GOVERNMENT CENSORSHIP OF ALLEGED “DISINFORMATION:”

Note: This special section covers some important recent highlights summarizing research and judicial findings on claims that federal officials coerced social media companies and others to censor legitimate free speech under the guise of combatting “disinformation.” Previously, coverage of this topic was scattered through several sections of Public Policy Advocacy Highlights.

Federal Judge’s Injunction Blocks Federal Officials From Encouraging Social Media Companies To Censor Protected Free Speech:  On July 4, U.S. District Judge Terry Doughty of the Western District of Louisiana issued an injunction against dozens of federal agencies and officials, blocking most contact with social media companies for the purpose of censoring social media information (with many exceptions). The sweeping order was explained by a memorandum opinion, 155 pages long, describing an enormous Executive Branch effort to censor protected speech by Americans on a variety of subjects, including, for example, posts making fun of First Lady Dr. Jill Biden. The Washington Post, New York Times, and many other media outlets have coverage.

The case is State of Missouri v. Joseph Biden, No. 3:22-cv-01213-TAD-KDM, July 4, 2023, W.D.La., brought by the States of Missouri and Lousiana and several individuals who allege they were harmed by concerted efforts of Federal officials to censor their social media postings because of their views. In many respects, Missouri v. Biden echoes the Petition for Certiorari presently waiting before the Supreme Court of the U.S. in NRA v. Vullo, No. 22-842, which recounts similar efforts by officials of the State of New York to silence an outspoken and controversial tax-exempt organization by convincing or coercing its banks and insurers to drop the organization as a client. In essence, both cases contend that the government officials, unable to block Americans’ speech directly, sought to do so indirectly through secret conversations and influence over necessary infrastructure providers. Both cases contend that viewpoint discrimination drives the government’s censorship decisions; the defendants, of course, deny that the First Amendment even applies to their actions. See, for example, New York’s Opposition to the Petition for Certiorari in Vullo, pp. 28-36.

Though the Missouri case is only in its preliminary stages, the factual record in the case is already enormous, which seems to have inhibited the immediate media coverage of the historic injunction. For example, the plaintiffs filed 350 pages of proposed findings of fact (Doc. 214-1), to which the defendants filed not only a Motion to Strike (Doc. 219), but also 723 pages responding to the proposed findings of fact. Mem. Op., at 8, n. 18. Tellingly, though the federal defendants contested the interpretation of the proposed findings of fact, “[a]t oral argument, the Defendants conceded that they did not dispute the validity or authenticity of the evidence presented.” Id.

Judge Doughty’s Memorandum Opinion spends close to 100 pages recounting specific instances of government officials contacting social media companies with public and private messages that accused the companies of not censoring material that did not violate the companies’ community standards or similar policies. For example, “[Facebook executive Nick] Clegg listed—in bold—demands that the White House had made in a recent meeting and provided a response to each. … Facebook noted that it was scrutinizing these accounts and censoring them whenever it could, but that most of the content did not violate Facebook’s policies. … Facebook even suggested that too much censorship might be counterproductive and drive vaccine hesitancy: ‘Among experts we have consulted, there is a general sense that deleting more expressions of vaccine hesitancy might be more counterproductive to the goal of vaccine uptake because it could prevent hesitant people from talking through their concerns and potentially reinforce the notion that there’s a ‘cover-up.’” Mem. Op., at 21-22. Four days later, “then-White House Press Secretary Jen Psaki (“Psaki”) … publicly reminded Facebook and other social-media platforms of the threat of ‘legal consequences’ if they do not censor misinformation more aggressively.” Id., at 22. Again, this case record tracks what happened in Vullo, complete with participation by top officials, secret meetings, and threats.

Ultimately, Judge Doughty’s analysis rested on standard First Amendment precedents, including the same cases making up the bulk of the material in the NRA v. Vullo Cert Petition pending before the Supreme Court:

Government action, aimed at the suppression of particular views on a subject that discriminates on the basis of viewpoint, is presumptively unconstitutional. The First Amendment guards against government action “targeted at specific subject matter,” a form of speech suppression known as “content-based discrimination.” National Rifle Association of America v. Cuomo, 350 F. Supp. 3d 94, 112 (N.D. N.Y. 2018) (which is now sub nom. Vullo). The private party, social-media platforms are not defendants in the instant suit, so the issue here is not whether the social-media platforms are government actors, but whether the government can be held responsible for the private platforms’ decisions.

Mem. Op., at 88.

If there is a bedrock principal underlying the First Amendment, it is that the government may not prohibit the expression of an idea simply because society finds the idea itself offensive or disagreeable. Matal v. Tam, 137 S. Ct. 1744, 1763 (2017); see also R.A.V. v. City of St. Paul, 505 U.S. 377 (1996). The benefit of any doubt must go to protecting rather than stifling speech. Citizens United v. Federal Election Commission, 130 S. Ct. 876, 891 (2010). … The Court, after examining the facts, has determined that some of the Defendants either exercised coercive power or provided significant encouragement, which resulted in the possible suppression of Plaintiffs’ speech.

Mem. Op., at 89.

Mem. Op.,. at 93-94.

Through meetings, emails, and in-person contacts, the FBI intrinsically involved itself in requesting social-media companies to take action regarding content the FBI considered to be misinformation. The FBI additionally likely misled social-media companies into believing the Hunter Biden laptop story was Russian disinformation, which resulted in suppression of the story a few weeks prior to the 2020 Presidential election. Thus, Plaintiffs are likely to succeed in their claims that the FBI exercised “significant encouragement” over social-media platforms such that the choices of the companies must be deemed to be that of the Government.

Mem. Op., at 108.

Similarly, the Memo Opinion explores the role of the Cybersecurity and Infrastructure Agency, the same subject as the House Judiciary Committee staff report released on June 26 (see next topic below). As the House Judiciary Committee found, CISA established a tax-exempt organization to, in CISA’s own words, “get around unclear legal authorities, including very real First Amendment questions that would arise if CISA or the other government agencies were to monitor and flag information for censorship on social media.” Memo. Op., at 111. And then CISA tried to cover up its subterfuge:

At oral arguments on May 26, 2023, Defendants argued that the EIP operated independently of any government agency. The evidence shows otherwise: the EIP was started when CISA interns came up with the idea; CISA connected the EIP with the CIS, which is a CISA-funded non-profit that channeled reports of misinformation from state and local government officials to social-media companies; CISA had meetings with Stanford Internet Observatory officials (a part of the EIP), and both agreed to “work together”; the EIP gave briefings to CISA; and the CIS (which CISA funds) oversaw the Multi-State Information Sharing and Analysis Center (“MS-ISAC”) and the Election Infrastructure Information Sharing and Analysis Center (“EI-ISAC”), both of which are organizations of state and local governments that report alleged election misinformation.

Mem. Op., at 111-12.

The Missouri injunction memorandum opinion is based on preliminary motions and stipulated facts. Nevertheless, Judge Doughty did not mince words: “government agencies have chosen to associate, collaborate, and partner with these organizations, whose goals are to suppress protected free speech of American citizens. The State Department Defendants and CISA Defendants both partnered with [tax-exempt] organizations whose goals were to ‘get around’ First Amendment issues.” Mem. Op., at 114.

Judge Doughty concludes:

The Plaintiffs are likely to succeed on the merits in establishing that the Government has used its power to silence the opposition. … the evidence produced thus far depicts an almost dystopian scenario. During the COVID-19 pandemic, a period perhaps best characterized by widespread doubt and uncertainty, the United States Government seems to have assumed a role similar to an Orwellian “Ministry of Truth.” 

The Plaintiffs have presented substantial evidence in support of their claims that they were the victims of a far-reaching and widespread censorship campaign. This court finds that they are likely to succeed on the merits of their First Amendment free speech claim against the Defendants.

Mem. Op., at 154.

House Judiciary Committee Staff Report: CISA Outsourced Government Censorship to a Nonprofit Following Lawsuit: One of the first fruits of the new Republican-led House Judiciary Committee’s investigation of “weaponization” is a June 26, 2023, interim Committee Staff Report of the Committee and the Select Subcommittee on the Weaponization of the Federal Government titled: “The Weaponization Of CISA:  How A ‘Cybersecurity’ Agency Colluded With Big Tech And ‘Disinformation’ Partners To Censor Americans.” The report describes how the Cybersecurity and Infrastructure Security Agency, established in 2018 within the Department of Homeland Security, “metastasized into the nerve center of the federal government’s domestic surveillance and censorship operations on social media.” The report has three major parts:

From the Executive Summary:

By 2020, CISA routinely reported social media posts that allegedly spread “disinformation” to social media platforms.  By 2021, CISA had a formal “Mis-, Dis-, and Malinformation” (MDM) team. In 2022 and 2023, in response to growing public and private criticism of CISA’s unconstitutional behavior, CISA attempted to camouflage its activities, duplicitously claiming it serves a purely “informational” role.

This interim staff report details, among other things, that:

• CISA is “working with federal partners to mature a whole-of-government approach” to curbing alleged misinformation and disinformation. 
• CISA considered the creation of an anti-misinformation “rapid response team” capable of physically deploying across the United States. 
• CISA moved its censorship operation to a CISA-funded non-profit [the Center for Internet Security, with subsidiaries] after CISA and the Biden Administration were sued in federal court, implicitly admitting that its censorship activities are unconstitutional.  
• CISA wanted to use the same CISA-funded non-profit as its mouthpiece to “avoid the appearance of government propaganda.”
• Members of CISA’s advisory committee agonized that it was “only a matter of time before someone realizes we exist and starts asking about our work.”

The June report is only a preliminary step, the Judiciary Committee notes, because CISA has not been responsive to subpoenas and information requests. In addition, other agencies, including the FBI, are also involved in the alleged “weaponization” scheme, and will likely come under similar scrutiny.

New York State Files Its Opposition to Certiorari in NRA v. Vullo, Claiming that Qualified Immunity Protects It Against the First Amendment: NRA v. Vullo, No. 22-842, began as a fight between two tax-exempt organizations over guns; five years later, at the Supreme Court, both sides are representing by heavyweight “gunslinger” constitutional law professors, ready for the fight at the OK Corral. But despite having hired the best in the country in their respective fields, the pugilists are talking past each other rather than really engaging. In other words, there are two issues in this case: violations of the First Amendment and “qualified immunity,” which immunizes federal law enforcement personnel from liability for violating constitutional rights when there was no clear prior judicial precedent applying those constitutional protections.

The counsel of record for the NRA is Eugene Volokh, a nationally-recognized First Amendment expert at UCLA Law School, who is routinely cited by the Supreme Court in its opinions. His main argument in the Petition for Certiorari is, predictably, that New York can’t violate the First Amendment directly so it shouldn’t be able to violate it indirectly by threatening someone else. “This case arises from a series of actions—including press releases, official regulatory guidance, and contemporaneous investigations and penalties—issued by or on behalf of New York’s powerful Department of Financial Services (“DFS”) against financial institutions doing business with the NRA. Among other things, the Complaint states that Superintendent Maria Vullo: (1) warned regulated institutions that doing business with Second Amendment advocacy groups posed “reputational risk” of concern to DFS; (2) secretly offered leniency to insurers for unrelated infractions if they dropped the NRA; and (3) extracted highly-publicized and over-reaching consent orders, and multi-million dollar penalties, from firms that formerly served the NRA.” Pet., at 3.

On the other side is Trevor Morrison, a professor from NYU Law School, whose specialty is criminal law, whose main argument in his Opposition to the Petition, filed on June 23, is that “qualified immunity” protects New York officials from even being tried for constitutional violations. “Petitioner has not identified a single case clearly establishing that anything like Respondent’s alleged actions crossed the line between permissible persuasion and unconstitutional coercion. To the contrary, as the Second Circuit recognized, “[t]he Complaint’s factual allegations show that, far from acting irresponsibly, [Respondent] was doing her job in good faith.” Opposition, at 10.

It Takes 297 Pages For DoJ to Explain Why Censoring Americans’ Social Media Through Private Companies Is Really OK: As Columbia Law Professor and noted litigator Phillip Hamburger explains in a Wall Street Journal op-ed (paywall) discussing State of Missouri v. Joseph Biden, No. 3:22-cv-01213-TAD-KDM, July 4, 2023, W.D.La., “The Supreme Court has adopted doctrines that make it hard for officials to see that they’re acting unconstitutionally.” Indeed, it’s not just “officials” who have trouble; the same may be said for the lawyers at the Department of Justice, who took 297 pages to explain why it’s really ok for the federal government to “jawbone” social media companies to censor private speech. Most of the DoJ opposition to the Missouri Complaint is a recitation of the many “disinformation” schemes used in recent years and a standard DoJ litany of denials of standing, justiciability and other procedural roadblocks that one can expect with any initial DoJ filing. Having it all in one place, however, gives some perspective on the massive scale of the federal government’s recent efforts and the disorganization of the legal theories and plans for execution.

Like the DoJ response, Hamburger’s article is complicated, but he does summarize his thesis succinctly:

The Supreme Court has adopted doctrines that inadvertently erode the ability of officials to see that censorship is unconstitutional. Although the doctrines, when carefully considered by sophisticated judges, reveal the unlawfulness of the suppression, they have weakened the constitutional obstacles to censorship by depriving them of their demotic clarity. They even seem to invite game-playing by officials. So FBI agents and other officials imagine that censorship is permissible. And in defending the errant officials, the Justice Department echoes their manipulative reading of weak doctrine. …

No wonder we have censorship. It has no real justification in the Constitution or even judicial doctrine. But judicial doctrine makes censorship plausible by leaving room for officials to think they can get away with crude and facile evasions. That’s why no one in government seems very worried about violating the Constitution. They think the court has given them a free hand to suppress speech.

There is significant merit in Hamburger’s argument, highlighted in the strained logic of the DoJ filing in Missouri, which reaches at every opportunity to say why the express terms of the First Amendment (“Congress shall make no law …”) don’t actually apply. For example, as in the Petition for certiorari in NRA v. Vullo points out, the U.S. Court of Appeals for the Second Circuit said that a government regulator can act “in good faith” when she reacts to social media postings by threatening private businesses who support tax-exempt organizations whose politics disagree with the regulator’s. Why? Because the regulator is supposedly just using “government speech,” which the Second Circuit says is not limited by the First Amendment. But that is a gross over-simplification by the Second Circuit, since the basic test in such cases is whether the regulator’s speech is intended to convince (permitted) or to coerce (prohibited) the private business’ speech. Both Hamburger’s op-ed and the DoJ brief in Missouri deal with this issue, but are like two trains passing in the night.

Hamburger: “In the course of defending government speech from claims of viewpoint discrimination, the court has suggested that government enjoys speech rights. Seizing on this, the Justice Department defends officials seeking censorship on the theory that when they request suppression, they are merely engaging in protected government speech., But the First Amendment is a limit on government. It doesn’t give government a freedom of speech to abridge the freedom of speech of others.”

DoJ: “Finding that Dr. Fauci’s publicly (or privately) expressed views render him “responsible for,” … the decision of a social media company and thus violates the First Amendment would, ironically, transform the First Amendment into a tool for muzzling routine government speech.” Memo, at 234. “Plaintiffs have no First Amendment right that entitles them to muzzle such plainly legitimate Government speech.” Id., at 270.

In other words, both sides are saying the other should not be using the First Amendment the way the other proposes. But all that ignores caselaw from the last sixty years, which does not define government speech as an absolute, but as a spectrum, on which government’s ability to control speech depends on the speech’s proximity to core government functions. As Justice O’Connor wrote for the Court in Board of County Commissioners, Wabaunsee County v. Umbehr, 518 U.S. 668 (1998):

Our unconstitutional conditions precedents span a spectrum from government employees, whose close relationship with the government requires a balancing of important free speech and government interests, to claimants for tax exemptions, users of public facilities, and recipients of small government subsidies, who are much less dependent on the government but more like ordinary citizens whose viewpoints on matters of public concern the government has no legitimate interest in repressing. … The First Amendment permits neither the firing of janitors nor the discriminatory pricing of state lottery tickets based on the government’s disagreement with certain political expression.

Id., at 680 (cleaned up). 

  Perhaps the Supreme Court will grant cert in Vullo and clarify at least this one area.

IRS

Supreme Court Grants Certiorari in Moore v. United States, Setting Up Significant Fight Over “Wealth Taxes:” The Supreme Court’s decision June 26, 2023, decision to grant certiorari to review the Ninth Circuit’s decision in Moore v. United States, No. 22-800, is a far bigger deal than is apparent in the limited media coverage accorded the Court’s action. The underlying question in Moore is whether the Sixteenth Amendment’s authorization of a federal “income” tax includes only “realized” income, or also includes “unrealized” wealth, such as increased value of stock holdings over time. This is a current hot topic of debate, as Congress considers “wealth taxes.”

In 2006, Charles and Kathleen Moore invested $40,000 in a friend’s new company in India that would provide affordable farming equipment to farmers in India’s most impoverished regions. The company was a success, expanding rapidly across India through reinvesting all its earnings. The Moores never received any dividends or other payments from their investment. Then, in 2018, they learned that the Tax Cuts and Jobs Act of 2017 had enacted a Mandatory Repatriation Tax, 26 U.S.C. § 965, which deemed a percentage of the company’s earnings to be current “income” to the Moore’s, even though they had not received a penny. The tax was imposed solely on the ownership of shares of a foreign company’s stock, not on the income realized from that ownership, which scholars noted raised a constitutional question. Sean P. McElroy, The Mandatory Repatriation Tax Is Unconstitutional, 36 Yale J. Reg. Bull. 69, 82 (2019). The Moore’s were assessed an additional $14,729 in tax.

In Moore v. United States, 36 F.4^th 930 (9^th Cir. 2022), the Ninth Circuit held that the Sixteenth Amendment did not require realization of income to authorize a tax. “Once the federal government decides to tax something, then, subject to any constitutional limitations, its power to tax and flexibility as to how to accomplish that must necessarily be broad. See, e.g., Agency for Int’l Dev. v. All. for Open Soc’y Int’l, Inc., 570 U.S. 205, 213 (2013) (stating that the Spending Clause “provides Congress broad discretion to tax”).” This is a curiously-incomplete citation to AOSI I, which is well-known for its holding that Congress’s ability to impose conditions on tax-exempt organizations is limited. All. for Open Soc’y Int’l, Inc., 570 U.S. at  2014–15 (“[T]he relevant distinction that has emerged from our cases is between conditions that define the limits of the government spending program—those that specify the activities Congress wants to subsidize—and conditions that seek to leverage funding to regulate speech outside the contours of the program itself”); Agency for Int’l Dev. v. All. for Open Soc’y Int’l, Inc., 140 S. Ct. 2082, 2086 (2020) (“AOSI II”) (same). The Ninth Circuit, however, forged onwards:

It is also clear that Congress has sought to exercise the full scope of its constitutionally provided power to tax. See Comm’r v. Glenshaw Glass Co., 348 U.S. 426, 429 (1955) (noting that the definition of “gross income” to be reported by taxpayers “was used by Congress to exert in this field ‘the full measure of its taxing power.’”). Given Congress’s expansive intent in taxing gross income, exclusions from gross income are construed narrowly in favor of taxation.” Comm’r v. Dunkin, 500 F.3d 1065, 1069 (9th Cir. 2007). …

Whether the taxpayer has realized income does not determine whether a tax is constitutional. In Heiner v. Mellon, the Supreme Court stated that whether or not a “partner’s proportionate share of the net income of the partnership” was distributable was not material to whether it could be taxed. 304 U.S. 271, 281, (1938) …  Helvering v. Enright’s Est., 312 U.S. 636, 641 (1941) ). And, the Supreme Court has made clear that realization of income is not a constitutional requirement. See Helvering v. Horst , 311 U.S. 112, 116 (1940) (“[T]he rule that income is not taxable until realized …. [is] founded on administrative convenience … and [is] not one of exemption from taxation where the enjoyment is consummated by some event other than the taxpayer’s personal receipt of money or property.”); see also Helvering v. Griffiths , 318 U.S. 371, 393–94 (1943) (explaining that Horst “undermined … the original theoretical bases” of a constitutional realization requirement).

36 F.4th at 934-36 (cleaned up).

Four Ninth Circuit judges dissented from rehearing the decision en banc, 53 F.4^th 507 (9th Cir. 2022), led by Judge Patrick Bumatay and including influential Judge Sandra Ikuta, noting that

[T]oday, Congress may enact a direct tax on “incomes”—and only on “incomes”—without apportioning the tax. The Sixteenth Amendment thus struck a delicate balance for federal taxing power—freeing Congress from the unwieldy requirement of apportionment, but only for taxes on “incomes.” Nothing in the Sixteenth Amendment relieved Congress of its duty to apportion other forms of direct taxation, such as a tax on property interests. Now, more than a century after its ratification, our court upsets the balance reached by the people. We become the first court in the country to state that an “income tax” doesn’t require that a “taxpayer has realized income” under the Sixteenth Amendment. Moore v. United States, 36 F.4th 930, 935 (9th Cir. 2022).

36 F.4th at 934-36 (cleaned up).

53 F.4^th at 508. In other words, the dissenters noted that the MRT under IRC § 965 not only is not authorized by the Sixteenth Amendment, but that it violates the “delicate balance” struck by the amendment process.

In the face of this recital of precedent and sweeping governmental tax authority, the Moores told the Supreme Court in their Cert Petition that “While precedent has approved income taxes on constructively realized income, no decision until the Ninth Circuit’s in this case dispensed with the need for realization altogether. In so doing, the decision below sweeps away the essential restraint on Congress’s taxing power, opening the door to unapportioned taxes on property (as in this case) and anything else Congress might deem to be ‘income.’ This case accordingly presents a constitutional question of the first order, one that warrants the Court’s review.” Eight amicus briefs were filed in support of the Petition, all by conservative-leaning organizations.

The Federal government’s response to the Petition also cited a type of delicate balance struck in IRC § 965, but a different balance from the Petitioners’. Instead, Solicitor General Elizabeth Prelogar noted that Congress had balanced changes relaxing taxes levied on repatriated funds against the new taxes on unrepatriated changes in wealth. She argued that this new tax helped avoid a potential windfall for overseas corporations that deferred income.   

The most direct impact on tax-exempt organizations will likely be on fundraising, but the biggest impact could be on foundations’ endowments. In a Policy Brief, the Philanthropy Roundtable predicted that taxing unrealized wealth would discourage “Philanthropists … from making charitable donations if they are subject to taxes on unrealized gains, which could have a long-term effect on charitable giving. What’s more, if such taxes are deemed constitutional, this could open the door to additional federal taxes on property, wealth, and possibly even the assets of charitable foundations.” Lane Powell attorneys recommend that “Taxpayers impacted by these other regimes also should consider whether they should file protective claims.”

Jacobin magazine, on the other hand, described the case as

The real goal of the case is “to slam shut the door on a federal wealth tax,” as the couple’s lawyers wrote in a 2021 column. The couple’s petition to the Supreme Court expressly decries previous wealth tax proposals from Democrats, including Biden, and urges the justices to “head off a major constitutional clash down the line.” A host of powerful interests, including the nation’s top business lobby, pressed the Supreme Court to take up Moore. So did a conservative think tank with financial ties to two of the central names in the Supreme Court’s recent ethics scandals: Elliott Management hedge fund chief Paul Singer and Texas real estate magnate Harlan Crow. Both billionaires could benefit if Supreme Court justices were to preemptively declare that taxes on wealth are unconstitutional.

IRS Rejects 501(c)(3) Status for “Name, Image, Likeness Collectives” Because They Provide Private Benefit to College Athletes: College sports is big business, built on the efforts of young amateur athletes. In part to encourage top athletes to attend their schools, Sports Illustrated reports that some universities who compete in the highest levels of college football have created an ecosystem of “collectives” to pay athletes for their names, images and likenesses (which include signatures and the like). In July 2021, the NCAA said these payments would not affect the athletes’ eligibility to compete. Congress quietly seems to agree. Taking the Buzzer Beater to the Bank: Protecting College Athletes’ NIL Dealmaking Rights: Hearing Before the Subcomm. on Innovation, Data, & Commerce of the H. Comm. on Energy and Commerce, 118th Cong. (2023) (hearing memorandum) (“NIL Collectives are a third-party collection of fans and boosters who pool together capital to compensate athletes who play for a given school. Over 250 collectives have been formed nationwide and nearly one-third of collectives have a nonprofit status.”).  Time provides more background on NILs in smaller sports, including one high jumper at the University of Texas who rakes in $1 million a year.

For some unknown reason, the Internal Revenue Service has granted 501(c)(3) charitable status to dozens of these “collectives”, which have received “millions in donations from boosters who are under the impression that their gifts fall under tax deduction.” Sounds a bit like private benefit to the athletes, right? Congress apparently did not see fit to statutorily exempt these collectives from the private benefit rules. So, the question would be whether the private benefit is incidental to charitable activities under both the organizational and operational tests for charitable status. But there wasn’t any good IRS guidance on what was acceptable incidental benefit and what was not.

Finally, on May 28, the IRS Chief Counsel’s Office stepped in and said no mas to many of the collectives. Oh, and Sports Illustrated also reports thatthe President of the NCAA, which started this process in 2021, agrees with the Service’s position. It’s a good memo, setting out for all those newly-hired and semi-trained Revenue Agents and reviewers the basics, background and caselaw for judging private benefit. But how many? “Most?” Maybe not. It’s hard to tell.

In a 12-page memo, Chief Counsel’s Analysis section begins: “we believe that the benefit to private interests will, in most cases, be more than incidental both qualitatively and quantitatively. Student-athletes generally benefit from a nonprofit NIL collective through the compensation paid by the collective for use of their NIL. This private benefit is not a byproduct but is rather a fundamental part of a nonprofit NIL collective’s activities.” P. 8 (emphasis added).

The standard for all collectives is the good ‘ol “facts and circumstances” test, because that’s the Service’s default. Interestingly, particularly in light of its “in most cases” statement on P. 8, Page 12 of the memo (also in the Analysis section) sets an 80%-100% per se test for substantiality outside of “facts and circumstances,” P. 12, which is a fairly high bar. And a footnote on the same page gives a safe harbor for those collectives that have already been granted charitable status: “We note that in reconsidering the exempt status of collectives that have already applied for and received favorable determination letters, it may be appropriate to grant relief under section 7805(b).”

Sounds like the future looks busy for many tax-exempt specialists who work with big schools with big teams. But also for some (probably a small number) of the smalls as well.

Iowaska Church of Healing Appeals Denial of 501(c)(3) Application: As discussed in the April Public Policy Advocacy Highlights, the Iowaska Church of Healing wanted IRS approval as a religious charity, but admitted using ayahuasca, a tea brewed from South American plants that contain a chemical deemed illegal under U.S. drug laws, as part of its religious rites. Even the sweeping Religious Freedom Restoration Act doesn’t override the IRS’s ability to deny charitable status under the illegality and public policy doctrines. The Service denied the church’s Form 1023 Application for Exemption on the grounds that the church was not organized and operated exclusively for exempt purposes because Ayahuasca is illegal under federal law and violates public policy. The church then sued the IRS claiming that this violated the church’s rights under RFRA, but U.S. District Judge Beryll Howell rejected the church’s claim. The court issued a summary judgment in favor of the IRS, agreeing with the IRS that the church doesn’t qualify under section 501(c)(3) unless it gets a permit exempting its Ayahuasca use, because of the illegality doctrine. The court also found that plaintiff lacked standing under the Religious Freedom Restoration Act because IRS exemption would not allow the church to use Ayahuasca legally. (Ironically, the church did not have to file Form 1023 to obtain tax-exemption.) Now, according to Des Moines TV station KCCI, the church has now filed an appeal of Judge Howell’s decision.

Deep Dive on No Labels Offers Analysis of Donors Based on IRS Filings: How often do you see an IRS Form 8872 “Political Organization Report of Contributions and Expenditures” printed in a national opinion publication? Much less, one which demonstrates the opposite of what it’s claiming to show? The routine complaint about “dark money” is that it hides the donors to an allegedly nefarious organization. As Mother Jones put it recently, “No Labels, the political outfit preparing to run a “unity” ticket in 2024 that Democratic strategists and Never-Trump Republican operatives fear will siphon votes from President Joe Biden, is what’s known as a dark-money group. Unlike political parties, political action committees, and House, Senate, and presidential candidates, it is not required to reveal who is funding it.” But if you read far into the article, you’ll find that at least some of the information is available from IRS and other federal government filings: “As a nonprofit, No Labels must file tax returns that are public. … IPFA, according to reports it filed with the IRS, …  A report it submitted last month to the IRS detailed the donations and the expenditures. … [the 8872 is reprinted at this point] …  it continued to file reports to the IRS …”

The Mother Jones article does complain that it really doesn’t know much more than is publicly disclosed, and speculates: “The lion’s share of the money that has moved in and out of IPFA has not been disclosed in its filings with the IRS, and there is no telling whether the listed donors are representative of the organization’s overall sources of financing. Most of the funding for No Labels’ 2024 project remains secret, as this group that claims to be addressing popular disenchantment continues to use the same-old tactics of big-money politics and keeps the voters in the dark.”

In other words, the information, or at least some of it, is reasonably available if someone is willing to do the classic kind of spadework that journalists, legal researchers and opposition researchers routinely do. What the breathless article demonstrates is that the target organization, No Labels, does, in fact, have bipartisan and fairly well-known donor support. And it appears that none of these revealing disclosures rely on illegal leaks of protected taxpayer information by, inter alia, organizations that are subject to losing their tax-exemptions by participating in illegality or activities against declared public policy (such as leaking protected taxpayer information).

FEC

FEC Deadlocks Over Request to Regulate “Deep Fakes” in Campaign Ads: The era of “deep fake” campaign ads began long ago, but new technology vastly expands the possibilities of mischief. Now Public Citizen has asked the Federal Election Commission to step in (h/t IFS) to regulate the “fraud” such ads might comprise. “Public Citizen requests that the Federal Election Commission clarify when and how 52 U.S.C. § 30124 (“Fraudulent misrepresentation of campaign authority”) applies to deliberately deceptive AI campaign ads.” After debating opening a rulemaking on the Public Citizen Petition, the FEC voted 3-3 not to open rulemaking.  As Roll Call reported, Commissioner Allen Dickerson pointed out that the agency’s jurisdiction is limited; Chair Dara Lindenbaum agreed, but voted in favor of opening a rulemaking to hear “some really wonderful comments in from people who may not usually comment … that may have ideas that may help us or Congress.”

“[T]he District Court Might Have Ruled Without A Full Appreciation For The Agency’s Tortuous Experience” – Former FEC Chair Lee Goodman Files Solo Amicus Brief in Defaulted CLC Lawsuit Over FEC Stalemated Action: The potential disruption to the Federal Election Commission from bypassing stalemated FEC action was on full view to the D.C. Circuit in an amicus brief filed by former FEC Chair and Commissioner (and, while in private practice, participant in the First Tuesday Lunch Group) Lee Goodman:

When the District Court ruled against the Commission and remanded the matter to the “expert agency” to distinguish between exempt versus non-exempt “input costs” incurred by citizens to produce and disseminate online political content, See Campaign Legal Center v. Federal Election Commission, Civ. A. 192336 (D.D.C. Memorandum Opinion dated December 8, 2022) (“Mem. Op.”), amicus became concerned that certain language in the opinion could be construed to disrupt nearly two decades of carefully calibrated regulations implementing a complex statute while ensuring free political speech on the internet. The arbitrary and capricious standard of review applicable to the Commission’s decision as well as the deference courts are to afford an agency’s interpretation of its own regulations are safeguards against such errors, but they did not restrain the lower court here.

Amicus also was concerned that the District Court might have ruled without a full appreciation for the agency’s tortuous experience with trying to regulate political speech on the internet, the history underlying the Internet Exemption, and the reasons for exempting free online posts and the “input costs” incurred to produce them from the restrictions the Federal Election Campaign Act applies to paid “advertising.” The District Court was denied the benefit of a complete briefing on the historical rationale of the exemption, including “input costs,” because the Commission had defaulted. Because the District Court was not fully informed, imprecise language in its ruling effectively reversed a regulation firmly grounded in the text of the Act as well as years of rulemaking history, practical experience in regulating online political speech, and sound legal and policy foundations. … This Court must properly apply the arbitrary and capricious standard of review to preserve the integrity of the Commission’s carefully calibrated regulation of political speech disseminated for free on the internet and to prevent the speech chilling turmoil the District Court’s opinion would cause.

DoJ

Senate Passes Two Bills to Amend FARA: The U.S. Senate has now passed two bills to amend the creaky Foreign Agent Registration Act. S. 264, the Lobbying Disclosure Improvement Act, passed by unanimous consent, identifies  registered lobbyists who rely on disclosure under the Lobbying Disclosure Act for exemption from FARA registration. S. 829, the Disclosing Foreign Influence in Lobbying Act, is potentially far more reaching, requiring the disclosure of “the name and address of each government of a foreign country (including any agency or subdivision of a government of a foreign country, such as a regional or municipal unit of government) and foreign political party, other than the client, that participates in the direction, planning, supervision, or control of any lobbying activities of the registrant.”  The Committee Report explains the purpose of the legislation:

there are instances in which, due to political climate, government structure, or other factors, some foreign governments and political parties are able to exert significant control over lobbying organizations without having a direct financial stake in lobbying activities. According to a January 2021 report from the Center for Strategic and International Studies, since 2012, the Chinese Communist Party (CCP) in particular is promoting a new form of corporate governance that calls for inserting provisions directly into corporate charters that give the company’s internal CCP organization a voice in management decisions. Reports by law enforcement organizations to Congress establish that the CCP is able to use its role in private companies to advocate for CCP interests and that other foreign governments or political parties would be able to engage similarly. The ‘‘Disclosing Foreign Influence in Lobbying Act’’ closes the LDA loophole that allows such foreign governments and political parties to escape disclosure by requiring disclosure of any participation by a foreign government or political party in the direction, planning, supervision, or control of lobbying activities, regardless of financial contribution, ownership of the client, or other financial incentive.

S. 829 is the latest version of legislation that passed three Senate Committees in 2019, and is the first one to have passed the Senate. Last month’s Public Policy Advocacy Highlights noted the bipartisan support for the bill with the odd-bedfellows coalition of chief Senate sponsor Republican Chuck Grassley and Democrat Sheldon Whitehouse, but now the bill has passed the Senate on unanimous consent.

Covington has an explainer that delves into some unanswered questions raised by the new legislation. For example: “This change, if enacted, would present new challenges for the regulated community. The amendment assumes that it is always clear when a filer has a FARA registration obligation and is relying on the LDA exemption, but that is not always the case. This amendment would force LDA registrants to take a position on whether or not they believe they are engaged in FARA registrable activities.”

“Fore!” Does Providing PR Services to Saudi-backed LIV Golf Require Registration Under FARA? (H/t Craig Engle). The Foreign Agent Registration Act regulations provide that, if a foreign government (or foreign political party) is the “principal beneficiary” of the work, the exemption from FARA registration for registered lobbyists is not applicable, even if you are representing a non-governmental entity. See 28 CFR § 5.307. Politico reports that presidential candidate “Vivek Ramaswamy” has “fired” the Gitcho Goodwin public relations team because the firm also represented the LIV Golf League, which is funded by the Saudi Arabian government. “It’s not uncommon for foreign entities to seek out politically-connected consultants to help navigate U.S. regulations and politics. Their registration on behalf of LIV marked a stark overlap of foreign lobbying and a presidential campaign in which the state of U.S.-Saudi relations is likely to be a topic of debate.” A federal magistrate ruled in February that the Saudi Public Investment Fund “is not a mere investor in LIV; it is the moving force behind the founding, funding, oversight and operation of LIV.”

CONGRESS

“Lady Justice may be blind, but before you speak to her, Rhode Island Senator Sheldon Whitehouse wants to see your donor list.” Luke Wachob from People United for Privacy has a scoop on Sen. Whitehouse’s latest attempt to sneak in more donor disclosure from tax-exempt organizations doing perfectly legal things. This time, Whitehouse has included a section in his “Supreme Court Ethics, Recusal and Transparency Act,” S. 359, which would require any tax-exempt organization that files one amicus brief a year to include in the brief disclosure of its “significant donors.”

COURTS

Despite Headlines, Supreme Court Statistics Show A Tale of Three Junes, Only One of Which Was “Red:” The dust hasn’t really settled on the just-completed Supreme Court Term, but some media commentary suggests that it was all “red” since 2020. Law Prof. Josh Blackman has a rundown in Volokh Conspiracy (an influential libertarian law professors’ blog in Reason magazine) about why that view isn’t accurate.

Flash back to June 2020. The supposedly-conservative 5-4 majority of the Supreme Court, in case after case, swung to the left: McGirt, Mazars, Vance, June Medical, Regents, Bostock, and so on. Things became so bleak I referred to the period as Blue June.

Now, jump forward to June 2022. The expanded 6-3 conservative majority, in case after case, swung to the right: West Virginia, Castro-Huerta, Kennedy, Dobbs, Bruen, Carson, and so on. In my lifetime, I could not recall such a consistent string of decisions that favored conservative jurisprudence. I called the period, fittingly, Red June.

What do I make of June 2023? Well, it is somewhere in between Red June and Blue June. Call it Purple June. There were several significant decisions to the right: 303 Creative, Nebraska, and Students for Fair Admission. (Curiously, all the hard-right decisions came on the last two days of the term–more on timing later.) There were several significant decisions to the left: Moore, Texas, Brackeen, and Milligan. And there were a few significant decisions that are harder to haracterize: Groff, Mallory, and Pork Producers. It’s a mix.

Meanwhile, the Washington Examiner interviewed Adam Feldman, who runs the numbers-crunching blog Empirical SCotUS, about ideological splits on the Court, who seems to echo Prof. Blackman: “Feldman said several factors explain the shift, noting that a large bulk of the 59 cases to be decided this term have seen ‘some mix of liberal justices in the majority. … “Whether they truly agree with it or not — with the majority opinions — I think they’re there to possibly make it less of a hard conservative outcome.”

Civil Procedure Junkies Alert: Yet Another District Court Analyzes Rule 12 Motions to Dismiss Robocall Complaints Under TCPA: Many tax-exempt organizations, including political committees, often use automatic dialing equipment of some type (“robodialers”). Robodialers are lawful, but are regulated under the various iterations of the Telephone Consumer Protection Act, 47 U.S.C. § 227, as well as many different state laws of varying complexity. Barr v. Amer. Ass’n of Political Consultants, 591 U.S. __, 140 S.Ct. 2335 (2020) (under strict scrutiny review and after questions at oral argument about whether every cellular phone with autodialing capability would violate Section 227, the Court found 6-3 that the Section violates, in part, the First Amendment). Many federal courts have reviewed the TCPA and its applications under a variety of fact patterns.

The latest of those robodialer cases is Shoemaker v. Zeitlin, No. 1:21-CV-1668-Conner, M.D.Pa, June 5, 2023, (h/t Craig Engle) in which Judge Christopher Conner rejected, in part, a motion to dismiss under the TCPA, and then granted a motion to dismiss a Pennsylvania unjust enrichment claim because the plaintiffs failed to provide any substantive legal or factual rationale for the application of state law. “We deem plaintiffs’ failure to respond to this dispositive legal argument an abandonment of their claims.” Slip op., at 25. Ouch. The decision has two important functions: it summarizes the tortured current state of TCPA civil procedure claims in the wake of AAPC, and it shows that courts, faced with many such cases, will not be lenient against counsel who are remiss in pleading under both federal and state robodialer claims. You’ve been warned (or if you’re defending, you now have more in your quiver).

Speaking of Robocalls, New FCC Limits and Requirements Go Into Effect in July: New Federal Communications Commission rules go into effect on July 20. There are a LOT of big changes for tax-exempt organizations and others, including limits on the number of calls that can be made each month, required training, and automated opt-outs. Holtzman Vogel has an explainer.

Chalk Up A First Amendment Win For Writing On Sidewalks in Seattle: In various cities during the restive year of 2021, many protestors wrote on sidewalks and walls of government buildings. In Seattle, a person who “writes, paints, or draws any inscription, figure, or mark of any type on any public or private building or other structure or any real or personal property owned by any other person” is guilty of “property damage.” Seattle Municipal Code 12A.08.020. Protestors used sidewalk chalk and charcoal to write messages on a temporary wall erected outside a Seattle Police Department precinct building, and were charged under the Ordinance. In Tucson v. Seattle, No. C23-17 MJP, June 13, 2023, U.S. District Judge Marsha Pechman enjoined Seattle from enforcing the Ordinance because it was “both vague and overbroad.” Slip op., at 8. A key factor was that the “visual blight” the Ordinance targeted was temporary and would wash away in the rain (of which there is a significant amount in Seattle). “On its face, the Ordinance sweeps so broadly that it criminalizes innocuous drawings (from a child’s drawing of a mermaid to pro-police messages written by the Seattle Police Foundation that can hardly be said to constitute ‘visual blight’ and which would naturally wash away in the next rain storm. Based on the record before it, the Court finds the Ordinance fails to narrowly target the purported visual blight.” Slip Op., at 10.  Compare painting a slogan on a street where the paint itself “on” the street presented a safety issue. Plus, there was content discrimination, as shown in coverage by PubliCola including pictures of Seattle Police tweeting that sidewalk chalk was not illegal.

Reknowned law Professor Eugene Volokh isn’t entirely comfortable with this opinion: “I’m not sure whether the decision is entirely correct. But it does leave room, I think, for narrower ordinances, for instance ones that (1) forbid unauthorized writing that is much harder to remove than chalk, especially when it causes significant damage; (2) perhaps forbid even chalking in places, such as indoors, where the chalk can’t just be easily hosed off; or (3) provide for implied as well as express consent (as in the writing a note on a classmate’s notebook). The decision also doesn’t preclude private property owners from removing the writing, though query whether it would forbid the city from selectively hosing off some chalking on public property when it wouldn’t hose off other chalking.”

STATES

New Jersey Election Law Enforcement Commission Is Back In Business: Last March, all four members of New Jersey’s Election Law Enforcement Commission resigned to protest against new statutory rules they said “defanged” the government agency. Now the New Jersey Monitor reports that NJ Governor Phil Murphy has appointed four replacement Commissioners (h/t IFS). Not everyone is happy: Commission Director Jeff Brindle “has sued Murphy and top aides, alleging the Elections Transparency Act is “special legislation” barred by the state constitution, charging the governor’s aides attempted to force his resignation by leaking damaging emails, and claiming Murphy sought his ouster over an op-ed Brindle wrote that targeted candidates’ use of nonprofits with lax disclosure requirement.” Always a lot of excitement in Jersey campaign regulation.

States’ Primary Schedules Are Still Up In The Air: The Associated Press reports that (h/t ELB) “Months after the Democratic Party approved President Joe Biden’s plan to overhaul its primary order to better reflect a deeply diverse voter base, … Party officials now expect the process to continue through the end of the year — even as the 2024 presidential race heats up all around it.” (To some degree, so are Republican primaries.) AP also notes: “The DNC says it prepared for an arduous process, but is not too concerned by the uncertainty, in part because Biden faces only minor primary challengers.”

Did You Think Americans for Prosperity Foundation v. Bonta Would Stop States From Using Dragnets To Collect Donor Information? Think again. National Review has a short roundup of state efforts to evade the Supreme Court’s strong July 1, 2021, opinion striking down California’s “dragnet” collection (and repeated leaking) of hundreds of thousands of organizations’ confidential donor files. “[I]n the first six months of 2023, no fewer than 19 states have considered legislation that would compel diverse and even apolitical organizations to share private supporter information. They range from blue states to purple states to red states, with at least eight bills still pending.” One of the states now demanding donor files? California. Luke Wachob, from People United for Privacy, has more, (h/t IFS) including: “One state representative in North Dakota put his reasoning for wanting to expose Americans’ nonprofit donations in blunt terms: ‘I need to know who my enemies are.’ But the Supreme Court had an answer to that claim two years ago: No, you don’t.”

How Florida Democratic Party’s Self-Inflicted Wound Cost Elections: Long-time “political hack” Steve Schale offers “Anatomy of a Murder,” a deeply-personal account in The Bulwark+ of his and the Florida Democratic Party’s mis-steps after the Obama vote in 2012. “When I left the party job in 2009, I genuinely believed we were out of the ditch and on a better path. … Things were trending in the right direction for Democrats in Florida. But right about then, a new idea was floated: standing up a donor table—or alliance, if that makes you feel better—that would operate and fund organizations outside of the party. … My concern was that the alliance would not be an add-on, but instead would end up being a replacement for the party.”

Law Prof. Richard Pildes in ELB comments: “This was one of the more fascinating pieces I’ve read on the sources of weakness in modern state parties, how that weakness affects their competitiveness, and the role of non-party, outside donors in that process. We’ve known that the McCain-Feingold law caused enormous damage to state political parties, and it’s unclear what role that law might have played in the background. This story is primarily about outside donor alliances that think they can perform party functions better than the parties. The story is about the decline of the Democratic Party in Florida, written by a long-time Democratic political operative there. The whole story is worth reading.”

“Instead of Door-Knocking, They Were In The Casino” – Why Republican Turnout Efforts Were Sabotaged By Fraud: Speaking of undercutting party efforts, NBC News had a blockbuster report on Republicans nationally having their efforts similarly undercut by field teams that just don’t do the work they’re paid for.

A few weeks before last fall’s midterm elections, a paid canvasser in Nevada did what thousands of door-knockers across the country were doing: They went on an app and marked off the homes they had visited that day. There was just one problem. This canvasser never went anywhere near those homes in a neighborhood in south Las Vegas. They were 8 miles away, sitting inside Caesars Palace casino, according to geotracking data obtained by NBC News. … If this were an isolated episode, it’d be a minor nuisance. But it wasn’t. The large-scale voter contact effort that conservatives have put at the center of their political operations in recent years is plagued with issues, according to more than a dozen people who’ve worked in GOP-aligned field operations and internal data obtained by NBC News. Those issues include fraudulent and untrustworthy data entries, akin to what occurred in Nevada, as well as allegations of lax hiring practices and a lack of accountability.

Insiders contend that two of the closest Senate races in 2022 – Nevada and Georgia – could have been affected by the field effort sabotage. “One national GOP operative who’s overseen door-knocking campaigns estimated that in their experience “when it comes down to the actual cheating,” roughly “10 to 20% of the staff ends up getting fired.” This time it wasn’t outside organizations that hurt the Republicans, but the urgency of impending elections and inadequate supervision.

NBC suggests that Democrats do not have the same type of issues, because they rely less on paid door-knockers: “Though Democrats deal with some of the same door-knocking challenges, the party has built-in advantages for in-person canvassing, according to interviews with two Democratic canvassing veterans as well as with Republicans with similar experience. They include a more ready supply of younger volunteers, allies in organized labor offering union workers to hit the doors and a base of supporters who are more tightly concentrated in urban and dense suburban areas where canvassers can hit a lot more doors in a lot less time.”

Texas Intervenes in Harris County’s Election Administration: Election administration isn’t often a topic covered in Public Policy Advocacy Highlights, but this is an unusual situation. Harris County, home to Houston, one of America’s largest and most dynamic cities, is administratively a mess: its schools have been taken over by the State because they’re a disaster, other agencies routinely make massive errors, traffic is miserable, growth is unchecked and byzantine, and there are areas which are as much under siege by criminals as Chicago or Portland, Oregon. It is also a vast island of blue in a very red state, and it had its share of issues during the 2022 midterms.

Now liberal publication The Texas Tribune has a deep dive (h/t ELB) on moves by the State to take over another county agency: the election administration:

Texas Republicans have muscled through legislation allowing unprecedented state interventions into elections in Harris County, the most populous county in Texas, threatening to drastically overhaul elections in the Democratic stronghold. The bills targeting Harris, which would eliminate its chief elections official and allow state officials to intervene and supervise the county’s elections in response to administrative complaints, are headed to the governor’s desk. Lawmakers say they’re responding to repeated election issues in Harris County, which includes the city of Houston. The county, for its part, has signaled it will challenge the bid to remove its elections administrator and is portraying the bills as a partisan power grab and the latest in a series of legislative moves by Texas Republicans to tighten access to the ballot in the wake of the 2020 presidential election.

San Francisco Cracks Down on Nonprofit Spending In Wake of FBI and Other Investigations: The San Francisco Standard reports that the city “dishes out more than a billion dollars annually to nonprofit organizations, but the city’s oversight of those dollars has been the subject of growing scrutiny in the wake of scandals. On Tuesday, the Board of Supervisors passed a bill requiring nonprofits receiving city funds to submit tax and governance documents confirming their nonprofit status and to designate the city administrator as the sole collector of such information. The bill, which was sponsored by Supervisor Ahsha Safaí, passed unanimously.” Some of the organizations “received largely glowing reviews from city agencies last year, not long before they were accused of mismanaging public funds.”

GENERAL

NY Times: Koch Network to Raise $70 Million “For Push To Sink Trump:” Maggie Haberman of the New York Times reports, based on various internal communications that appear to have been leaked, that

The political network established by conservative industrialists Charles and David Koch has raised more than $70 million for political races as it looks to help Republicans move past Donald Trump, according to an official with the group. With some of this large sum to start, the network, Americans for Prosperity Action, plans to throw its weight into the GOP presidential nominating contest for the first time in its nearly 20-year history. The network spent nearly $500 million supporting Republican candidates and conservative policies in the 2020 election cycle alone. …

The Koch network’s goal in the 2024 presidential primaries, which has been described only indirectly in written internal communications, is to stop Trump from winning the Republican nomination. In February, a top political official in the network, Emily Seidel, wrote a memo to donors and activists saying it was time to “have a president in 2025 who represents a new chapter.” …

With seven months until the primaries, the Koch coalition of conservatives is still searching for who its influential and wealthy donors believe can take down the former president, a reflection of a broader paralysis among anti-Trump Republican donors who have watched in shock as Trump’s poll numbers have held despite two indictments. A memo that circulated inside the Koch network this month made the case that Trump’s renomination was not inevitable, arguing that the issue of electability could still weaken him.

Where Did The Donors Go? Conflicting articles struggle to explain why the number of donors to tax-exempt organizations have declined more than the total amount of giving to charity. The Nonprofit Times reported that Giving USA 2023: The Annual Report on Philanthropy for the Year 2022, a report published by Giving USA Foundation, found that “Giving to nonprofits in the United States plunged during 2022, led by the disappearance of individual donors. Giving dropped to an estimated $499.33 billion – down 3.4% in current dollars and 10.5% after adjusting for inflation from a revised total of $516.65 billion in 2021.” Authors at Indiana University blamed “Inflation, economic uncertainty, individuals returning to previous giving levels after the pandemic surge and the decline in the number of donors” for the drop.

A second Nonprofit Times article noted that a different Better Business Bureau study, also conducted by Indiana University researchers, found that “donor disconnect is multi-level” and “Younger people are less likely to say they’ve stopped donating to charity because they can’t afford to give and more likely to say it’s because they don’t feel like they have been asked or don’t feel connected to the charity.” And a third report from Nonprofit Times reported that the Center for Effective Philanthropy in Cambridge, Massachusetts, found that “Nonprofits entered this year on a more positive financial footing that many leaders initially feared during the pandemic and the high inflationary period that followed. Many also are continuing to enjoy the fruits of an increased level of trust from funders whose philanthropic giving proved vital in tiding them over these last few years.”

One significant difference between the studies is that the more positive reports come from organizations which rely more on foundation or high wealth donors, rather than smaller, individual donors. Key to the higher donations, according to the CEP study: “streamlined grant application processes, removal of restrictions on the use of grants, and receipt of multi-year funding from foundations.” Another way of looking at these results is that, contrary to reports that greater disparity of wealth indicates that the wealthy are less charitable and civic-minded, higher-income donors are shoring up tax-exempt organizations in a time of peril.

Another article from CNBC wondered why conservative donor Peter Thiel’s foundation gave $3 million, its second-largest gift of 2021, to the left-leaning New Venture Fund, part of the Arabella Advisors network. Various personages expressed confusion about the gift, which probably simply reflects the fact that donors are rarely as simplistic as media stereotypes suggest, and Thiel has long confounded media coverage.

TechSoup Offers Guide for Tax-Exempt Organizations Using ChatGPT: Even if AI isn’t taking over the world, a lot of people want to know how to use it. TechSoup, which provides information and discounted products to tax-exempt organizations registered with various companies that provide discounts to tax-exempts (like Microsoft and Adobe), has a brief blog post on how to use ChatGPT to help nonprofits. “You can use ChatGPT to save time, generate insights, and boost day-to-day productivity at your organization. We’ll go over some ‘prompting’ tips you can use, as well as some ways that ChatGPT can help nonprofits’ everyday needs. We’ll also cover a few limitations to be aware of when using this technology.”

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