Welcome to this issue of the Nonprofit Federation's Critical Issues Hot Sheet. This update includes any Federal Legislation, Regulatory issues, State Legislation and Ethics issues affecting nonprofits. Questions or comments regarding any issues may be directed to Senny Boone at 202.861.2498.
SAVE THE DATE—Critical Issues Conference 2009—March 26, 2009 - Washington, DC
REGULATORY ISSUES
POSTAL REGULATORY COMMISSION The PRC held its final public hearing to solicit views relating to the universal service obligation of the US Postal Service and the postal monopoly. The hearing was webcast on the PRC Web site via a link to the streaming audio. The Postal Accountability and Enhancement Act of 2006 (PAEA) requires the Commission to report to the President and Congress this December 19 on universal postal service and the postal monopoly in the US, including the monopoly on mail delivery and access to mailboxes. Complete Announcement
PRESIDENT NOMINATES PRC COMMISSIONER RUTH GOLDWAY FOR ANTOEHR President George W. Bush announced he has nominated Ruth Y. Goldway, of California, to be Commissioner of the PRC, for an additional six-year term expiring Nov. 22, 2014.
POSTAL SERVICE PLANS TO OVERHAUL DELIVERY NETWORK, CLOSE FACILITIES The US Postal Service plans to close dozens of facilities across the country as part of a major reorganization, a move that could save millions of dollars and create a more flexible postal network. But the plan is certain to spark a fresh round of bickering with the agency’s strong labor unions. Last month, the USPS released a plan for overhauling its delivery network. The report calls for closing airport mail facilities, consolidating bulk mail centers, and streamlining the computer software that maps postal routes. The closures could lead to the elimination of hundreds of jobs and more outsourcing.
INTERNAL REVENUE SERVICE REVISED FORM 990 MAY BE SOURCE OF NEW IRS COMPLIANCE CHECK PROJECTS The IRS may use information reported on the revised Form 990 to begin new compliance check projects, Exempt Organizations Director Lois Lerner told participants at an American Institute of Certified Public Accountants conference June 19. The new Form 990 addresses new topics such as compensation, governance, and expenses, which can be used to spark new compliance check projects. Lerner said that practitioners can expect to hear about new compliance projects through the exempt organizations implementing guidelines that come out in October. In response to a question on the Form 990 about the conflict of interest policy, Lerner said that the failure of an organization to have such a policy will not automatically trigger an audit. Rather, she said, a “no” answer will be looked at in conjunction with other types of information on the form, such as whether the charity made loans to its officers, directors or trustees.
FTC SUBMITS DO NOT CALL REPORT TO CONGRESS The FTC has submitted its report to Congress regarding the Do Not Call Registry for Fiscal Year 2007, as required by the Do Not Call Implementation Act. The report contains information on the effectiveness of the Registry, the number of consumers who have placed their numbers on the Registry (145 million), the number of entities paying fees to access the Registry and the amount of these fees, FTC enforcement of the Registry under the Telemarketing Sales Rule, and other information. The full report can be found here.
FEDERAL ISSUES The House will recess August 11 through September 5. The Senate will recess August 9 through September 7. 110th Congress 2nd Session Adjornment Date - TBD
SENATE COMMERCE COMMITTEE HOLDS HEARING ON PRIVACY & ONLINE ADS The focus of the hearing centered on the current state of the online advertising industry, its impact on users’ privacy, and what role self-regulation or legislation could serve in protecting consumer privacy. Committee Chairman, Senator Dorgan (D-ND) publicly recognized the myriad benefits of online advertising and clarified that the hearing was not meant to question its value but rather examine its impact on users’ privacy. The FTC stated that it favors a self-regulatory rather than a legislative approach to addressing online privacy issues because of the speed at which technology is changing. Sen. Dorgan added that the Committee intends to hold another hearing in the near future regarding on-line advertising to further examine the role of Internet Service Providers (ISP) in ensuring the privacy of their customers.
STATE LEGISLATION This report includes briefings on the following proposals, which are rated for importance on a scale of 1 (not important) to 10 (extremely important).
Please note that this is not a comprehensive list of all bills that affect the solicitation of charitable contributions.This list only includes those bills that would have some significant negative effect on how nonprofits and fundraisers operate.You should consult with competent legal counsel to make sure you are in compliance with all applicable laws.
CA S 1400 NEW HI S 3171 -- UPDATED HI S 73 HI S 1657 HI S 2014 MA S 949 NEW MA S 2559 ME LR 1444 / ME LD 1792 MI S 507 NC HB 1569 NY A 3679 NY A 4613 NEW NY A 6225 NY A 7650 NY A 8834 / NY S 5267 NY S 523 / NY S 4943 NY S 8041 NY A 11478 / S 7850-- UPDATED OK SB 1955
CA S 1400 - NEW
Importance: 8
Description: This bill would regulate sweepstakes mailings only.Although it imposes many restrictions on sweepstakes, the most important aspect of the bill is that it would require an “opt in” system for list trading and rentals.List owners would be prohibited from trading or renting list names without express prior permission from the recipient.
Status: This bill has a great deal of support in the legislature.It has already passed one house and is working its way through the other.Although the chances of stopping it are slim, DMA lobbyists have assembled a coalition that has been working against it from the beginning and they aren’t giving up.
DMANF Analysis: While few DMANF members engage in sweepstakes mailing, this bill would be significant because it would impose an “opt in” system on list trading and rental without any exceptions for nonprofits.If this bill passes, it could start a trend that may be followed by other states and that may be imposed far beyond sweepstakes mailings.
HI S 3171 - UPDATED
Importance: 7
Description: This bill reinstitutes the registration requirement for charities in Hawaii.It goes into effect upon passage and registrations must be filed by January 1, 2009.It removes the bonding requirement for fundraising consultants but imposes the highest registration fee for nonprofits in the country ($750 for nonprofits with revenues of $2,000,000 or more).The bill also requires commercial co-venturers to notify the state before beginning a charitable sales promotion in Hawaii
Status: This bill was signed into law on 6/13/08.
DMANF Analysis: This new law simply adds another form and additional administrative requirements to the burdens already carried by nonprofits that solicit nationwide.However, it relieves PFCs of the significant burden of filing a $25,000 bond.
MI S 507
Importance: 7
Description: This bill is a significant revision of the Michigan charitable organizations and solicitations act.Although it sets the registration fee for professional fund-raisers at $300 and raises the bonding requirement from $10,000 to $25,000, it redefines “professional fund-raiser.”It is currently unclear whether this redefinition will exempt most fund raising counsel (those whose clients have final authority over solicitation material; those who do not solicit; and those whose compensation is not related to the amount of funds raised) from the registration and bonding requirement.DMANF counsel are consulting with the Attorney General’s office to see how it will interpret the new language.
Status: A substitute bill has been stalled for several months even though the sponsor’s staff had high hopes that it will pass this legislative term.The Attorney General’s office has already indicated that it supports the bill, although exactly how the bill will be interpreted remains unclear. The exact terms of the bill are still being negotiated.
DMANF Analysis: If passed, this bill could exempt PFCs from the bonding and registration requirement in Michigan.If it does not, it would still make useful, although less significant, revisions to the Michigan law.N.B. Regardless of how this bill is interpreted, it will not have a significant negative effect on how nonprofits and fundraisers operate.It was included on this list because of the possibility that it will have a significant positive effect and may warrant favorable lobbying from the nonprofit and fundraising community.
NY A 7650
Importance: 6
Description: Mandates do not mail/call/email list.Each organization must maintain its own and must check the list that the State of NY will create.
Status: Introduced in late April, 2007 and in committee.This bill languished through the last session of the New York legislature without ever being acted upon.There is no momentum for it yet in this session.The companion bill in the Senate disappeared in January so it appears unlikely that the Assembly version will move forward either.
DMANF Analysis: This would impose a tremendous burden on nonprofits.The bill is not specifically aimed at nonprofits, but the definitions of “individual reference service provider” and “marketing list broker” are drafted so broadly that they will likely encompass many nonprofits and fundraisers.The provisions of the act are quite onerous.Organizations set up a mechanism to honor opt-out requests and scrub its lists against a new “exclusion list” created by the Secretary of State.Detailed notice must be given to everyone remaining on the list each time their name is shared; and organizations must provide a copy of all information on file for an individual upon demand.
ME LR 1444 / ME LD 1792
Importance: 5
Description: This bill would place a $250,000 compensation limit on directors and officers of Maine charities that receive 25% of their funding from government sources.
Status: This bill was heard in committee on May 15 but the committee took no action. The bill has been carried over to the next legislative session.
DMANF Analysis: If passed, this bill would make it difficult for large Maine nonprofits to deliver services in Maine.It would encourage larger nonprofits to move out of the state.
NC H 1569
Importance: 4
Description: This bill would provide that 501(c)(3)s that spend less than 65% of their annual gross receipts on their charitable purposes would no longer be exempt from the N.C. state income tax.Gross receipts are defined to include the gross amount solicited on its behalf by a solicitor.Funds spent are defined to include any funds retained by a paid solicitor and any funds not retained by the organization at the end of the fiscal year.
Status: This bill was introduced in April and no action has been taken on it since then.
DMANF Analysis: If passed, this bill would essentially tax the proceeds of charitable solicitations in NC.
NY A 4613 - NEW
Importance: 4
Description: This bill would make many revisions to New York’s charitable solicitations act.Most revisions are minor, but a few are significant:
·Professional fund raisers (which are usually called “solicitors” in other states) would see their registration fee climb to $1800 per year.
·Professional Solicitors, which New York law defines to be individuals hired to solicit donations directly (e.g. door-to-door canvassers, telefunding reps, etc.), would no longer be required to register and pay a registration fee.
·Fundraising contracts would be deemed to have a clause in them providing that the names and addresses of any contributors acquired under the contract will be owned by the nonprofit.
·Subcontractors to fund raising counsel must get written consent from the charities for which they will be conducting fundraising activity, and the subcontract must be filed with the NY Attorney General’s office along with the fundraising consulting contract.
·Professional fund raisers, fund raising counsel, and commercial co-venturers would now have to retain records on their fundraising activities for six years rather than just three years.
Status: The bill has passed the Assembly and is now in the Senate Committee on Finance.The same bill was proposed last year and did not pass.
DMANF Analysis: This bill will primarily affect professional fund raisers by raising their fee but by also excusing them from the expense and administrative burden of getting each of their solicitors registered with the state of New York.Depending on how the Attorney General’s office interprets the subcontracting issue, this law may require that freelance copywriters’ contracts be filed with the Attorney General’s office.
NY S 523 / NY S 4943
Importance: 4
Description: These two different Senate bills require that fundraisers and charities disclose, at the time of solicitation, the percentage of the gross contribution that will go to the charity and the percentage that will go to the fundraiser.This would apply to all charitable solicitations, including solicitations by charities that are exempt from the registration requirement.
Status: S 523 was voted “do pass” by the Senate Finance Committee, but momentum stalled for nearly a year.In January, 2008 S 523 was moved to another committee so it appears that the sponsor is trying another line of attack.
DMANF Analysis: These bills are facially unconstitutional under Riley v. National Federation of the Blind of N.C., 487 U.S. 781 (1988) and several other cases, therefore they are unlikely to pass.If either somehow passes, though, it should be struck down immediately.
NY S 8041
Importance: 3
Description: This bill would require that charities print on every solicitation an address and telephone number to contact so that the addressee can be removed from the mailing list.
Status: This bill was introduced in late April and has not yet moved.
DMANF Analysis: Various laws already require that nonprofits print an address to which requests for financial information should be directed.Usually, these are the same addresses to which requests to be removed from the mailing list would be sent.The bill does not require that the “do-not-mail” address be labeled as an address to which “do-not-mail” requests be sent, so even if the bill passes as currently written, the new address will likely already be on mailpieces that comply with existing law without requiring any additional verbiage.However, given that this is part of a broader movement to stifle direct mail solicitations the DMANF will follow this bill closely.
NY AB 8834 & SB 5267
Importance: 3
Description: Creates a state “do-not-contact” list.List owners and brokers would be compelled to maintain their own do-not-contact lists as well.The bill will clearly affect list brokers although charities are exempted.Those regulated will have to: exclude records from the do-not-contact list, advise people of their rights under the law when people contact them, disclose all data on record to people when they request it, and comply with other requirements.
Status: In committee on Consumer Protection.These bills went nowhere in the last legislature and were reintroduced on May 31, 2007.They do not appear to have any momentum.
DMANF Analysis: While this would impose restrictions and procedures similar to the DMA preference service, it would also impose additional burdens such as advising people of their rights under the NY law and required disclosure of all information on file regarding an individual upon his request
MA S 2559
Importance: 2
Description: Would impose an annual salary cap of $500,000 per individual on charities organized in Massachusetts and with revenues of $1,000,000 or more.
Status: This bill has not been acted upon since it was introduced in March.
DMANF Analysis: If passed, this bill would make it difficult for large Massachusetts nonprofits to deliver services in Massachusetts.It would encourage larger nonprofits to move out of the Commonwealth.
HI S 1657
Importance: 2
Description: Would require the HI Attorney General’s office to publish the percentage of donated funds that are received by a charitable organization.
Status: This bill has not been acted upon since it was introduced in January.
DMANF Analysis:Various states, most notoriously New York with its “Pennies for Charities” report, already make such reports.Another such report would help cast nonprofit fundraising in a negative light.
NY A 3679
Importance: 2
Description: Would require nonprofits to submit with each registration a “detailed statement”describing how the percentage of funds contributed to the organization are allocated to administrative/operating expenses and to the charitable purpose.
Status: This bill was introduced months ago and does not appear to be going anywhere.
DMANF Analysis: It would appear that a simple statement indicating the percentages were determined in accordance with GAAP and AICPA 98-2 would not qualify as a “detailed statement.”This would be the first requirement of its kind and would present an additional administrative hassle for most organizations.
OK SB 1955
Importance: 2
Description: This bill makes several changes to the OK charitable solicitations act.Most important are the changes for “professional fund raisers” (solicitors).PFRs would have to pay a $300 registration fee and post a $25,000 bond annually instead of the $2500 bond they post now.They would also have to undergo background checks with each registration and renewal.In addition, individuals hired to actually conduct solicitation activity (door-to-door, telefunding, etc.) will have to pay a $25 registration fee and undergo a background check.
Status: This bill has apparently stalled and is not likely to pass this year.
DMANF Analysis: If passed, this bill would make it more expensive and difficult for nonprofits to engage others to solicit contributions in Oklahoma.
HI S 73
Importance: 1
Description: Would require nonprofits with revenues of $1M to form an audit committee and file an audit.Such nonprofits must also use generally accepted accounting procedures.
Status: This bill does not appear to be moving.
DMANF Analysis: Most nonprofits with $1M or more in revenues are already required by other states to prepare and file an audit so this should have minimal impact.
MA S 949 - NEW
Importance: 1
Description: This bill would impose various Sarbanes-Oxley style requirements upon charities that must register in Massachusetts.The requirements include:audit committees, whistleblower protections, and mandates that particular executives sign the organization’s financial reports.The bill would also impose a state analog to the “intermediate sanctions” statute and associated regulations.
Status: his bill was introduced in May and no action has been taken on it since then.
DMANF Analysis: Most charities that raise money nationwide should already be complying with the requirements that this bill would impose because they mimic existing federal law.
NY A 11478 / S 7850 - UPDATED
Importance: 1
Description: Would allow fundraising consultants and solicitors an opportunity to take a class on fundraising laws and ethics and have their registration fee (which is among the highest in the nation) waived for a year.
Status: he Senate bill was introduced in late April.The Assembly was substituted by the Senate bill in June.At this time of year, these bills can move quickly and pass in NY.
DMANF Analysis: This is a reprise of a recent NY bill that first sought to require a class for all fundraisers registered in NY.Then the bill was amended to make the class optional and allow for a waiver of the renewal fee if the class was taken, but the bill was vetoed by Governor Spitzer.It appears that the sponsors are taking another run at it.
