibited from engaging in anything that supports or opposes candidates for office.

Law review note on blogging

As I'm getting set to record my audio guide on the laws impacting nonprofits' use of new media, I noticed Rick Hasen's pointer to this excellent student note (PDF) on the FEC's approach to blogging. Worth the read if you want to delve more into the nuts and bolts!

Nonprofit Law Podcast #17: Debates & forums

Episode #17 of the Nonprofit Law Podcast continues the month-long series on election season and nonprofits with a look at debates and forums. Check out the shownotes and resources at nplawcast.com!

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Gingrich's 527 excuse?

Newt Gingrich blamed McCain-Feingold as a major factor in his decision not to run for president... a lot of folks have questioned this as a front, and Politico suggests the legal reasoning was, well... off.

Light blogging this week

I'm on another bandwidth-limited excursion, so posts may be limitedthis week. In the meantime, check out the latest episode of the podcast on voter guides...

Nonprofit Law Podcast #16: Voter guides

Episode #16 of the Nonprofit Law Podcast continues the month-long series on election season and nonprofits with a look at voter guides. Check out the shownotes and resources at nplawcast.com!

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Turf

Really interesting article in today's New York Times regarding foundation funding of a youth activist network run in part by MTV. The problem? Idealist and others have asked for this type of funding before... and they're not happy that a for-profit got the nod.

Nonprofit playing "mystery" role in California ballot measure

The San Francisco Chronicle reports:

[Charles] Hurth is the registered agent for Take Initiative America, a tax-exempt group formed Sept. 10, 2007, according to the organization's incorporation documents. A day later, the group made its hefty donation to fund petition-gathering that would get the so-called Presidential Election Reform Act on the June ballot.

The donation was the only reported contribution to the ballot-measure campaign, according to financial documents released earlier this week.

The proposed ballot measure would change the winner-take-all election rules for the 55 electoral votes in Democratic-leaning California. It would allocate the electoral votes based on the popular vote winner in each individual congressional district - providing an unexpected windfall for Republicans.

Leading Democratic presidential candidates and Democratic National Committee Chairman Howard Dean have charged that the effort is a Republican dirty trick to change the election rules in the middle of the 2008 presidential campaign.

But Hurth's utter lack of connections to politics in California has raised cries of foul play and suggestions that a major GOP presidential candidate could be behind the matter.

Democrats say Hurth violated the spirit if not the letter of California campaign finance laws because he would not disclose the source of his group's funding.

"Under the law, you're prohibited from making a contribution through an intermediary without disclosing the true donor," said San Francisco attorney James Harrison, representing Californians for Fair Elections, a Democratic group opposing the measure. "That's considered money laundering."

Jonathan Wilcox, the spokesman for the Missouri-based Take Initiative America group, said Hurth's organization is a nonpartisan, grassroots effort working for election reform. But he insisted, "We have a national network of donors ... and we will comply with all disclosure laws."

Roman Porter, spokesman for the state Fair Political Practices Commission, when asked Wednesday about the Democrats' charges, said. "We're aware of the concern regarding this situation, and we're reviewing it."

This is another example of where a nonprofit appears to be following all disclosure laws, but is still being asked to do more. You may recall that there were calls for Sen. Edwards to disclose funders from a nonprofit he was heavily involved in before his presidential run. It will be interesting to see if there is a movement that spawns from these types of activities to change disclosure rules for nonprofits that engage in certain election activities.

UPDATE: Apparently the folks behind the initiative aren't doing so well.

Tax Exempt Law Student Blog

Check out Jed Bodger's blog focusing on tax-exempt issues... Jed's an LLM student and a Nonprofit Law Podcast listener. The blog has some great information for anyone interested in this area of law.

California church off the hook - IRS punts

All Saints Church in Pasadena, California had been under an IRS investigation since a 2004 sermon sparked the agency to investigate whether the church had violated the prohibition on electioneering in the presidential race. The IRS has reportedly dropped the investigation, but has told All Saints in a letter that it still believes the church has violated the law. Unfortunately, the IRS is not willing to share with All Saints, or anyone else in the regulated community for that matter, why it is taking that stand.

This is frustrating. An IRS investigation is - and I'm sure the church leaders would agree - nearly as bad as being found in violation. It is invasive, expensive and irritating. After all the church went through, it is apparent that the IRS would investigate on these facts again, but would presumably not find a violation? If the IRS is intent on helping the nonprofit community follow the law, it has to give us better guidance than "facts and circumstances" standards and a handful of hypotheticals in a fact sheet.

UPDATE... more from the AP via The Washington Post.

Thompson reverses field on election law changes

CNN has the scoop on a very public flip-flop:

"The part that has not worked out and really was a mistake were the attempts to place limitations on campaign ads in certain parts of the process," the former 'Law & Order' actor said. "The Supreme Court has got better things to do then to hear a hundred different cases on a hundred different kinds of ads," he said of a process he feels has spawned a large amount of bureaucracy, diverted resources, and put "unfair limitations" on people. "I don't think that part of it was a good idea."

Thompson was a major supporter of McCain-Feingold, and if memmory serves did not have this opinion on the electioneering communications regime that the Supreme Court tossed earlier this year. No comment, other than to say two words... political expediency.

UPDATE... apparently Thompson once asked the bill to be called McCain-Feingold-Thompson. Not anymore, I guess...

Nonprofit Law Podcast #15: Kicking off the election season series

Episode #15 of the Nonprofit Law Podcast is up and at 'em... this week I begin a month-long series on election season and nonprofits with a basic overview of the rules. Check out the shownotes and resources at nplawcast.com!

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Word from the IRS...

As reported in the AFJ Advocacy Digest:

"The number of tax-exempt organizations charged with violating Internal Revenue Service rules by engaging in prohibited political activities is likely to continue growing during 2008's presidential campaign, a top IRS official said Sept. 19. Lois Lerner, director of exempt organizations for IRS, made the remarks during a panel discussion at the annual meeting of the Council on Governmental Ethics Laws (COGEL)," reports BNA Money & Politics (subscription required).

I'll be starting a month-long election related activity series starting Sunday on the Nonprofit Law Podcast so your nonprofit can avoid things that will catch the eye of the IRS...

Nonprofit Law Podcast #14: Who gets to see what?

Episode #14 of the Nonprofit Law Podcast is swimming in the Internets... this week I revisit the topic of disclosure in "who gets to see what?". Check out the shownotes and resources at nplawcast.com!

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Comments on IRS Form 990

Alliance for Justice filed comments on the new Form 990... check out the full scoop here (PDF). The highlights are:

1) Lobbying reporting is expanded in confusing and inconsistent ways
2) The definitions of key terms are inconsistent with their current interpretations
3) The IRS questions improperly interfere with the internal governance and management of nonprofits
4) The IRS failed to address special reporting problems that are unique to 527 organizations

We'll see if the IRS addresses AFJ's issues when they respond to comments later in 2007 or early 2008.

Required reading

Lloyd Mayer of Notre Dame Law School has written a great article titled, What is this Lobbying that We are so Worried About? Here is the syllabus:

Lobbying is both an essential part of our democratic process and a source of some of our greatest fears about dangers to that process. Yet when Congress, the public, and scholars consider loosening or, as is more often the case, tightening the restrictions on lobbying, they usually assume that everyone knows what activities are in fact “lobbying.” They therefore overlook the fact that multiple definitions of lobbying currently exist in the various federal laws addressing lobbying. This Article seeks to fill this gap by answering the question of how lobbying should be defined for purposes of the existing federal laws relating to lobbying. The Article first explores the three sets of applicable laws, which tax lobbying, disclose lobbying, and restrict lobbyists. This exploration reveals that all three sets of laws arise out of a common concern regarding the influence of interest groups on government actions. Drawing on the extensive research regarding how interest groups wield such influence, the Article then determines that this research strongly suggests that the vulnerability to interest group methods that raise the greatest concerns varies depending on the type of government actor that an interest group seeks to influence. The Article therefore proposes the adoption of single definition of lobbying that covers all direct attempts to influence government officials and employees in Congress and at the very highest levels of the Executive Branch, while excluding attempts to influence other types of government actors and to influence the public.

Nonprofit Law Podcast Catch-Up

Back from my travels, and time to play catch-up with the Nonprofit Law Podcast... Check out editions number 12 and 13 in your podcatcher of choice, or click on the handy players below. Shownotes and resources for both can be found at nplawcast.com!

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NLP 12: Personal vs. organizational activity


NLP 13: The new IRS return for small nonprofits

Foreign referendums and lobbying

I'm typing this on my iPhone in Costa Rica after an interesting couple of days exploring volcanoes, coffee plantations and... a ballot referendum. All of this reminded me of an interesting quirk in tax law
to post for nonprofit law blog readers.

In a few weeks, Costa Ricans will vote whether or not to join the other Central American countries in approving a set of free trade agreements with North America. In my travels this week, I have seen
campaign signs supporting and opposing the referendum (some decidedly low-tech... like the one on the left here)... Which leads me to the tax law quirk. If you are a US 501(c)(3) public charity, taking a stance on this referendum counts as direct lobbying, even
though it is foreign legislation. It's always been an interesting wrinkle, and rarely applies to most charities, but it's something to
be mindful of if your organization deals with such matters.

See? Even when I try to take week off from nonprofit law, I can't
quite manage to do it! Regular blogging resumes this week, and a new
nonprofit law podcast should be up on Sunday. Have a great weekend!

Judge rejects Shays and Meehan case

Hat tip to AFJ's Advocacy Digest:

A district court judge agreed on Thursday that the Federal Election Commission can continue to police outside 527s on a case-by-case basis, pushing the issue back to Members of Congress, who already face a heaping post-recess legislative plate. The U.S. District Court for the District of Columbia on Wednesday ruled in favor of the FEC, dismissing a case brought by Rep. Christopher Shays (R-Conn.) and former Rep. Marty Meehan (D-Mass.). The suit attempted to compel the agency to issue rules for outside political groups such as the conservative Swift Vets and POWs for Truth and the liberal America Coming Together.

Roll Call reports more here. I'll be out of the country for the next week, so things might be a little quiet here on the blog. I'll post the next edition of the podcast tomorrow... have a great Labor Day weekend!

Nonprofit navigator highlights WRTL

Check out Beth Kingsley's excellent article on WRTL in the latest edition of the Nonprofit Navigator:

The Supreme Court on Campaign Finance: Or, What does Wisconsin Right to Life really mean?

The recent U.S. Supreme Court ruling in FEC v. Wisconsin Right to Life ("WRTL") has been portrayed variously as the death-knell for campaign finance reform, a victory for free speech, an incremental adjustment to the McCain-Feingold regulatory scheme, or opening a loophole in the campaign finance law big enough to drive a truck - or perhaps just a family-sized SUV - through. While scholars debate the effect on stare decisis and the implications for how this court will treat other campaign limitations, nonprofits and political operatives need to know what the case means in more practical terms. What are the rules for this election cycle?

Newt Gingrich, a 527 and a 501(c)(3)... which doesn't fit?

Newt Gingrich's 527, American Solutions, reportedly returned a $50,000 contribution from a 501(c)(3) charity last week. What's remarkable about this is that Newt and his folks were the ones that likely saved the bacon of the folks at the foundation.

As most of you probably know, a 501(c)(3) public charity is prohibited by tax law from giving money to any entity in a manner which supports or opposes candidates for office. A 527, typically, exists solely for political purposes... usually supporting or opposing candidates. There are a few circumstances where a 501(c)(3) could give funds to a 527, but they're few and far between... and susceptible to great IRS scrutiny. It seems the Gingrich folks were pretty sure they couldn't spin $50,000 of anything they did as nonpartisan... so they returned the money to the (c)(3) to save them from themselves (or a sure-to-come complaint). In response, the Hasan Family Foundation, the 501(c)(3), stated:

American Solutions is a nonpartisan effort that is focused upon educating Americans... None of the funds contributed to the organization are going towards politicians or a political party. We would never contribute foundation funds to a political party and/or candidate.

The reality is that tax law is a lot stricter than that... Hasan Family Foundation can do nothing at all that supports or opposes candidates. Giving money to an obviously partisan 527 that will use that money to fund things that support or oppose candidacies (cough-cough... Newt Gingrich's presidential run?) crosses the line. Thankfully for the folks at Hasan Family Foundation, Newt's folks at American Solutions are a little more savvy on the ins and outs of tax law than they are.

Nonprofit Law Podcast #11

I've just posted Episode #11 of the Nonprofit Law Podcast... this week I give the basics on fiscal sponsors. Check out the shownotes and resources at nplawcast.com!

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FEC asks for input on WRTL

Yesterday, the Federal Election Commission released a notice of proposed rulemaking on how it intends to handle the Supreme Court's ruling in WRTL. The Commission has its response narrowed to two options... both allow communications to be paid with corporate or union funds if they are “susceptible of a reasonable interpretation other than as an appeal to vote for or against a clearly identified Federal candidate.” Option one requires disclosure to the FEC if a communication mentions a candidate and falls within 30 days of a primary or 60 days of an election, and the other does not.

I suspect the usual opponents will square off on this during the comment period...

Craigslist Foundation: a nonprofit clearinghouse?

I've been a fan of Craigslist Foundation's work, particularly their bootcamps. Their new direction is very interesting... check out Project Entry Point:

We are transforming the existing Craigslist Foundation website into a comprehensive doorway to the nonprofit sector using a design inspired by craigslist.org and customized to the needs of the sector. Like craigslist.org, Craigslist Foundation's website will connect people to the services they need, to the jobs they seek, and to the peers they want to meet.

If they can pull this off in a useful way, this will be incredibly helpful for the larger nonprofit community... imagine having one-stop internet "shopping" for information on how to deal with issues that others have successfully navigated? This could be a boon for best practices and legal compliance.

Starting a Nonprofit: What You Need to Know

Although it is a little over two years old, this is a nice resource... Starting a Nonprofit: What You Need to Know (PDF) is a manual created by law students at the University of Richmond that outlines some of the basic legal issues for creating a nonprofit organization. It's free and available for download under a Creative Commons license... a nice alternative to the other beginner manuals out there.

Nonprofit Law Podcast #10

Episode #10 of the Nonprofit Law Podcast... recorded live in Saugerties, NY... this edition, we cover the world of restricted funds and lobbying. Check out the shownotes and resources at nplawcast.com!

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Should Nonprofit Organizations Play an Active Role in Election Campaigns?

The Bradley Center has posted the forum on nonprofits and elections here. As always, this is a lively debate topic!

Form 990 junkies, take note...

If you're interested in more on the future of Form 990 (the annual tax return form for many nonprofits), Alliance for Justice has scheduled a telephone conference that might be up your alley...

The call will focus on lobbying, political activities, and corporate governance that will be a part of AFJ's comments to the IRS. RSVP to Kyle Murphy at kyle(at)afj(dot)org by August 20 at 4pm ET. Instructions will be forwarded to all registrants on that date.

Nonprofits and candidates

Eliza Newlin Carney writes in today's Rules of the Game column that nonprofits that are run by current candidates should be subject to greater disclosure rules:

Nonprofits have defended their right to privacy long and passionately, arguing that disclosure of donors would squelch contributions and hurt worthy causes. But such groups enjoy tax-exempt status on the grounds that they work for the public good, not for the good of politicians. Tax-exempt groups that associate themselves with candidates in a high-profile, high-dollar presidential race must be held to a higher standard of disclosure.

While she cites some high profile abuse of charities by politicians, I'm not so sure this rises to the level of crisis portrayed in the article. It is a good - not bad - that high profile people are involved in charitable causes. Would disclosure rules really stop a candidate who is already breaking tax law by supporting a campaign through a charity?

I'm not at all opposed to regulating nonprofits... it just needs to be worthwhile and effective. I'm skeptical that this proposal would do anything to stop malfeasance. It will only create additional reporting requirements for charities that are doing good work with the help of a person who happens to be running for office.

Nonprofit Law Podcast #9

Episode #9 of the Nonprofit Law Podcast is up a little earlier than normal since I'll be on the road tomorrow... this week, we're looking a little more at the big picture: do you really need a nonprofit? Check out the shownotes and resources at nplawcast.com!

And, just because I like to cater to the early-adopting techie types... I have a special page set up to listen to the Nonprofit Law Podcast on your iPhone thanks to the folks over at the Financial Aid Podcast who are way smarter than I am at coding such things!

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On the road

I'll be out and about in upstate New York for the next week or so, so posting might be a little lighter than normal. Those of you who are Nonprofit Law Podcast listeners, the next show will be posted Sunday as usual Saturday night. August seems to bring insane heat and a dearth of news on the nonprofit law front, so enjoy the quiet times!

Wiki on the new Form 990

If you're interested in collaborating with others regarding the new Form 990, think about heading over to the National Center for Charitable Statistics and Guidestar's wiki. If you're not familiar with wikis, they are collaborative websites which can be edited by anyone. Sounds like a disaster, but usually they work quite well (like Wikipedia... usually). This is a great resource if you want to learn more about the revision or add your two cents to the discussion on how it can be improved.

Thanks to Gene Takagi's Nonprofit Law Blog for the pointer...

Nonprofit election activities forum

The Chronicle of Philanthropy has an article on last week's forum on election year activity by nonprofits... the consensus seems to be that the IRS and lawmakers need to give the nonprofit community more guidance. Best line quoted in the article... "The IRS confuses itself with the Centers for Disease Control... [i]n cutting out the tumor, they tend to cut out vital organs."

Nonprofit boot camp

Craigslist is great for searching for jobs and perhaps a used Mac... but the folks over there have also formed a foundation that helps nonprofits. The Craigslist Foundation's nonprofit boot camps are outstanding opportunities to learn and network... check out the upcoming ones in Berkeley (Saturday, August 18th) and NYC (Saturday, September 15th). DC's is right around the corner, and I hope to be able to attend... I'll post details when they announce the dates.

But, there's more... past boot camps have audio and other online resources. Check out the information from 2006's boot camp in San Francisco. One lecture of interest to readers of this blog is IRS audit manager Joe Kroll's rundown on the laws of 501(c)(3)s. The lecture can be found here, complete with a snazzy online player.

Correcting nonprofit reporting

This post is in response to a commentary piece today on wired.com that has misreported the lobbying rules for a nonprofit... it's an attempt to set the record straight on the law, and yet another plea from yours truly that reporters and bloggers need to contact people that actually know nonprofit law when commenting or reporting on the matter.

Wired.com posted a comment today regarding alleged illegal lobbying by SoundExchange, a nonprofit that has been designated by Congress and the US Copyright Office as the collector of digital royalties (iTunes sales, for instance) for music artists and record labels. SoundExchange is a 501(c)(6) trade association (see GuideStar here, but you'll need an account) and, according to its site, has been granted the exclusive authority to collect these royalties under the Copyright Act.

Any 501(c)(6) has the right to engage in lobbying activity under the tax code (see Revenue Ruling 1961-177) (PDF). One normally sees a lot of lobbying activity by trade associations, particularly if they are based in DC as SoundExchange is. However, the Copyright Act specifies the uses for the royalty money, and lobbying is not one of those uses that got the thumbs up from Congress (see section 114(g)). Guess who is a major funder of the lobbying group, MusicFIRST Coalition? You guessed it... SoundExchange.

The Wired commentator, Eliot Van Buskirk, asserts that SoundExchange has violated the law by funding a lobbying organization... but that's wrong. My read of the statute says that SoundExchange can only use the royalty money for administration of royalty collection, dealing with disputes in royalties, and dealing with the narrow issue of recordings made by entities that have a license to broadcast a performance. That's it... lobbying's not on the list. But the key here is that the use of the royalty money is restricted. SoundExchange can use other sources of money and legally use that as the source for lobbying. SoundExhange's general counsel told Van Buskirk:

Funding provided by SoundExchange to musicFIRST is authorized by copyright owners and performers who have chosen to become members of SoundExchange. These contributions come only from our members and not from non-member royalties, and were unanimously approved by the SoundExchange board.

So... the funds are coming from member dues, not from royalties, therefore the Copyright Act restrictions do not apply. Van Buskirk consulted an intellectual property professor and a music attorney to find out if there was specific legal authority for a nonprofit to lobby, and was told there is no specific statute authorizing the activity.

Of course, this is nonsense. Trade associations are free to lobby pursuant to their status under Section 501(c)(6) of the tax code, and have since 1961 (PDF). A little research, like googling "501(c)(6) lobbying" leads to a host of information on this legal point. The IRS has plenty of information in Political Campaign and Lobbying Activities of IRC 501(c)(4), (c)(5), and (c)(6) Organizations (PDF). On page 2. Asking an IP law professor and a music lawyer who don't look anyplace except one section of the Copyright Act won't give the right answer... Mr. Van Buskirk should have spoken with someone who knows nonprofit law, but more to the point, these two attorneys should have said they had no expertise in nonprofit law rather than lead Mr. Van Buskirk to believe SoundExchange was acting outside of the law.

Perhaps as a safety cushion on the point, Van Buskirk suggests that even if the lobbying was legal it was still out of bounds because "Congress intended to keep SoundExchange out of the lobbying business." That's simply not what the statute says. Congress clearly intended to keep SoundExchange out of the lobbying business with royalty money... and that's not semantics... it's what Congress said in the law.

Before I close out on this... don't take my post here as defense of the music industry or their trade associations on substantive issues or what they lobby for... I'll keep my thoughts on that to myself. However, the law's pretty clear on all of this, and I wish it had been reported correctly.

Nonprofit Law Podcast #8

Episode 8 of the Nonprofit Law Podcast is now available... this week there's math, so pull out the calculators as we go through calculating public support. Check out the shownotes and resources at nplawcast.com!

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Ethics reform passes Senate

The ethics bill I mentioned the other day just passed the Senate and is on the way to the President's desk... where it meets an uncertain fate. The White House is not happy with certain provisions in the bill, but has not commented on the part that impacts nonprofits (which, admittedly, is a very minor piece of the legislation).

Bauer on WRTL

Bob Bauer has two entries on his blog reviewing Rick Hasen's WRTL article... as one would expect, he finds flaws in his theoretical and practical analysis. And, as one would usually expect, i find the truth somewhere in the middle. I suspect we'll see a lot of ads that fall within the Supreme Court's newly created safe harbor addressing some kind of legislative issue that might also be seen to have campaign impacts. How prevalent these ads become remains to be seen... ultimately the ads will have to achieve their desired effect on the ad consumer. If they work in the way the ad producers want, you can bet you'll see more of them. In other words, the focus groups (i.e. John and Jane Doe turning dials in some windowless conference room in Des Moines and Manchester) will ultimately decide how many ads that have electoral impact see the light of day.

Ethics bill and charities

The freshly-passed ethics bill includes a provision of interest to some charities. The bill imposes additional reporting requirements on lobbyists who make contributions to charities that are controlled by members of Congress. The bill does not limit or prohibit a lobbyist from supporting a charity maintained, established or controlled by a member of Congress.

Deregulating election laws

Rick Hassen posted his latest paper on the Supreme Court and election law, Beyond Incoherence: The Roberts Court's Deregulatory Turn in FEC v. Wisconsin Right to Life. Based on the title, I suspect he's not a fan of the Roberts Court... A little reading for your Tuesday if you're into analysis. After my tangle with Dulles Airport (which I may personally rename to include expletives, but that's another post), I may hold off until later...

Nonprofit Law Podcast #7

Episode 7 of the Nonprofit Law Podcast is now available... this week, I cover publishing legislative scorecards. Check out the shownotes and resources at nplawcast.com!

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More Nonprofit Law Podcast kudos

More kudos for the Nonprofit Law Podcast came from onPhilanthropy this week... it's gratifying that the latest episode on social networks is getting a lot of positive feedback. I think nonprofits have been very innovative in the use of technology, but unfortunately the law does not give much guidance on the legality of these innovative strategies... I'm glad the podcast and some of my other projects will be helpful on the subject.

Nonprofits and elections discussion

The Hudson Institute is hosting an event entitled, Should Nonprofit Organizations Play an Active Role in Election Campaigns? on August 9th from noon to 2 PM in DC:

Recent readers of The Chronicle of Philanthropy witnessed a lively discussion unfold on its pages between D.C. Central Kitchen president and author ROBERT EGGER and Georgetown University scholar PABLO EISENBERG. With a view to the next election cycle, Egger argued in a May 31 opinion piece* that nonprofit organizations deserve the kind of political stature corporations enjoy because like corporations, they employ millions of Americans, command billions of dollars in resources, and thus play a vital economic as well as civic role in their communities. Yet nonprofits face a double standard when it comes to political activity, and they “accept their muzzled role.” Egger concludes that the laws that prohibit charities from direct campaign activities “not only are outdated, but also will be counterproductive” as nonprofits continue to grow in size, wealth, and stature.

Eisenberg, a regular contributor to the Chronicle, responded to Egger in his June 28 column.** “Existing regulations are not the culprit for the nonprofit world’s failure to be more activist and politically involved,” he wrote. Historically, charities and foundations have held themselves apart from business and government, serving as a mediating force between the two. Yet as a result, nonprofit groups have “enormous leeway in supporting and promoting activism and influencing the political system.” The problem is not that these organizations are hampered by their nonprofit status and all that it entails, Eisenberg argued, but that most simply fail to exercise their current rights to organize communities, communicate with elected officials and their staffs, and educate and register voters.

On Thursday, August 9, Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal will host a discussion between these two storied nonprofit sector leaders. Chronicle of Philanthropy editor STACY PALMER will serve as the discussion’s moderator. Please join us! Lunch will be served.

* “Charities Must Challenge Politicians,” Robert Egger, The Chronicle of Philanthropy, May 31, 2007. (For an electronic copy, visit the Chronicle's web site at http://www.philanthropy.com. Also available in PDF form - click here.)
** “Charities Should Remain Nonpolitical,” Pablo Eisenberg, The Chronicle of Philanthropy, June 28, 2007. (For an electronic copy, visit the Chronicle's web site at http://www.philanthropy.com. Also available in PDF form - click here.)

I plan on attending... this should be an interesting discussion.

WRTL: the FEC and settlements

The final disposition of the WRTL case seems to let nonprofits engage in grassroots lobbying without interference from the FEC. Following settlements in WRTL and a subsequent case, the parties and the FEC have agreed that the Supreme Court has essentially determined that genuine issue advertisements are not regulable by the FEC. The new standard, for those playing the home game, is that communications may only be regulated if they are “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.”

That's pretty hard for the Congress to prove, and it seems that the pendulum has swung back to favor advocacy rights over the need to regulate campaign finance. Alliance for Justice has more here.

Nonprofit Law Podcast #6

Episode 6 of the Nonprofit Law Podcast is now available... this week, I cover the legal issues for nonprofits using social networks like MySpace and Facebook. Check out the shownotes and resources at nplawcast.com!

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IRS Draft Form 990 teleconference

Today's IRS teleconference on the new Form 990 was interesting. Here are the highlights:

Reasons for change & approach
The form is outdated... it was last updated in 1979. Since then there have been an explosion in the number and sophistication of tax exempt organizations. The current form has been "jury rigged" to deal with changes, and that has not been effective. The form can't be renumbered in the current system, so the form often makes no sense. This leads to incomplete and incorrect filings.

The new form is designed to increase transparency, improve compliance and reduce burden on filers. One of the ways to deal with this was to reduce the number of schedules and restructure the whole form so that it makes more sense and is more consistent, especially for smaller organizations.

Overview of the redesign

• A summary or snapshot of the organization... the information all comes from other places on the form
• New calculation of efficiency and effectiveness indicators (seeking comments on this)
• Five highest compensated individuals (not just officers, etc.) - must use W2 or 1099 reporting and it expands beyond just 501(c)(3)s
• City and state of residence for individuals added (currently allows address of the organization)
• Page 4 - mostly new questions on governance (seeking comments)
• More breakdown on types of support and some forms of expenses
• Part VII - trigger questions for filing schedules (seeking comments)
• Part VIII - trigger questions for filing other IRS forms (seeking comments)
• Trimmed to 15 Schedules... some highlights:
• Schedule A is still for (c)(3)s only but it has been streamlined. It includes a public support test section with a five year period instead of four. Lobbying information has moved to Schedule C.
• Schedule B is largely unchanged (lists donors).
• Schedule C includes lobbying and inter-organization transfers with 527s.
• Schedule D has a mix of old and new, including Donor Advised Funds
• Schedule F has new information on foreign activities
• Schedule G has new information on third party fundraising (not internal development officer information, however)
  
• Schedule I still covers grants, but there are some changes
  
• Schedule J is new and targets information on highly compensated individuals
  

More information on the draft Form 990 is here. As far as the Form 990 goes, it looks like this new form may be simpler to handle, but as with any change, people who are used to the old form may be puzzled by the proposed changes. It seems like the IRS has put a lot of effort into this redesign, but it remains to be seen the degree to which this helps smaller nonprofits. There may be some threshold changes to the Form 990-EZ to help with that, but those changes are unclear right now (the IRS is seeking comment on that). The very smallest of organizations will be filling out a new Form 990-N beginning in 2008... basically a postcard that includes very limited information for filing.

Comments are due by September 14th (details here) in order to get this new form ready for fiscal 2008 (filed in 2009). The IRS rep says that if the new form is not finalized by December of this year it could not be implemented until 2012. That seems odd, but it apparently has something to do with the IRS technology division... and you don't want to argue with them, I suppose.

Forum on election activity

I received an invite to a panel discussion on election activity for 501(c)(3) charities in my email box yesterday... I plan on attending, and will post my thoughts on the blog afterwards. I've copied the information in case anyone is interested in participating in the discussion:

OMB Watch invites you to a panel discussion on the Pros and Cons of an IRS Bright Line Rule for Campaign Activities for Charities and Religious Organizations

Has the IRS' more aggressive approach to enforcement of the ban on partisan activities by 501(c)(3) organizations created unanswerable questions for your organization?

Ever wonder why IRS rules can't define permissible electoral activity as clearly as they define lobbying?

What impact could the recent Supreme Court decision in FEC v. Wisconsin Right to Life have on IRS enforcement policies? Does the IRS enforcement process need to be changed?

Hear experts discuss these questions and more:

Friday, August 3
10 a.m. to 12 p.m.
2040 S Street, NW, Washington, DC

Participants may also join by phone
Dial 1-302-709-8424; participant code 11549882# (not toll-free)

Panelists include:

Gregory Colvin
Attorney, Silk Adler & Colvin, expert and author on nonprofit lobbying and political activities. Co-Chair of the Subcommittee on Political and Lobbying Organizations and Activities of the Exempt Organizations Committee of the Tax Section of the American Bar Association.

Beth Kingsley
Attorney at Harmon Curran Spielberg & Eisenberg specializing in tax exemption, lobbying, policy advocacy and federal election law. Co-chair of the ABA Exempt Organizations Committee's subcommittee on Forms, Rulings, and Administrative Developments

Marcus Owens
Former IRS Director of Exempt Organizations Division and attorney at Caplin & Drysdale. Represents a broad range of tax-exempt organizations. Projects include organizations interested in public policy but concerned with legislative and political activities. Co-chair of the ABA Tax Section EO Committee's Subcommittee on Audits and Appeals

Moderator – Kay Guinane, Director – Nonprofit Advocacy Program

Please RSVP to Katie Clabby at kclabby@ombwatch.org or (202) 234-8494

House subcommittee to consider new Form 990

Next Tuesday, the House Ways and Means Oversight Subcommittee will hold a hearing on the new Form 990 and the impact on tax-exempt organizations. The subcommittee will hear testimony from the IRS, GAO and some select nonprofits. If you're interested in weighing in, you can let the Oversight Subcommittee know your thoughts here. I'll post some thoughts next week after the hearing.

Nonprofit Law Podcast #5

Episode 5 of the Nonprofit Law Podcast is now available... this week, I cover the different flavors of nonprofits. Check out the shownotes and resources at nplawcast.com!

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Nonprofit Law Podcast featured

onPhilanthropy's media blog just featured the Nonprofit Law Podcast... welcome to one and all!

McCain's reversal of fortune

The Wall Street Journal suggests that Sen. McCain's recent fundraising troubles are related to his own campaign finance reform law. Two years ago he was the absolute front-runner in the GOP, and now he's fallen well out of that slot and his landmark legislation has been turned back in part by the Supreme Court. What a difference two years makes...

New Nonprofit Law Podcast this weekend... have a good one!

Al Gore on nonprofit disclosure

I just finished listening to the audiobook version of Al Gore's The Assault on Reason, and deeply embedded towards the end, Gore mentions how he would like to require full transparency of donors to nonprofits. I think his intentions are good... he believes that corporations (the energy industry in particular) hides behind front nonprofits, funding ballot measure campaigns with practical anonymity. Unfortunately, I think the mechanism he would choose to solve this problem ignores decades of precedent protecting donor privacy. It wasn't that long ago that civil rights groups were targeted by those opposed to their cause for donor lists... it was an intimidation game, and it almost worked until the Supreme Court declared that these lists are private.

Would philanthropic giving drop if people knew that their names would be public? Would people who ordinarily give to controversial groups back off and start giving only to "safe" charities? I wonder if Gore has considered these questions?

Nonprofit Law Podcast #4

Episode 4 of the Nonprofit Law Podcast is now available... this week's topic is public disclosure rules. Check out the shownotes and resources at nplawcast.com!

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Nonprofit paying for Gov. Schwarzenegger's travel

NPR's Marketplace has a story, based on reporting first in the L.A. Times, on a nonprofit footing the bill for Gov. Arnold Schwarzenegger's overseas travel. The California State Protocol Foundation has paid for some (reportedly) pricey travel for the governor, and due to the protections afforded to nonprofits, the donors names are protected from public (but not IRS) scrutiny.

The issue of public disclosure of charitable contributors has been popping up a lot lately... it will be interesting to see if this causes a push in Congress to change the disclosure rules for charities. If so, expect the matter to be taken up by the courts. If you're interested in learning more about public disclosure rules, check out episode #4 of the Nonprofit Law Podcast, coming out this weekend.

IRS teleconference on new Form 990

The IRS is hosting two days of teleconferences as part of its roll-out of the new Form 990. It's definitely attracting some attention, as the first day is totally booked. The remaining available slot is July 19th from 1-2 PM EDT.

If you're the point person at your nonprofit that fills out the annual tax return (aren't you lucky!), this might be of interest to you. If you're already booked during the big show, or would alternatively rather do something... anything else, I'm signing up for it and will post the scoop here.

Nonprofit Law Podcast #3

I present to you episode 3 of the Nonprofit Law Podcast... this week's topic is bylaws. Check out the shownotes at nplawcast.com!

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WRTL analysis begins: deregulation wins?

Commentary is rolling in on the WRTL decision... Rick Hassen has predicted that the corporate and union money will flood the 2008 election because of this ruling. Possible? I think so... but let's also remember that as sweeping of a ruling this is (essentially, the Court said if there's a reasonable interpretation that an ad is NOT influencing an election, it can't be regulated by BCRA... that's pretty broad), advertisements will still have to facially be about something other than elections. It's interesting that the Court ruled in a manner that went well beyond what WRTL was asking for... but that might be a bigger picture issue related to the new Court members.

Are we back to a pre-BCRA world for nonprofits who wish to advocate in and around election season? I'd argue it hasn't rolled back that far, but suffice to say that this ruling certainly reshuffles the deck in the constant struggle between our values of free speech and the right to express viewpoints (whether from corporations or not) versus our values of controlling campaign finance to limit the perception of corruption. This time, it seems, the Court has swung the pendulum back to the notion that we as a country would rather filter through the speech rather than limit the expression through campaign finance limitations.

One thing is clear. This debate has raged for over 31 years, and shows no signs of ebbing.

WRTL wins: issue ads now legal during election season

SCOTUSblog has the scoop... it was 5-4 and the dissenting Justices spoke at length (which seems to be a new thing on the Court).

Needless to say, there will be a LOT of analysis on this. I think this is a good thing in a sense, however, I think Congress needs to rethink the electioneering communications scheme to regulate what should be regulated and leave lobbying and other protected communications alone.

This is not the death of campaign finance reform... it is, however, the first time the reform legal theory has been knocked down by the Court in a while. We'll see how both sides react...

UPDATE: The Washington Post gives some additional details here.

UPDATE, Part Deux: Campaign Legal Center has posted the decision here.

Nonprofit Law Podcast #2

Episode number 2 of the Nonprofit Law Podcast was just unleashed on the Internets... this week's topic is nonprofit startup tips. It came from a listener, so please feel free to contact me and give me your ideas for future shows at nplawcast.com!

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Pressuring disclosure of donors

I just came across this story on CNN regarding the Center for Responsive Politics call for the Center for Promise and Opportunity (John Edwards' anti-poverty charity) to release its donors to prove it wasn't electioneering. Let me be the first to call for the Center for Responsive Politics, a well-respected group, to stop preening for press based on a sack full of nothing.

They have a theory... the theory is that Edwards used the Center for Promise and Opportunity to jump start his presidential run without having to form an exploratory committee subject to FEC reporting requirements. The problem is that it's simply a theory based solely on Edwards' travel to a few early primary states that ignores - it seems - the other work done by the organization that fully complies with its charitable mission. Their allegation is thinly supported, and that's being kind.

In another article, former FEC chair Scott Thomas (not generally a staunch supporter of nonprofits) told a reporter that "there's nothing wrong with the approach Edwards took - so long as he did not conduct any campaign-like activities, such as disproportionate travel to early voting states or using funds to maintain a political staff." In other words, you need a lot more to prove this charity did anything wrong.

To ask for donors based on what the Center for Responsive Politics has is pretty remarkable... and not in a good way. The law protects the identity of donors to charities for a variety of reasons. People who give to charities have, often, relied on that for a long time. The Center for Responsive Politics should respect that and find some hard evidence of misuse of charitable resources before it tries to pressure a charity in the press to hand over private information. This is a seriously slippery slope (a term I hate to use)... the next charity targeted could be yours.

Quietly waiting...

I am currently on a mini, semi-vacation in rural Virgina but managed to duck in a little coffee shop wi-fi access time to check in on Wisconsin Right to Life... looks like the next potential day for a decision is tomorrow, but it could be put off until next week. We'll see...

In the meantime, I'm hard at work (remember it's a mini, semi-vacation!) on the next episode of the Nonprofit Law Podcast... I hope to get it up by Friday.

The new Form 990

The Chronicle of Philanthropy has a great article that breaks down the brand new, ink-still-wet Form 990. The highlights:

• Lots of new schedules following a 10 page "core" form that all groups fill out
• Supplemental compensation information for the highly-paid executives of nonprofits (>$150k)
• A narative section for the most significant accomplishment for the year
• A new schedule devoted to fundraising

There's a lot more... check out the Chronicle's article for the summary.

This is not the final form... the IRS is taking comments through September 14. If you're interested in checking out the draft, or in making comments go to the IRS draft 990 site and fire away. I'm still digesting the proposed changes... clearly the new form asks for more information, and I'm unsure what the practical utility is for some of these adds.

One last note... the proposed form will not go into effect until the 2008 tax year, so none of this really hits until 2009. Seems like it's far away, but it will be here before you know it!

WRTL: Has Justice Alito shown his hand?

The Washington Post reports today that Justice Alito gave a speech warning about the threats to free speech to the National Italian American Foundation.

That sound you hear is the speculation machine in DC going to 11.

If Justice Alito sides with WRTL on the free speech side (as opposed to the campaign finance reform side of the FEC), that would most likely represent the reversing vote for the provision of McCain-Feingold that stops nonprofits from engaging in certain types of grassroots lobbying communications near elections. Remember Alito replaced O'Connor and she voted to support the general principle (for lack of a better term) of this portion McCain-Feingold a few years back.

I've long felt that this part of the law (the "electioneering communications" provision) was created with the best of intentions, but simply carved out more legitimate nonpartisan, nonpolitical speech than the Constitution allows. Unlike many of the people that I agree with on this issue, I am definitely not a supporter of election deregulation. Should the Court toss this out to the recycling bin, I hope there's a middle path to ensure election advertisements can be properly regulated while protecting the lobbying voices of nonprofit groups.

Nonprofit Law Podcast #1

Episode number 1 is up... just a lay of the land this week. Please feel free to contact me and give me your show ideas at nplawcast.com!

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WRTL update

SCOTUSblog and Rick Hassen report no ruling from the Supreme Court on everyone's favorite campaign finance case.... maybe next week.

Nonprofits should be interested in this if they engage in grassroots lobbying activity using broadcast ads... most don't, quite frankly. Still, it's an interesting view into what direction this Court is headed when it comes to the balance between advocacy rights and the need to regulate campaign finance.

New forms on the way

The IRS is about ready to unveil some new forms for nonprofits to fill out as a part of their annual reporting... no news yet on what they look like, but that's only fueling the speculation as to whether the new forms will be helpful or more of the same.

Back from New Orleans after a great weekend with the Waterkeeper Alliance. I gave a presentation on effective grassroots lobbying on Saturday and had a nice chance to meet some of the new programs' Keepers. I expect to do a segment on grassroots lobbying issues on a future edition of the Nonprofit Law Podcast, so stay tuned. Speaking of the podcast, I'll be posting episode #1 sometime this week...

Countdown to WRTL

The Supreme Court is probably with a few weeks of releasing its holding in Wisconsin Right to Life... the Green Bay Press-Gazette has this story in advance. I mentioned the case in the latest Capital Caucus... the newest members of the Court may have to abandon their own stated principles of stare decisis in order to reverse aspects of McConnell and find for WRTL. It shall be interesting...

Waterkeeper Alliance conference

I'll be speaking this week at the Waterkeeper Alliance annual conference in New Orleans... the topic is the laws of grassroots lobbying for 501(c)(3)s. I hope to post the first edition of the Nonprofit Law Podcast while I am down there, but I expect blogging to be a bit on the light side.

IRS releases guidance on election activity

It's not my birthday, but the IRS just handed out a gift... precedential guidance on what 501(c)(3)s can do around election time.

Updating a fact sheet released early last year, the new Revenue Ruling covers a host of topics near and dear to charities that engage in advocacy around election time. Remember it's illegal for a charity to do anything that remotely supports or opposes a candidate for public office. Nonpartisan activities, however, are permissible (like voter guides, public debates, get-out-the vote drives, etc.). Charities can also engage in issue advocacy and general education activities so long as they do not connote support or opposition to any candidates. Individuals involved in charities are still free to engage in partisan activities on their own time, using their own resources, so long as the 501(c)(3) is not tapped for assistance.

I'll be covering some of the issues raised in the Revenue Ruling in one of the first few episodes of the Nonprofit Law Podcast. In the meantime, check out the Revenue Ruling here (PDF).