A Year of Attacks on Advocacy, Flawed Anti-Terrorism
Measures
December 13, 2005 Vol. 6, No.
25:
According to a
survey of Louisiana residents released last month by Louisiana State
University, faith-based organizations and nonprofits got higher marks than
government for their hurricane recovery efforts. While not surprising given
the abysmal government response, the findings raise larger questions about the
role of the federal government in providing resources to the nonprofit sector.
Nonprofits face major
long-term
budget challenges at the federal level that will continue to make it more
difficult to serve the people and missions they exist to serve.
Even as tax and budget cuts are starting to have an impact on nonprofits,
we see efforts to limit the advocacy voice of groups. This has come in the
form of restrictions on the federal grantees' use of private funds, and
slippage of election reforms into nonprofit issue advocacy. Moreover, as
Congress begins to tackle allegations of corruption, particularly among
lobbyists and elected officials, nonprofit advocacy rights may also wind up
curtailed.
One
bill in the House that included a new affordable housing fund created
enormous anxiety and action within the sector. Reminiscent of the 1990s Istook
amendments that silenced the advocacy voice of nonprofits, this bill would
have restricted nonprofits from receiving affordable housing funds if they
engaged in voter registration and other nonpartisan voter activities,
lobbying, or produced "electioneering communications" with their private
funds. Broader than the Istook amendments, the bill's language would have cut
off grants to nonprofits that "affiliated" with any other entity doing such
activities. The definition of affiliation contained in the affordable housing
provision was so broad as to implicate board members, coalition partners, and
those giving certain amounts of money--including state government grants. The
provision passed the House in a closely contested vote. Now it is up to the
Senate.
While attacks on advocacy such as the affordable housing fund provision
took place, Congress stepped up efforts to investigate the governance and
oversight of charities. At the encouragement of the Senate Finance Committee,
Independent Sector formed a
panel to propose recommendations for improving governance and oversight of
the sector. Other groups, such as the National Committee for Responsive
Philanthropy (NCRP) and the Philanthropy Roundtable, developed recommendations
of their own. The NCRP recommendations targeted foundations, and the
Philanthropy Roundtable raised concerns about developing new requirements when
existing requirements are inadequately enforced. Many groups raised concerns
about the impact of such proposals on small nonprofits. As the year draws to a
close, congressional proposals for reform will likely be pushed into 2006.
A new area of concern emerged for the nonprofit sector this year:
anti-terrorism financing. The Combined Federal Campaign (CFC), the
government's workplace charitable giving program, had earlier told applicants
that they must check their employees and others they give money to against a
variety of terrorist watch lists. In addition to the civil liberties issues
involved, major concerns were raised about the accuracy of these lists. The
ACLU and 12 other organizations, including OMB Watch, challenged the CFC
requirement.
This year, the CFC concluded that eligibility was not contingent on
checking terrorist watch lists, but on certifying compliance with
anti-terrorist financing laws. The CFC also suggested nonprofit participants
follow guidelines developed by the Treasury Department. These guidelines,
Anti-Terrorist Financing Guidelines: Voluntary Best Practices for
U.S.-Based Charities have faced widespread opposition since their
introduction in 2002.
A
number of nonprofits and foundations worked with the Treasury Department
during 2005 to revise the guidelines. Last week, the Treasury Department
issued a new revision that in many respects moves in the wrong direction. The
overall effect is to place charities in the role of government investigators
and informers, diverting resources from charitable activity to what may prove
to be useless information collection and reporting. The revised guidelines
reflect a larger problem with the federal government's approach to
anti-terrorist financing issues: instead of focusing resources on following
investigative leads, the government is collecting vast amounts of information
in the hope that something will turn up--in essence, looking for the
proverbial needle in a haystack. This does not effectively prevent diversion
of funds to terrorist networks.
Many policy developments in 2005 had implications for the nonprofit sector.
To follow is an overview of the most influential developments related to OMB
Watch's work.
A New Attack on Advocacy: Private Fund Encroachment
Legal Services:
Litigation challenging the constitutionality of limitations on the
advocacy rights of government-funded nonprofit legal services groups
advanced recently with oral arguments before a federal appeals court. On
Nov. 2, the U.S. Court of Appeals for the Second Circuit heard oral argument
in Velazquez v. Legal Services Corporation (LSC), a lawsuit brought
on behalf of a coalition of lawyers, indigent clients and New York City
officeholders, arguing the government has no business regulating the
privately funded, constitutionally protected activities of legal service
programs. The attorney for the Justice Department argued that the government
had an important interest in having legal services programs focus
exclusively on the categories of case the government chooses to fund. This
statement cuts to the heart of why the outcome of this case is important to
the nonprofit sector. If the federal court upholds the LSC restrictions on
the use of the private funds of nonprofit legal services programs, the
Velazquez case could open the door for an attempt by Congress to limit
the use of the private funds of a wide variety of federal grantees,
restricting whatever it deems threatening or out of line with its
intentions.
Affordable Housing Fund Anti-Advocacy Provision:
Restrictions on the use of private funds were not exclusive to the courts.
On Oct. 26, H.R. 1461, the Housing Finance Reform Act, passed the House
331-90, despite a provision that disqualifies nonprofits from receiving
affordable housing grants if they have engaged in voter registration and
other nonpartisan voter activities, lobbying, or produced "electioneering
communications." Organizations applying for the funds are barred from
participating in such activities up to 12 months prior to their application,
and during the period of the grant even if they use non-federal funds to pay
for them. Most troubling, affiliation with an entity that has engaged in any
of the restricted activities also disqualifies a nonprofit from receiving
affordable housing funds under the bill.
Led by the affordable housing community, nonprofit groups
rallied against the
appalling anti-advocacy provisions. After losing a close House fight by five
votes, the nonprofit sector continues to work to ensure the language is not
included in the Senate version. The Senate bill, S. 190, currently does not
contain an affordable housing fund provision, to which the anti-advocacy
language could be attached.
Head Start: Language in the Head Start Improvements for
School Readiness Act, S. 1107, creates
new
barriers to voter registration by expanding the current prohibition on
use of program (i.e., federal and matching) funds to private funds.
Moreover, the provision appears to expand the reach of the prohibition from
specific Head Start programs to the program's sponsoring agency. This
revision has significant implications for how Head Start grantees may use
their private funds; as such funds might be considered part of the program.
Head Start grantees are already prohibited from using Head Start program
funds for any type of political activity, including voter registration.
A coalition of nonprofit organizations sent a letter to the sponsors of
the legislation, Sens. Michael Enzi (R-WY), Edward Kennedy (D-MA), Lamar
Alexander (R-TN) and Chris Dodd (D-CT), asking for clarification that the
provision only pertains to federal Head Start funds.
Elections and Issue Advocacy
IRS Audits: Recent audits by the IRS as part of its
Political Intervention Program (PIP) have led to growing concern and legal
confusion about the difference between statements by individuals and
statements attributed to organizations, and what constitutes genuine issue
advocacy, as opposed to partisan electioneering. In 2004, the IRS initiated
the new PIP process to review cases of potential violations on the ban on
partisan activities by 501(c)(3) organizations. The process came under fire
when the National Association for the Advancement of Colored People (NAACP)
was
audited because its chair criticized President Bush during a July 2004
convention speech. The concern about muzzling charities picked up steam this
year as the pastor of All Saints Episcopal Church in Pasadena, CA
announced in November that the IRS was conducting a formal examination
of the church's tax-exempt status, due to an anti-war, anti-poverty sermon
delivered two days before the 2004 presidential election. (http://www.ombwatch.org/article/articleview/3167/1/403)
Federal Election Commission Regulations: A diverse
coalition of charities filed an
amicus brief
on Nov. 14 in the Supreme Court case Wisconsin Right to Life v. Federal
Election Commission urging the court to protect the right of nonprofits
to broadcast grassroots lobbying communications. The multi-party amicus
brief was filed on behalf of 35 conservative and progressive charities
(exempt under 501(c)(3) of the federal tax code). The brief argued that the
electioneering communications restrictions deny charities the right to
petition the government for redress of grievances, which is protected by the
First Amendment and that the Bipartisan Campaign Reform Act cannot be
constitutionally applied to 501(c)(3) charities because such organizations
cannot engage in partisan electioneering.
The FEC also began a rulemaking proceeding to review the "electioneering
communication" exemption for 501(c)(3) organizations, after it was the
subject of a court challenge by BCRA's sponsors. The outcome of this
rulemaking may have a direct impact on whether charities can engage in
issue advocacy 30 days before a primary and 60 days before a general
election.
Lobbying Reform
In response to
recent scandals
involving congressional travel paid for by a nonprofit serving as a conduit
for a registered lobbyist, Congress may be stepping up lobbying reform
legislation. Legislation introduced in the House and Senate is aimed at
lobbyists in general but may result in changes for charities, particularly
in regard to reporting of grassroots lobbying and disclosure of donors.
Anti-Terrorist Financing Issues
Combined Federal Campaign:
The Office of Personnel
Management's Combined Federal Campaign (CFC), the federal government's
workplace charitable giving program, finalized a
rule change on Nov. 7 that moved away from its previous requirement that
all participating charities check their employees' names and those entities
they contribute to against government watch lists.
The American Civil Liberties Union joined forces with 12 national
nonprofit organizations, including OMB Watch, in challenging the requirement
to check terrorist watch lists. The suit was put on hold when the Office of
Personnel Management (OPM) proposed in March to change the requirement. OPM
proposed that participating charities certify that they are in compliance
with existing anti-terrorist financing laws. The final rule was consistent
with the March proposal: "OPM does not mandate that applicants check the
Specially Designated Nationals (SDN) list or the Terrorist Exclusion List
(TEL)." Unfortunately, the OPM rule encourages charities to follow the
Treasury Department's anti-terrorist financing guidelines (see below).
Treasury Department Anti-Terrorist Financing Guidelines:
On Dec. 5, the Treasury Department released a revised version of its
November 2002
Anti-Terrorist Financing Guidelines: Voluntary Best Practices for
U.S.-Based Charities. The Treasury Department announcement requested
public comment on the revisions by Feb. 1, although the revised guidelines
immediately replace the 2002 version.
The Treasury Guidelines have been the focus of criticism from a number of
nonprofits, and a working group of nonprofits and foundations worked with
the Treasury Department, in an effort to improve the guidelines. In
addition, the Georgetown University Public Policy Institute hosted an event
discussing the impact of the guidelines and other anti-terrorism financing
requirements on the charitable sector.
Unfortunately, the new guidelines move in the wrong direction calling on
nonprofits to check a terrorist watch list for employees, recipients they
give money or in-kind support to, and employees of recipient entities. The
guidelines also call on nonprofits to report anyone on the list, as well as
"any suspicious activity" by individuals or groups, to the government.
In the wake of Katrina, charities and foundations scrambled to figure out
how to aid the victims of Hurricane Katrina, helping them get housing, jobs,
transportation, health care, education for their children, post-trauma
counseling, and other services. Charities also focused on long-term outcomes,
the work of nonprofits can help prevent the massive devastation wrought by
Hurricane Katrina. Good charitable giving legislation should only be Congress'
first step in aiding charities in getting the resources they need when
Congress and the nation is asking so much of them. Congress also must do more
than rely on the nonprofit sector's disaster preparedness and relief programs.
Congress cannot expect a vibrant nonprofit sector to provide services in
the face of disaster or step in when there are budget cuts, and in the same
breath not allow the sector to speak out on issues without the fear of
retribution. When government seeks to limit free expression under the very
programs it deems beneficial to underserved communities and
individuals--whether it involves legal representation for the poor or civic
engagement for affordable housing recipients--government exerts a level of
control antithetic to our democracy.