Characterizations, editorial comments, abbreviations and shorthand references are solely PPA Highlights author Barnaby Zall’s, and do not necessarily represent the views or positions of the Public Policy Legal Institute, the First Tuesday Lunch Group or their members and participants. Suggestions and corrections welcome.
IRS
Ten Years Later, the IRS Targeting Scandal Continues to Stir Debate: So opines long-time Tax Notes Editor Fred Stokeld (firewall). Among other comments, David Keating, President of the Institute for Free Speech and a co-leader of the First Tuesday Lunch Group, told Stokeld: “The fundamental problem is that the IRS knows nothing about free speech or Supreme Court First Amendment jurisprudence, which is hardly surprising given its tax collection and compliance mission,” … As a result, the IRS guidance on political activity is unconstitutionally vague. When lines aren’t drawn clearly, that lack of clarity creates an environment for abuse.”
Other coverage of the anniversary was limited. Law Prof. and founder and Chairman of the Institute for Free Speech Brad Smith wrote in the Washington Examiner: “Until and unless Congress acts to get the IRS out of the speech-policing business altogether, courts should find current IRS rules unconstitutionally vague on the same First Amendment grounds that have guided the courts when considering FEC rules.” Matt Nese commented in Reason magazine (“Every American has the right to support causes they believe in without fear of harassment, intimidation, or discrimination from the tax collector. Ten years after the IRS unveiled one of the most shameful scandals in its history, it’s high time for Congress to offer lasting solutions.”);
FEC
FEC Approves New Audit Procedures: At its May 3 meeting, the Federal Election Commission approved new procedures for audits of political action committees that do not receive federal funds. Chair Dara Lindenbaum and Commissioner Trey Trainor issued a memo explaining the changes and the reasons they were needed.
The new process is designed to be faster and save both the Commission’s and committees’ resources. The new process encourages Audit staff to request, and the committee to provide, all documents as early in the process as possible. Further, to expedite the resolution of legal questions arising in an audit, committees will be provided with OGC’s legal analysis at the exit conference with an opportunity to meaningfully respond, and to seek resolution of the issue by the Commission.
The new process also reduces the report writing burden on Audit by requiring only two reports. These efficiencies and procedural protections will benefit the Commission, committees, and the public. The new process also promotes transparency. For example, the Commission will now publish on its website non-confidential documents related to any findings at the conclusion of audits, such as ads and independent expenditures. The public will now have the benefit of seeing the documents underpinning certain legal determinations that the Commission made during the audit process. The publication of these documents will promote transparency, help ensure consistency in results across audits raising similar legal issues under similar fact patterns, and promote the orderly development of the law.
DoJ
When Top DoA Officials Included Outside Lobbyist Eric Kessler on Policy Email Chains and Discussions Did They Lose Their Ability to Use FOIA Exemption Five? Fox News reported on May 16 that Secretary of Agriculture Tom Vilsack and his staff included Eric Kessler, a co-founder of progressive powerhouse consulting and management firm Arabella Advisors, on email chains reflecting discussion of policy policy changes involving the meat industry. Executive Branch officials have long included discussions with representatives of interest groups in policy deliberations. Many of the specifics of the emails released under a Freedom of Information Act request filed by Americans for Public Trust, however, were redacted under the exception for pre-decisional discussions that have not been reduced to policy documents. Leaving aside the question of whether the pre-decisional FOIA Exception 5b actually applied in this case, the inclusion of an outside participant may also undercut the agency’s argument for using Exception 5 as claimed. Since NLRB v. Sears, Roebuck, 421 U.S. 132, 153 (1975), the standard has been “Exemption 5, properly construed, calls for ‘disclosure of all “opinions and interpretations” which embody the agency’s effective law and policy, and the withholding of all papers which reflect the agency’s group thinking in the process of working out its policy and determining what its law shall be.’” The Court compared the pre-decisional exemption to the usual attorney-client confidentiality, which is abrogated when a third-party is included in such discussions. 421 U.S. at 154.
Other questions could be raised by the Supreme Court’s recent decision in Percoco, discussed below under Courts, such as whether the outside lobbyist’s participation gives rise to an honest services liability for Kessler himself. One hopes that the DoA officials consulted with agency lawyers before including the outside lobbyist in these discussions.
Did Social Media Monitor DataMinr Give U.S. Marshals Advance Warning of Pro-Abortion Demonstrators? Recently, much attention has been paid to the FBI and other Department of Justice agencies who were alleged to have been biased against conservative organizations, particularly in monitoring and trying to censor social media activities. Now a different DoJ agency, the U.S. Marshals Service, has been reported by The Intercept as having used a wide-ranging Twitter “official partner’s” product called Dataminr to predict demonstrations by pro-abortion organizations. “Internal emails show that the U.S. Marshals Service received regular reports from Dataminr, a company that persistently monitors social media.” The Marshals protect, among other things, courts and jurists, and this particular set of warnings was produced in the aftermath of the Supreme Court’s recent decision reversing Roe v. Wade.
DoJ Issues New FARA Advisory Opinions, Including on “Virtual Entity Presence” Triggering Registration Requirement: The Department of Justice issued several new Advisory Opinions interpreting the Foreign Agent Registration Act. Covington has an explainer, which does note that they may “contain little actionable guidance.” For example, “The FARA Unit concluded in one recent advisory opinion that a U.S. online platform was required to register under FARA for ‘creat[ing] a virtual entity presence’ for a foreign government agency and ‘displaying that presence on’ the company’s platform”, which DoJ interpreted as meaning that the U.S. platform would be considered a “publicity agent” for the foreign government sufficient to trigger registration.
CONGRESS
House Committees Oversight Priorities Include Regular Tax-Exempt Organization Priorities, Not Many Weaponization Controversies: A new report from the House Committee on Oversight and Accountability includes plans and authorization for all 118th Congressional oversight Committees. As discussed in the latest First Tuesday Lunch Group meeting, there’s nothing in the official plans that describes “weaponization” or other concerns that sparked interest after the 2022 midterm elections in oversight hearings over the operations or politicization of tax-exempt organizations. Covington offers a general overview.
Ways & Means: The submission from the Ways and Means Committee covers pretty straightforward and non-controversial topics:
• Tax-Exempt Organizations. Oversight of federal tax laws, regulations, and filing requirements that affect tax-exempt organizations, particularly charities, foundations, and political groups operating as social welfare organizations. Evaluate overall IRS efforts to monitor tax-exempt organizations, identify areas of non-compliance, prevent abuse, and ensure timely disclosure to the public about tax-exempt organization activities and finances. Review IRS tax-exempt application process and agency oversight of new exempt organizations.
P. 227
There is a section on Security of Taxpayer Information, which includes: “Examine leaks of confidential taxpayer information in recent years to determine how these egregious leaks occurred and evaluate whether congressional action is needed to make sure such leaks do not happen again.” P. 228.
Judiciary: After the last election, Committee leaders spoke about various investigatory topics involving tax-exempt organizations. For example, Judiciary Subcommittee on Crime and Federal Government Surveillance Chair Andy Biggs invoked the 2010 Lois Lerner-led IRS targeting scandal and said: “The queries in the IRS interrogatory [to the Adams, Baldwin and Covey Foundation] are ‘a form of government surveillance of the American people, … There is no authority for the IRS to regulate speech.” Biggs’s Subcommittee, however, did not report any specific plans for an investigation into the IRS’s treatment of tax-exempt organizations.
The Judiciary Subcommittee on the Weaponization of the Federal Government did report priority plans to “examine how executive branch agencies work with, obtain information from, and provide information to the private sector, non-profit entities, and other government agencies to facilitate action against American citizens, including the extent, if any, to which illegal improper, unconstitutional, or unethical activities were engaged in by the executive branch or private sector against citizens of the United States …” and “issues related to the protection of civil liberties of citizens of the United States, including whether the civil liberties of citizens of the United States have been violated by executive branch agencies.” P. 134-35.
House Administration: The House Administration Committee announced oversight priorities to “examine the role and impact of political organizations and non-profit organizations on federal elections.” Pp. 12, 26.
New Intelligence Superagency – The Foreign Malign Influence Center – Spools Up In the Director of National Intelligence’s Office: The many, many new federal agencies dealing with foreign “malign influence” both globally and within the United States have a new cat-herder: the Foreign Malign Influence Center, now within the Office of the Director of National Intelligence (DNI). Basically, the new FMIC is poised to become a new federal manager of efforts to limit American social media, election activity, and other activities that might affect “public opinion within the United States.” 50 U.S.C. § 3059(f)(2)(B). Because other, identical efforts within other agencies have gone so well …
The Intercept says the new Center has received a mixed reception. The Center is now operational to herd the other federal “offices dedicated to fighting foreign disinformation [that] are springing up like daisies” like the Pentagon’s new “Influence and Perception Management Office,” and the four separate new parts of the Department of Homeland Security, as well as in the Department of Justice, the FBI and the State Department. Director of National Intelligence Avril Haines told the Senate Armed Services Committee on May 4 that the Center “encompasses our election threat work, essentially looking at foreign influence and interference in elections, but it also deals with disinformation more generally.”
The DNI and its predecessors always had staff checking foreign activities in the United States, as did other organizations like the Department of Justice. But, in the wake of concern over foreign “misinformation” and “disinformation” and other foreign shenanigans on social media and otherwise, in 2019, Congress added a new “primary organization in the United States Government for analyzing and integrating all intelligence possessed or acquired by the United States Government pertaining to foreign malign influence.” 50 U.S.C. § 3059. And Congress shortened the name on December 23, 2022, so that new primary organization is now to be known as the Foreign Malign Influence Center (changed from “Influence Response”), and is responsible for combatting “malign influence,” statutorily defined as
any hostile effort undertaken by, at the direction of, or on behalf of or with the substantial support of, the government of a covered foreign country with the objective of influencing, through overt or covert means—
(A) the political, military, economic, or other policies or activities of the United States Government or State or local governments, including any election within the United States; or (B) the public opinion within the United States.
50 U.S.C. § 3059(f)(2).
And, although Russia, Iran, North Korea, and China are named as being covered by the new Center, the Center’s Director can designate any other foreign country to be covered as “appropriate.” “Exposing deception in defense of liberty” is the center’s motto, ODNI’s website says. It enjoys access to “all intelligence possessed or created pertaining to FMI [foreign malign information], including election security.”
Hopefully, the new Center’s Director can sing better tunes than the previous occupant of the similar DHS office.
Bipartisan FARA Enforcement Act Reintroduced: How often do you see Sen. Sheldon Whitehouse team up with five conservative Senators on legislation? Not often, but together, Sens. Whitehouse, Grassley, Rubio, Young, Cornyn and Graham have reintroduced the same Foreign Agents Registration Act reform bill that passed three Senate Committees in 2019, but didn’t progress further. Lead sponsor Chuck Grassley said: “This bill gives the Justice Department new tools to detect and deter secret foreign lobbying and ensures policymakers and the American public know when influence campaigns are being pushed by foreign interests. The bill is the product of years of negotiations and congressional oversight, and it’s time we get it on the books.”
COURTS
Briefing In Former New York Superintendent of Financial Services Maria Vullo’s Response on NRA v. Vullo Has Been Extended to June 23, 2023: As expected, the Respondent in NRA v. Vullo, No. 22-842, which asks whether a government regulator may use indirect threats to censor a tax-exempt organization’s advocacy, requested and received an extension of time to respond to the Petition for Certiorari. The delay likely pushes back the Court’s decision to grant cert until at least mid-summer, and any merits briefing even later.
Meanwhile, an additional four amicus briefs have been filed supporting the Petition, including one from the States of Texas and Indiana which, like the earlier brief filed by 18 other States, is likely to be influential with some Justices.
Supreme Court Rejects “Honest Services” Public Corruption Conviction of Joseph Percoco, Former Aide to NY Gov. Cuomo: And speaking of Gov. Cuomo’s powerful aides benefitting from their relationships, one former Cuomo aide had his conviction for “honest-services fraud” reversed. As reported in last November’s Public Policy Advocacy Highlights, the Supreme Court did not seem receptive to the expansive interpretations of corruption used by federal prosecutors to indict and convict a former close aide to New York Governor Andrew Cuomo. On May 11, the Court overturned Joseph Percoco’s conviction because, at the time he received payments from a construction company which wanted to use his expertise and friendship with the Governor, he was not a government employee, but was Cuomo’s campaign chair. “Percoco was convicted of this offense based on instructions that required the jury to determine whether he had a ‘special relationship’ with the government and had ‘dominated and controlled’ government business. We conclude that this is not the proper test for determining whether a private person may be convicted of honest-services fraud”.
Percoco resigned his post as Cuomo’s Executive Deputy Secretary to become his re-election Chair, and accepted the money only days before returning to his government job. The key question was whether private individuals could owe a duty to the public similar to that of government employees and certain contractors who accepted that duty as part of becoming agents of the government. Percoco asked the Court whether a private person who “has informal political or other influence over governmental decisionmaking can be convicted of honest-services fraud.” The Court looked back to Skilling v. United States, 561 U. S. 358 (2010), which had upheld an honest-services fraud conviction of a person “engaging in such schemes [who] had sufficient reason to know that their conduct was proscribed.” Id., at 407, 410, 412. An agent of the government may be considered to have such knowledge. Slip op., at 9. But just having domination or control over governmental business because of a special relationship to a government official was not enough, even if government employees relied on that relationship to listen to the private person. Id., at 9-10. The Court would not, for example, use some “ill-defined” standard of how much influence a lobbyist or close colleague had: “the jury instructions did not) define “the intangible right of honest services” “‘with sufficient definiteness that ordinary people can understand what conduct is prohibited,’” or “‘in a manner that does not encourage arbitrary and discriminatory enforcement’,” citing McDonnell v. United States, 579 U. S. 550, 576 (2016).
In other words, political insiders, lobbyists, and friends or family of government officials do not automatically become subject to honest-services fraud prosecutions. Prosecution and conviction require a special showing that such a relationship actually involved the relevant government officials’ acquiescence in the exercise of government power sufficient to generate a duty to the public to provide honest services. That relationship does exist, but it wasn’t shown in this case. Slip op., at 11. Could it be shown in the Dept. of Agriculture policy discussion and email chain including a third-party outside lobbyist discussed above under DoJ? An interesting question.
How Does the Warhol Decision Affect “Fair Use?” The recent decision in Warhol Foundation v. Goldsmith, has many in the world of fine art concerned about chilling derivative works, and legal experts are divided on whether the fear is well-grounded. Many tax-exempt organizations rely on “fair use” as a wide-ranging defense to copyright demands and claims, but Goldsmith requires a deeper analysis than most shorthand uses suggest. The key for most tax-exempt organizations will indeed be in whether the claimed infringement was primarily “of a commercial nature or is for nonprofit educational purposes.” 17 U.S.C. § 107(1); slip op. at 14. “First, the fact that a use is commercial as opposed to nonprofit is an additional ‘element of the first factor.’ The commercial nature of the use is not dispositive. But it is relevant.” Slip op., at 18. “In sum, the first fair use factor considers whether the use of a copyrighted work has a further purpose or different character, which is a matter of degree, and the degree of difference must be balanced against the commercial nature of the use. If an original work and a secondary use share the same or highly similar purposes, and the secondary use is of a commercial nature, the first factor is likely to weigh against fair use, absent some other justification for copying.” Slip op., at 19-20. That weight became irresistible here, because although the Warhol Foundation was a nonprofit, it was charging high prices to license its version of Goldsmith’s photo, indicating that its primary use of the photos was not for educational purposes, but commercial. And that was enough to undercut its fair use defense.
Supreme Court Clerk Sometimes Enforces Newly-Relaxed Notice Paragraph Requirement: Effective last January, the Supreme Court removed the Rule 37.2 requirement that amicus briefs need consent from the parties for submission, but left in the requirement that the parties’ counsels require at least ten days’ notice of an intention to file a brief. Now the Clerk’s Office has begun enforcing that notice requirement. So far, however, it appears that enforcement is not uniformly applied, as some briefs whose filers have not given notice remain on the docket without further action (at least for a while).
D.C.D.C. Judge Transparent About Her Favoritism: Judge Ana Reyes, newly-appointed to the U.S. District Court for D.C. issued the usual standing order instructing counsel about her take on various procedural matters, and, on page four, included the following (h/t Law Prof. Eugene Volokh and longtime practitioner Arthur Spitzer):
g. Oral Argument. …
ii. The Court understands that, for reasons passing understanding, not all counsel are fans of the Boston Red Sox. Counsel should be aware, however, that the Court may reference key moments in Red Sox history during oral argument. References may include: (a) Dave Roberts’s steal; (b) Carlton Fisk’s walk-off homerun; (c) Ted Williams’s final at-bat; and, inter alia, (d) David Ortiz’s “this is our [bleep] city” speech. Any reference to Game 6 of the 1986 World Series is strictly prohibited….
You’ve been warned.
DON’T USE ChatGPT to Write Your Briefs: YIKES! Speaking of warnings of a much more consequential form, how about this blistering and damning opinion (h/t Law Prof. Eugene Volokh) from the Southern District of New York (always a fountain of kindness and courtesy in the best of circumstances): “The Court is presented with an unprecedented circumstance. A submission filed by plaintiff’s counsel in opposition to a motion to dismiss is replete with citations to non-existent cases.” When questioned, the lawyer admitted one of his firm’s lawyers had used ChatGPT to write the briefs, and noted that ChatGPT itself doubled down on its falsity when he asked the program whether these were real cases and the program responded that they were. Both lawyers are now subject to showings for sanctions … and likely deserve them. Even worse, later coverage indicated that ChatGPT is now writing briefs and memos in classes and in Big Law firms and by self-represented parties which make up as much as half the filings in some courts. Don’t be that lawyer (or nonlawyer).
STATES
Minnesota, a One-Party State, Enacts Election Law Changes, Including Reporting Expansion and Barring “Foreign-Influenced” Campaign-Related Expenditures: Courthouse News reports that the Democratic Farmer Labor Party now controls all three branches of the State’s government and has enacted several new policies. “More controversially, the bills would create new disclosure requirements for would-be election advertisers and pamphleteers, closing loopholes that allow them to avoid reporting their political activities if they don’t expressly advocate for or against a candidate or ballot question using certain words, and bar ‘foreign-influenced’ corporations and nonprofits from spending money to influence elections.” The term “foreign-influenced” is quite broad, including foreign investors who indirectly beneficially own 1% of an organization and any organization with a principal place of business in another country. Note that this definition also covers ballot questions, and requires the “foreign-influenced” entity to report within seven days of making any contribution. About $1.5 million in state funds are appropriated for implementing and enforcing the new laws in the next few years.
Have Clients Engaging in Voter Registration Efforts in Florida? Check the New Florida Law: Many non-political tax-exempt organizations engage in some fashion with voter registration (that is, beyond just telling people to be engaged in the election process). On May 24, Florida Gov. Ron DeSantis signed a new law which includes important new criminal sanctions against voter registration organizations which do not follow new rules. Some of these rules are broad, including “A third-party voter registration organization that collects voter registration applications serves as a fiduciary to the applicant and shall ensure, that any voter registration application entrusted to the organization, irrespective of party affiliation, race, ethnicity, or gender, is promptly delivered to the division or the supervisor of elections in the county in which the applicant resides within 10 days after the application is was completed by the applicant, but not after registration closes for the next ensuing election.” § 97.0575(5), Fla. Stat. (as amended). Democracy Docket has a general summary. The new law has been challenged in court by a variety of organizations claiming that it will target Black and Latinx voter registrants. (H/t ELB.)
Voter Fraud in Texas: Texas Monthly goes on a deep dive (h/t Law Prof. Richard Pildes in ELB) into how 15 voters, including police officers, illegally registered in the city of Laredo to help elect a councilwoman in a razor-close election, plus bonus coverage of historical (LBJ’s missing ballot boxes) and recent descriptions of voter fraud in the Lone Star state.
GENERAL
Bad News for News Media: AP Poll Finds Americans No Longer Trust or Believe News Media, and Think It Is Responsible for Much Political Polarization: An Associated Press poll on May 1 found that
When it comes to the news media and the impact it’s having on democracy and political polarization in the United States, Americans are likelier to say it’s doing more harm than good. Nearly three-quarters of U.S. adults say the news media is increasing political polarization in this country, and just under half say they have little to no trust in the media’s ability to report the news fairly and accurately, according to a new survey from The Associated Press-NORC Center for Public Affairs Research and Robert F. Kennedy Human Rights. … The survey reveals the complicated relationship many Americans have with the media: A majority rate in-depth and investigative reporting as very helpful or extremely helpful for understanding the issues they care about, but they are more likely to say they regularly scan the headlines than read an in-depth investigative article. And while overall trust in the media is low, a majority of respondents say the media is doing at least somewhat well in covering issues they care about.
In related news, the polling company YouGov reported on public trust in specific media outlets. The good news is that one media outlet was considered Trustworthy or Very Trustworthy by 62% of Americans, twenty points ahead of any other media source. The bad news is that the trustworthy news source was IBM-owned The Weather Channel. Traditional mainstream media outlets ABC, CBS and NBC were in the 42% range (meaning more people did not find them trustworthy than found them trustworthy), and the other measured outlets were below that range.
A College-Level Lesson on the Perils of Risk Managers: Law Prof. Jonathan Turley writes in The Hill about the latest college furor over speech on campus, this time at venerable Oberlin College where students were frantic over the appearance of Kalinda Watson, a risk management expert.
Vox PPLI 