Author: barnabyzall

Public Policy Advocacy Highlights for March 2022 (Full Edition, including Ides of March Report)

Public Policy Advocacy Highlights for March 2022 (Full Edition, including Ides of March Report)

As always, characterizations, editorial comments, abbreviations and shorthand references are solely PPA Highlights author Barnaby Zall’s, and do not represent the views or positions of the Public Policy Legal Institute or the First Tuesday Lunch Group or their members and participants. Suggestions and corrections welcome.

DC

Glitch in DC Corporate Filings and a Workaround: Beth Kingsley reports DCRA wouldn’t issue a certificate of good standing to a corporation, even though they are in good standing, because the corporation had not yet filed its Biennial Report (which was not yet due, but which the system expected to receive). “It turns out there is a glitch in the system (which they acknowledge) and because the database is ready to accept 2022 Biennial Reports it won’t recognize that an entity is in good standing, even though the filing deadline is not yet here. … If your clients experience issues with this you can probably resolve it by filing this year’s report and then requesting the certificate from the online system.”

Who Must Be Listed on DC Biennial Reports? Tom Antonucci asks “I’m trying to confirm whether all directors (or just one director) needs to be listed on the [DC Biennial] report; and whether there is a separate requirement to list ‘beneficial owners’ on the report (ignoring for now the question of whether a home address needs to be included) [which has been much discussed in First Tuesday Lunch meetings recently]. … Notwithstanding the statutory language, DCRA’s form appears to combine/confuse ‘governors’ and ‘beneficial owners.’”  

IRS

Malone: Don’t Call Us, Don’t Mail Us About Delays: Recent First Tuesday Lunch Group meetings have discussed problems and delays in IRS’s Tax-Exempt Organizations and Government Entities Division. Ernst & Young reports from a TEGE Council meeting: “At a virtual TEGE Exempt Organizations Council meeting attended by EY on March 3, 2022, IRS Tax-Exempt and Government Entities division (TE/GE) director Robert Malone suggested that tax-exempt organizations (1) contact the IRS to request corrections to the Exempt Organizations Business Master File Extract (EO BMF), and (2) utilize IRS-website resources to check the status of applications for IRS recognition of tax-exempt status.” In other words, call IRS about their mistakes, not their delays. Of course, as often mentioned in FTLG meetings, if you qualify (in good faith) for expedited processing, a call is appropriate.

More on Remedying IRS Customer Service “Dumpster Fire:” The Hill reports that “The Internal Revenue Service (IRS) plans to add 10,000 new employees to its payroll, hiring 5,000 in the next few months and an additional 5,000 by the end of next year [emphasis added], to tackle the backlog of tax returns and unanswered phone calls caused by the pandemic. The aim is to shrink the agency’s to-do list from more than 23 million unprocessed forms and requests down to the accustomed level of about 1 million by the end of 2022.” In addition, some 700 existing Service employees will be re-tasked to process returns, another 6,000 will be eligible for overtime pay, and the Service will hire more independent contractors and utilize more computerized assistance functions. Total cost $225 million, or about 1.7% of the IRS budget. But, they’re not going to be done reducing the backlog until after “the end of next year”?!! That dumpster’s still pretty warm.

IRS Stops Mailing First Delinquency Notices For Forms 990, 1120-POL and Other Forms: On a related note (literally, an emailed note and not a release for exempt organizations), and blaming the overwhelming backlog of unprocessed returns (see above), the Service has suspended the automated mailing of a variety of First and Second Delinquency Notices to, inter alia, tax-exempt organizations. As of March 25, the EO-related forms include:

NumberName
CP214Reminder Notice About Your Form 5500-EZ or 5500-SF Filing Requirement
CP217Form 940 Not Required – Federal, State, and Local Government Agencies
CP259AFirst Taxpayer Delinquency Investigation Notice – Form 990/990EZ/990N
CP259BFirst Taxpayer Delinquency Investigation Notice – Form 990PF
CP259DFirst Taxpayer Delinquency Investigation Notice – Form 990T
CP259FFirst Taxpayer Delinquency Investigation Notice – Form 5227
CP259GFirst Taxpayer Delinquency Investigation Notice – Form 1120-POL
CP259HFirst Taxpayer Delinquency Investigation Notice – Form 990/990EZ
CP403First Delinquency Notice – Form 5500 or 5500-SF
CP406Second Delinquency Notice – Form 5500

IRS TE/GE Issues New Technical Guidance: The Service’s Tax-Exempt Organizations and Government Entities office has published three new comprehensive, issue-specific Technical Guides:

TG 3-8, Termination of Private Foundation Status, was renumbered TG 3-22 without substantive change.

Confused About the New 1099-MISC and NEC Forms? The Service offers a new video about the new non-employee compensation reporting forms.

Kiplinger Offers a DAF’s Guidance on Charitable Tradeoffs Between DAFs and Private Foundations: Kiplinger offers a fairly robust, though basic, description of choices for donors who want to increase charitable giving. Author is Lawson Bader, CEO of mega-Donor Advised Fund Donors Trust, which, entirely coincidentally, was repeatedly lambasted during the Jackson confirmation process for aiding “dark money” campaigns about judicial candidates. That alleged ability to become involved in contentious public policy advocacy, however, was not discussed as an advantage or neutral factor in Bader’s analysis, probably because Bader understands more about what a DAF can, and cannot, do than those commenting on Judge Jackson’s nomination process.  

Pandemic Relief Funds Might Trigger New Federal Audit Requirements: The IRS recently reported that “investigators have uncovered more than $1.8 billion in fraudulent activity related to federal COVID-19 stimulus funds. … the IRS said it has closed 660 criminal cases related to various stimulus bills prompted by the pandemic.” The Minnesota Reformer points out that many smaller EOs may not have realized that the receipt of significant federal funds might trigger new requirements that they obtain audits this year. “Nonprofits are facing fresh scrutiny in the face of the sprawling investigation of Feeding our Future and the large sums the federal government funneled through nonprofits to make sure people were fed and cared for during the pandemic. The U.S. Justice Department is investigating the Minneapolis nonprofit for allegedly misappropriating $65 million in federal food program dollars.”

DEPT OF JUSTICE

More On Recent FARA DoJ Opinions on Nonprofit Organizations: Venable has a new update piece explaining more about the recent academic institution-oriented DoJ opinions handed down on the Foreign Agent Registration Act. “Both opinions highlight the limits of the academic exemption and the importance of considering FARA with regard not only to an organization’s formal contracts and agreements, but also to the organization’s public statements about its work, including press releases, reports, and social media posts, as each of these can be used by DOJ in evaluating the application of FARA. What is interesting about the regulation limiting the scope of the academic exemption to nonpolitical activities is that that limit is not actually found in the statute.”

FEC

Statute of Limitations Blocks FEC Action on 501(c)(4)’s Alleged Campaign Expenditures: In MUR 7465 (Freedom Vote), the Federal Election Commission voted 4-2 to dismiss and close a complaint that Freedom Vote, a 501(c)(4) Ohio corporation, failed to register and report as a political committee. Commissioners Dickerson, Cooksey and Trainor said “By the time this Matter was presented to the Commission for a probable-cause determination, however, the five-year statute of limitations had expired on the bulk of Freedom Vote’s alleged FECA violations. In an exercise of our prosecutorial discretion, we declined to pursue the alleged violations that were not time-barred. …  the Respondent is a defunct, bankrupt entity accused of prior reporting violations, and there is no basis to believe that the allegedly impermissible conduct will recur.” Freedom Vote apparently settled an IRS audit controversy before going bankrupt.

FEC Fines Govt Contractor Marathon Petroleum Corp $85,000 in Conciliation Agreement for $1M Contributions to Leadership PACs: CLC filed a complaint in October 2020, which became MUR 7843; Covington represented the company. Marathon argued that a subsidiary of the company was a contractor and its compliance attorneys had been “unaware” of that contract; it also argued that the statutory prohibition against government contractors contributing to SuperPACs was unconstitutional under Citizens United and Speechnow. The FEC agreed 5-0 to accept the Conciliation Agreement.

FEC Issues New Form 1 for IE-only (“SuperPACs”) and Hybrid Committees Using Separate Bank Accounts: On March 3, 2022, the Federal Election Commission proposed for Congressional review revised forms to allow independent expenditure-only and hybrid committees to register without filing separate statements (discussed at an earlier First Tuesday Lunch meeting). “The revised form introduces voluntary provisions for registering independent expenditure-only political committees (commonly known as “Super PACs”) and hybrid PACs, which intend to establish separate bank accounts to make contributions and to raise unlimited amounts to make independent expenditures.” The proposed form revisions will go into effect unless Congress intervenes.

Does the FEC Inappropriately Conflate Individuals and Corporations? Federal Election Commission Chair Allen Dickerson pens a separate Statement of Reasons in MUR 7707 (Friends of Bill Posey) explaining his repeated “concern that the Commission is insufficiently attentive to the law governing corporations.”

COURTS

Supreme Court – First Amendment “Cannot Be Used As A Weapon To Silence”: In Houston Community College System v. Wilson, 595 U.S. __ (March 24, 2022), the Supreme Court said that the HCC Board of Directors’ verbal censure of one of its members did not offend the First Amendment. “The First Amendment surely promises an elected representative like Mr. Wilson the right to speak freely on questions of government policy. But just as surely, it cannot be used as a weapon to silence other representatives seeking to do the same. …When the government interacts with private individuals as sovereign, employer, educator, or licensor, its threat of a censure could raise First Amendment questions. But those cases are not this one.” Slip op. 9, 11.

Government Agencies, Including the IRS, Must Also “Turn Square Corners”; IRS Can’t Legislate Major Financial Penalties and Reporting Requirements Without Complying With Basic APA Rules: Not so long ago, before the 2013 Lois Lerner targeting scandal, there was significant communication and cooperation between the Service and practitioners that helped both the regulators and regulated organizations understand, enforce and comply with the rules; no longer, and now the Service is suffering from both congressional and judicial challenges. For example, Chief Judge Jeff Sutton of the U.S. Court of Appeals for the Sixth Circuit is on a roll recently, writing several influential opinions in important cases. On March 3, in Mann Construction v. U.S., he took on the age-old tradition of deferring to IRS informal guidance (we used to call that deference “we have 200 million taxpayers and we don’t have time to do things the hard way other agencies use”), and rejected the Service’s claims that it could establish a new “listed transaction” reporting rule without following the “baseline” rules of the Administrative Procedures Act. Instead of the traditional deference, Sutton applied the Supreme Court newly-invigorated “square corners” doctrine: “The taxpayers claim that the IRS failed to meet a reporting requirement of its own by skipping the notice-and-comment process before promulgating this legislative rule. If individuals ‘must turn square corners when they deal with the government,’ the taxpayers insist, ‘it cannot be too much to expect the government to turn square corners when it deals with them.’ Niz-Chavez v. Garland, 141 S. Ct. 1474, 1486 (2021). … The question is whether Congress amended the APA’s prerequisites, not whether the IRS did. … But the U.S. Supreme Court has already rejected the idea that tax law deserves special treatment under the APA. In its words, ‘we are not inclined to carve out an approach to administrative review good for tax law only.’ Mayo Found. for Med. Educ. & Rsch. v. United States, 562 U.S. 44, 55 (2011).” Slip op., 1, 10, 11.

Court Holds Wyoming’s EC Statute Unconstitutionally Vague and Not Narrowly Tailored Under Exacting Scrutiny Analysis: In Wyoming Gun Owners v. Buchanon, U.S. District Court Judge Scott Skavdahl held Wyoming’s electioneering communications statute “does not survive exacting scrutiny and violates the First Amendment.” Slip op. 28. WyGO’s 2020 radio ad mentioned two state Senate candidates, one favorably, the other less so; the Wyoming Secretary of State’s Election Division imposed a $500 fine for failing to register and report, “because the ad identified two candidates up for election with less than thirty days before the primary and could only be reasonably interpreted as an appeal to vote for Bouchard and against Johnson.” The Court held that, while the government had an important interest in EC reporting, the statute was void for vagueness (“statute provides no guidance for what expenditures or contributions ‘relate to’ electioneering communications.”), slip op. 13-14, and, citing AFPF/TMLC v. Bonta, failed the narrow tailoring prong of exacting scrutiny because “compelled disclosure of donors who make political contributions or expenditures … pose a significant threat to associational freedom.” Slip op. 18. “If the statute is written in such a way that organizations like WyGO are required to design specific bookkeeping systems to comply with the statute, it is not clearly written or narrowly tailored. It is on the state of Wyoming to prove they have narrowly tailored the statute to meet their interests and putting the responsibility on WyGO to keep proper records does not meet that burden.” Slip op. 24.

District Court Rejects Injunction Against FEC Requiring Disclosure of All Donors to Organizations Making IEs Because Current FEC Interpretation Unlikely to Cause Injury: The FEC has traditionally interpreted 52 U.S.C. § 30104(c), governing disclosure of donors to organizations that make independent expenditures, to mean disclosing only donors who make donations for the purpose of furthering such IEs. The D.C. Circuit, part of a long chain of cases, decided in Citizens for Responsibility & Ethics in Wash. v. FEC, 971 F.3d 340, 350 (D.C. Cir. 2020) (CREW III), that the FEC regulation inappropriately narrowed the statute, and required the disclosure of all donors. The FEC, on the other hand, apparently has used the definition of “contribution” to narrow the class of donors back to its traditional model. On March 22, in Wisconsin Family Action v. FEC, Judge William Griesbach of the Eastern District of Wisconsin agreed with the FEC and found that not all donors who give to organizations which run IEs must be disclosed, citing AFPF/TMLC v. Bonta, 141 S. Ct. 2373, 2382 (2021). Griesbach refused to grant an injunction against the FEC because the FEC basically said it will only require the disclosure of donors who earmark their donations for the purpose of supporting the IEs. Slip op. 22, 23 (“But based on the FEC’s interpretation of § 30104(c), the FEC will not require WFA to disclose all of its donors simply because it makes independent expenditures exceeding $250 in a calendar year. … the Court is ill equipped and without authority to provide an advisory opinion as to whether disclosure will be required”). The Court told WFA to get an FEC Advisory Opinion defining a “contribution” that might trigger the disclosure requirement. But, of course, the reason for all this legal fighting is that the FEC has been deadlocked and unable to obtain enough votes to act on the question. See, e.g., Slip op. 6 (after the original court decision, FEC issued a press release instead of amending the regulations).

Jury Rejects Prosecutors’ Claim That $1 Million Pro-Clinton Committees’ Donation Was Illegal Foreign Contribution: Politico reports that a DC federal jury “acquitted one man of a conspiracy to use straw donors and pass-throughs to donate millions of dollars to political funds backing Hillary Clinton in the 2016 presidential race, but jurors may be deadlocked on the fate of another man on trial in the case. … outside the presence of the jury, prosecutors said they believed that the original source of the money was actually the government of the United Arab Emirates.” Meanwhile, Reuters reports that a Ukrainian businessman was sentenced to a year in prison for helping a Russian oligarch funnel money to U.S. candidates who could help his cannabis company he was building with Lev Parnas, a former associate of Rudy Giuliani.

Omaha TV Station Reports on Cong. Fortenberry’s Novel Defense Against Charges of Foreign Campaign Contributions – “He Didn’t Need the Money:” KETV in Omaha, Nebraska, recounts differences between Cong. Jeff Fortenberry’s defense counsel’s and the prosecution’s positions on $30,000 in financial support which allegedly could be traced to foreign money. Fortenberry’s campaign issued a statement about the testimony, including: “Even the government’s own witness, the Congressman’s FEC attorney at the time, testified that Rep. Fortenberry is an honest person and that if he had actually heard that donations to his campaign had been illegal he would have taken action.” UPDATE: That defense didn’t work: On March 25, “Fortenberry was convicted of one count of scheming to falsify and conceal material facts and two counts of making false statements to federal investigators.”

NY AG Loses Bid to Close Down NRA: On March 2, the Supreme Court of New York, Commercial Division (which is a New York intermediate appellate court), denied the NY Attorney General’s attempt to close down the National Rifle Association as a remedy for alleged financial mismanagement and insider reports of exploitation of exempt assets. “Her allegations concern primarily private harm to the NRA and its members and donors, which if proven can be addressed by the targeted, less intrusive relief she seeks through other claims in her Complaint. The Complaint does not allege that any financial misconduct benefited the NRA, or that the NRA exists primarily to carry out such activity, or that the NRA is incapable of continuing its legitimate activities on behalf of its millions of members. In short, the Complaint does not allege the type of public harm that is the legal linchpin for imposing the ‘corporate death penalty.’ Moreover, dissolving the NRA could impinge, at least indirectly, on the free speech and assembly rights of its millions of members.” Slip op., 2. Only the claims that would have dissolved the NRA were dismissed; other claims remain viable. Id.

“Is Justice Kagan Done With Stare Decisis?” Richard Re blogs at Re’s Judicata about a potentially important change in Justice Kagan’s views and approach to precedent: “Justice Kagan has recently been the Court’s most steadfast proponent of stare decisis. And that commitment to precedent has expressly extended to questions of method and interpretation, such as Auer deference and stare decisis itself. So for Kagan to suggest ‘toss[ing] out’ all substantive canons — a set of legal principles that are indeed ‘all over the place’ — is surprising.”

Why WA AG Settled on $9 Million Fine After Winning $18 Million in Failure to Report Win: Washington State Attorney General Bob Ferguson announced on March 2 that he has settled a campaign finance reporting claim against the Consumer Brands Association (formerly the Grocery Manufacturers Association) for $9 million, less than a month after the Washington Supreme Court upheld a record $18 million fine against the group. Why? Ferguson told the Seattle Times that the SCoWA “ruling came on a divided, 5-4 vote, raising the prospect that the conservative majority on the U.S. Supreme Court might strike down the fine — and even put the state’s campaign-finance laws in jeopardy.” The Seattle Times article, following a common error in media coverage, referenced AFPF/TMLC v. Bonta, the U.S. Supreme Court’s July 2021 decision to strike down a California Attorney General’s rule that imposed a “dragnet” sweep of charitable donors, although the rules for charitable and political donor disclosures are different.

No Campaign Contributions Limits in Alaska: Following Thompson v. Hebdon, a July 2021 Ninth Circuit finding that Alaska’s campaign contributions were unconstitutionally low, the Alaska Public Offices Commission eliminated all limits on campaign contributions to most statewide and municipal elective offices. The APOC staff had recommended simply raising the limits to a level acceptable to the Ninth Circuit, but there were not enough affirmative votes on the Commission to adopt the staff’s proposal.

Chinese Communist Party Tries to Attack U.S. Congressional Candidate: And speaking of foreign influence on U.S. elections, why stop with straw donors, when you can try more direct means? Daily Beast quotes FBI wiretaps in arrest warrant requested for Chinese government attempting to undermine the U.S. Congressional campaign former Tiananmen Square dissident now living in exile in New York. While they don’t cover how to avoid “honey pots” and other snares, the FEC and FBI do offer information on how campaign committees can protect themselves from foreign influence campaigns.

Pro-Tip – What Are Appropriate Qualifications and Actions for an Exempt Org’s General Counsel: Of note in the New York v. NRA decision (above) is the court’s discussion of the qualifications and actions of John Frazer, the NRA’s General Counsel since 2015. Slip op. 8, 28-29. “Whether Frazer in fact was qualified to hold these positions is a concern raised in the Complaint. At the time of his appointment, Frazer had been licensed as an attorney for seven years, but spent most of that time working in a non-legal position at the NRA. Frazer had been in private practice, as a solo practitioner, for only 18 months when he became the NRA’s General Counsel.” Slip op., 8. No discussion of how hard it is to hire an experienced exempt org. GC in many cases. Perhaps that is moot, however, since the NY AG alleged that the NRA’s Executive Vice President “allegedly hired Frazer without seriously vetting his qualifications.” Id. And, would inadequate qualifications absolve an attorney or officer who allegedly certified filings without actually reviewing or confirming them (especially if he supposedly had knowledge of misconduct that would have precluded certification)? Slip op., 27-29, 35-37. Of course, at this motion to dismiss stage in the proceedings, these are just allegations and no wrongdoing has been proven.

CONGRESS

Congressional Letter Requests IRS Investigation of Hollywood Foreign Press Association: Following a 2021 Los Angeles Times investigation of the tax-exempt sponsor of the Golden Globes awards, Cong. Joyce Beatty and Brenda Lawrence asked the Service to look into “seemingly corrupt and unacceptable deal making patterns of HFPA.” Concerns included self-dealing and what might have been IRC § 4958 violations, and “failure to embrace robust diversity and inclusion practices that we are now seeing being implemented in Hollywood and across all business and government sectors.”

STATES

Term Limits Redux? Prof. Derek Muller asks in ELB whether Tennessee’s passage of a multi-year residency law for congressional candidates (with “nearly unanimous” bipartisan support) heralds an attempt to convince the U.S. Supreme Court to revisit its 1995 decision in U.S. Term Limits v. Thornton, 514 U.S. 779 (1995), which throttled the then-powerful and widely-supported term limits initiative movement. USTL held that states cannot add to the qualifications set out in the Constitution, but Muller points out that Justices Thomas, Kavanaugh and Gorsuch (who wrote a 1991 law review article) might argue that term limits might not be prohibited “qualifications” but permissible “manner” regulations of holding elections.

Covington Releases 400-Page Pay2Play State-by-State Survey: Where applicable, for all capital cities, all cities with a population of over 100,000 (200,000 for California and New Jersey) and many counties. For Purchase. Venable (via FTLG participant Ron Jacobs) highlights new Delaware County, Pennsylvania, P2P rules. In a FTLG email, Eric Wang points out a 2010 SEC adopting release explanation of its P2P rules excludes advisers’ directors from these rules “unless the contributions were made by these persons for the purpose of avoiding application of the rule, which could result in the adviser’s violation of a separate provision of the rule.”

Covington Releases 300-Page Survey of State Campaign Finance, Lobbying and Ethics Rules: A lot of practitioners routinely do these surveys, and some offer them for purchase or subscription by others. Some of the most helpful offer not just the rules, but also contact information within each relevant state office. Covington is offering its 2022 edition survey for purchase in a national or individual state versions.

GENERAL

What’s Happening at the New York Times? Editorial Against Cancel Culture, Acknowledgement of Hunter Biden’s Laptop: The storied Gray Lady’s March 18 editorial, America Has a Free Speech Problem, says, inter alia, “People should be able to put forward viewpoints, ask questions and make mistakes and take unpopular but good-faith positions on issues that society is still working through — all without fearing cancellation.” It should be read alongside Bari Weiss’s July 2020 resignation letter, which says: “a new consensus has emerged in the press, but perhaps especially at this paper: that truth isn’t a process of collective discovery, but an orthodoxy already known to an enlightened few whose job is to inform everyone else.” Phillip Bump from the Washington Post gives his reaction and definitions of various terms in the discussion: “The real threat, as always, isn’t 20 people chiding someone in Twitter mentions but, instead, in passing laws to restrict what people do on Twitter in the first place.” Matt Taibi blogs “In an inane sequel to the Harper’s Letter fiasco, a New York Times editorial ignites a fury proving its anodyne thesis.” Ken White in Popehat says the editorial is “vexingly unserious.” And the NYT belatedly acknowledges that Hunter Biden’s emails were not Russian disinformation. The WSJ responds: “You don’t say.”

Libraries Walk A Fine Line On First Amendment “Audits:” According to the American Library Association’s Office for Intellectual Freedom, an increasing number of public library visitors are attempting to film “First Amendment audits” of the libraries’ book collections and public activities. “‘What are they looking for? Every single one of them is different. Some auditors are looking for fame and fortune on YouTube and other auditors are looking for confrontation,’ said Deborah Mikula, executive director of the Michigan Library Association (MLA). ‘They’re looking to be confronted, either by the staff or by police, and they’re creating those videos to claim a violation of their First Amendment rights.’”

Continuing Attacks on Legal Counsels: Part of a trend we’ve discussed before, Axios reports that the 65 Project, counseled by David Brock, of “oppo” organization American Bridge, but also conservative Republicans and others, is “targeting 111 attorneys in 26 states who were involved to some degree in efforts to challenge or reverse 2020 election results. They include lawyers at large national law firms with many partners and clients and lawyers at smaller, regional firms. … It plans to spend about $2.5 million in its first year and will operate through an existing nonprofit called Law Works. Brock told Axios in an interview that the idea is to ‘not only bring the grievances in the bar complaints, but shame them and make them toxic in their communities and in their firms.’”

Careful About Characterizing Support: Houston Chronicle (paywall) reports the Texas Election Commission levied a $30,000 fine on an unsuccessful City Council candidate whose campaign flyer suggested that Harris County Black Democratic News had endorsed him without disclosing that the source of the funds for the endorsement mailer was the candidate.

Popular Advocacy Doesn’t Always Translate Into Donations: The Nonprofit Times reports that “More than two out of five people and nearly half of single women supported the 2020 racial justice protests but a much smaller portion, about 1 in 7, actually donated money to racial justice causes, according to a new study.”

You Probably Won’t Be Using This New Tax Ruling: Business Insider reports that: “Ukrainian authorities have reassured citizens that they don’t need to declare captured Russian tanks or any equipment they pick up as personal income. ‘Have you captured a Russian tank or armored personnel carrier and are worried about how to declare it? Keep calm and continue to defend the Motherland!’ a statement from the Ukrainian National Agency on Corruption Prevention seen by Interfax-Ukraine said.” The announcement (available only in Ukrainian) noted that the value of a captured tank would likely be less than the Ukraine living wage.

Public Policy Advocacy Highlights for March 2022 (Ides of March Edition)

Public Policy Advocacy Highlights for March 2022 (Ides of March Edition)

(Note: The recent flood of public policy advocacy highlights continued apace in early March. Because the lengthy last few Highlights reports overloaded our mailing list server, PPLI is serving up fresh news early this month. As always, characterizations, editorial comments, abbreviations and shorthand references are solely PPA Highlights author Barnaby Zall’s, and do not represent the views or positions of the Public Policy Legal Institute or the First Tuesday Lunch Group or their members and participants. This list will be updated later in March. Suggestions and corrections welcome.)

DC

Glitch in DC Corporate Filings and a Workaround: Beth Kingsley reports DCRA wouldn’t issue a certificate of good standing to a corporation, even though they are in good standing, because the corporation had not yet filed its Biennial Report (which was not yet due, but which the system expected to receive). “It turns out there is a glitch in the system (which they acknowledge) and because the database is ready to accept 2022 Biennial Reports it won’t recognize that an entity is in good standing, even though the filing deadline is not yet here. … If your clients experience issues with this you can probably resolve it by filing this year’s report and then requesting the certificate from the online system.”

IRS

Malone: Don’t Call Us, Don’t Mail Us About Delays: Recent First Tuesday Lunch Group meetings have discussed problems and delays in IRS’s Tax-Exempt Organizations and Government Entities Division. Ernst & Young reports from a TEGE Council meeting: “At a virtual TEGE Exempt Organizations Council meeting attended by EY on March 3, 2022, IRS Tax-Exempt and Government Entities division (TE/GE) director Robert Malone suggested that tax-exempt organizations (1) contact the IRS to request corrections to the Exempt Organizations Business Master File Extract (EO BMF), and (2) utilize IRS-website resources to check the status of applications for IRS recognition of tax-exempt status.” In other words, call IRS about their mistakes, not their delays. Of course, as often mentioned in FTLG meetings, if you qualify (in good faith) for expedited processing, a call is appropriate.

IRS TE/GE Issues New Technical Guidance: The Service’s Tax-Exempt Organizations and Government Entities office has published three new comprehensive, issue-specific Technical Guides:

TG 3-8, Termination of Private Foundation Status, was renumbered TG 3-22 without substantive change.

Confused About the New 1099-MISC and NEC Forms? The Service offers a new video about the new non-employee compensation reporting forms.

More on Remedying IRS Customer Service “Dumpster Fire:” The Hill reports that “The Internal Revenue Service (IRS) plans to add 10,000 new employees to its payroll, hiring 5,000 in the next few months and an additional 5,000 by the end of next year [emphasis added], to tackle the backlog of tax returns and unanswered phone calls caused by the pandemic. The aim is to shrink the agency’s to-do list from more than 23 million unprocessed forms and requests down to the accustomed level of about 1 million by the end of 2022.” In addition, some 700 existing Service employees will be re-tasked to process returns, another 6,000 will be eligible for overtime pay, and the Service will hire more independent contractors and utilize more computerized assistance functions. Total cost $225 million, or about 1.7% of the IRS budget. But, they’re not going to be done reducing the backlog until after “the end of next year”?!! That dumpster’s still pretty warm.

DEPT OF JUSTICE

More On Recent FARA DoJ Opinions on Nonprofit Organizations: Venable has a new update piece explaining more about the recent academic institution-oriented DoJ opinions handed down on the Foreign Agent Registration Act. “Both opinions highlight the limits of the academic exemption and the importance of considering FARA with regard not only to an organization’s formal contracts and agreements, but also to the organization’s public statements about its work, including press releases, reports, and social media posts, as each of these can be used by DOJ in evaluating the application of FARA. What is interesting about the regulation limiting the scope of the academic exemption to nonpolitical activities is that that limit is not actually found in the statute.”

FEC

Statute of Limitations Blocks FEC Action on 501(c)(4)’s Alleged Campaign Expenditures: In MUR 7465 (Freedom Vote), the Federal Election Commission voted 4-2 to dismiss and close a complaint that Freedom Vote, a 501(c)(4) Ohio corporation, failed to register and report as a political committee. Commissioners Dickerson, Cooksey and Trainor said “By the time this Matter was presented to the Commission for a probable-cause determination, however, the five-year statute of limitations had expired on the bulk of Freedom Vote’s alleged FECA violations. In an exercise of our prosecutorial discretion, we declined to pursue the alleged violations that were not time-barred. …  the Respondent is a defunct, bankrupt entity accused of prior reporting violations, and there is no basis to believe that the allegedly impermissible conduct will recur.” Freedom Vote apparently settled an IRS audit controversy before going bankrupt.

FEC Issues New Form 1 for IE-only (“SuperPACs”) and Hybrid Committees Using Separate Bank Accounts: On March 3, 2022, the Federal Election Commission proposed for Congressional review revised forms to allow independent expenditure-only and hybrid committees to register without filing separate statements (discussed at an earlier First Tuesday Lunch meeting). “The revised form introduces voluntary provisions for registering independent expenditure-only political committees (commonly known as “Super PACs”) and hybrid PACs, which intend to establish separate bank accounts to make contributions and to raise unlimited amounts to make independent expenditures.” The proposed form revisions will go into effect unless Congress intervenes.

Does the FEC Inappropriately Conflate Individuals and Corporations? Federal Election Commission Chair Allen Dickerson pens a separate Statement of Reasons in MUR 7707 (Friends of Bill Posey) explaining his repeated “concern that the Commission is insufficiently attentive to the law governing corporations.”

COURTS

Government Agencies, Including the IRS, Must Also “Turn Square Corners”; IRS Can’t Legislate Major Financial Penalties and Reporting Requirements Without Complying With Basic APA Rules: Not so long ago, before the 2013 Lois Lerner targeting scandal, there was significant communication and cooperation between the Service and practitioners that helped both the regulators and regulated organizations understand, enforce and comply with the rules; no longer, and now the Service is suffering from both congressional and judicial challenges. For example, Chief Judge Jeff Sutton of the U.S. Court of Appeals for the Sixth Circuit is on a roll recently, writing several influential opinions in important cases. On March 3, in Mann Construction v. U.S., he took on the age-old tradition of deferring to IRS informal guidance (we used to call that deference “we have 200 million taxpayers and we don’t have time to do things the hard way other agencies use”), and rejected the Service’s claims that it could establish a new “listed transaction” reporting rule without following the “baseline” rules of the Administrative Procedures Act. Instead of the traditional deference, Sutton applied the Supreme Court newly-invigorated “square corners” doctrine: “The taxpayers claim that the IRS failed to meet a reporting requirement of its own by skipping the notice-and-comment process before promulgating this legislative rule. If individuals ‘must turn square corners when they deal with the government,’ the taxpayers insist, ‘it cannot be too much to expect the government to turn square corners when it deals with them.’ Niz-Chavez v. Garland, 141 S. Ct. 1474, 1486 (2021). … The question is whether Congress amended the APA’s prerequisites, not whether the IRS did. … But the U.S. Supreme Court has already rejected the idea that tax law deserves special treatment under the APA. In its words, ‘we are not inclined to carve out an approach to administrative review good for tax law only.’ Mayo Found. for Med. Educ. & Rsch. v. United States, 562 U.S. 44, 55 (2011).” Slip op., 1, 10, 11.

Jury Rejects Prosecutors’ Claim That $1 Million Pro-Clinton Committees’ Donation Was Illegal Foreign Contribution: Politico reports that a DC federal jury “acquitted one man of a conspiracy to use straw donors and pass-throughs to donate millions of dollars to political funds backing Hillary Clinton in the 2016 presidential race, but jurors may be deadlocked on the fate of another man on trial in the case. … outside the presence of the jury, prosecutors said they believed that the original source of the money was actually the government of the United Arab Emirates.” Meanwhile, Reuters reports that a Ukrainian businessman was sentenced to a year in prison for helping a Russian oligarch funnel money to U.S. candidates who could help his cannabis company he was building with Lev Parnas, a former associate of Rudy Giuliani.

NY AG Loses Bid to Close Down NRA: On March 2, the Supreme Court of New York, Commercial Division (which is a New York intermediate appellate court), denied the NY Attorney General’s attempt to close down the National Rifle Association as a remedy for alleged financial mismanagement and insider reports of exploitation of exempt assets. “Her allegations concern primarily private harm to the NRA and its members and donors, which if proven can be addressed by the targeted, less intrusive relief she seeks through other claims in her Complaint. The Complaint does not allege that any financial misconduct benefited the NRA, or that the NRA exists primarily to carry out such activity, or that the NRA is incapable of continuing its legitimate activities on behalf of its millions of members. In short, the Complaint does not allege the type of public harm that is the legal linchpin for imposing the ‘corporate death penalty.’ Moreover, dissolving the NRA could impinge, at least indirectly, on the free speech and assembly rights of its millions of members.” Slip op., 2. Only the claims that would have dissolved the NRA were dismissed; other claims remain viable. Id.

Pro-Tip – What Are Appropriate Qualifications and Actions for an Exempt Org’s General Counsel: Of note in the New York v. NRA decision is the court’s discussion of the qualifications and actions of John Frazer, the NRA’s General Counsel since 2015. Slip op. 8, 28-29. “Whether Frazer in fact was qualified to hold these positions is a concern raised in the Complaint. At the time of his appointment, Frazer had been licensed as an attorney for seven years, but spent most of that time working in a non-legal position at the NRA. Frazer had been in private practice, as a solo practitioner, for only 18 months when he became the NRA’s General Counsel.” Slip op., 8. No discussion of how hard it is to hire an experienced exempt org. GC in many cases. Perhaps that is moot, however, since the NY AG alleged that the NRA’s Executive Vice President “allegedly hired Frazer without seriously vetting his qualifications.” Id. And, would inadequate qualifications absolve an attorney or officer who allegedly certified filings without actually reviewing or confirming them (especially if he supposedly had knowledge of misconduct that would have precluded certification)? Slip op., 27-29, 35-37. Of course, at this motion to dismiss stage in the proceedings, these are just allegations and no wrongdoing has been proven.

Why WA AG Settled on $9 Million Fine After Winning $18 Million in Failure to Report Win: Washington State Attorney General Bob Ferguson announced on March 2 that he has settled a campaign finance reporting claim against the Consumer Brands Association (formerly the Grocery Manufacturers Association) for $9 million, less than a month after the Washington Supreme Court upheld a record $18 million fine against the group. Why? Ferguson told the Seattle Times that the SCoWA “ruling came on a divided, 5-4 vote, raising the prospect that the conservative majority on the U.S. Supreme Court might strike down the fine — and even put the state’s campaign-finance laws in jeopardy.” The Seattle Times article, following a common error in media coverage, referenced AFPF/TMLC v. Bonta, the U.S. Supreme Court’s July 2021 decision to strike down a California Attorney General’s rule that imposed a “dragnet” sweep of charitable donors, although the rules for charitable and political donor disclosures are different.

No Campaign Contributions Limits in Alaska: Following Thompson v. Hebdon, a July 2021 Ninth Circuit finding that Alaska’s campaign contributions were unconstitutionally low, the Alaska Public Offices Commission eliminated all limits on campaign contributions to most statewide and municipal elective offices. The APOC staff had recommended simply raising the limits to a level acceptable to the Ninth Circuit, but there were not enough affirmative votes on the Commission to adopt the staff’s proposal.

CONGRESS

Congressional Letter Requests IRS Investigation of Hollywood Foreign Press Association: Following a 2021 Los Angeles Times investigation of the tax-exempt sponsor of the Golden Globes awards, Cong. Joyce Beatty and Brenda Lawrence asked the Service to look into “seemingly corrupt and unacceptable deal making patterns of HFPA.” Concerns included self-dealing and what might have been IRC § 4958 violations, and “failure to embrace robust diversity and inclusion practices that we are now seeing being implemented in Hollywood and across all business and government sectors.”

STATES

Covington Releases 400-Page Pay2Play State-by-State Survey: Where applicable, for all capital cities, all cities with a population of over 100,000 (200,000 for California and New Jersey) and many counties. For Purchase. Venable (via FTLG participant Ron Jacobs) highlights new Delaware County, Pennsylvania, P2P rules.

GENERAL

Libraries Walk A Fine Line On First Amendment “Audits:” According to the American Library Association’s Office for Intellectual Freedom, an increasing number of public library visitors are attempting to film “First Amendment audits” of the libraries’ book collections and public activities. “‘What are they looking for? Every single one of them is different. Some auditors are looking for fame and fortune on YouTube and other auditors are looking for confrontation,’ said Deborah Mikula, executive director of the Michigan Library Association (MLA). ‘They’re looking to be confronted, either by the staff or by police, and they’re creating those videos to claim a violation of their First Amendment rights.’”

Continuing Attacks on Legal Counsels: Part of a trend we’ve discussed before, Axios reports that the 65 Project, counseled by David Brock, of “oppo” organization American Bridge, but also conservative Republicans and others, is “targeting 111 attorneys in 26 states who were involved to some degree in efforts to challenge or reverse 2020 election results. They include lawyers at large national law firms with many partners and clients and lawyers at smaller, regional firms. … It plans to spend about $2.5 million in its first year and will operate through an existing nonprofit called Law Works. Brock told Axios in an interview that the idea is to ‘not only bring the grievances in the bar complaints, but shame them and make them toxic in their communities and in their firms.’”

Careful About Characterizing Support: Houston Chronicle (paywall) reports the Texas Election Commission levied a $30,000 fine on an unsuccessful City Council candidate whose campaign flyer suggested that Harris County Black Democratic News had endorsed him without disclosing that the source of the funds for the endorsement mailer was the candidate.

You Probably Won’t Be Using This New Tax Ruling: Business Insider reports that: “Ukrainian authorities have reassured citizens that they don’t need to declare captured Russian tanks or any equipment they pick up as personal income. ‘Have you captured a Russian tank or armored personnel carrier and are worried about how to declare it? Keep calm and continue to defend the Motherland!’ a statement from the Ukrainian National Agency on Corruption Prevention seen by Interfax-Ukraine said.” The announcement (available only in Ukrainian) noted that the value of a captured tank would likely be less than the Ukraine living wage.

Public Policy Advocacy Highlights for February 2022

Public Policy Advocacy Highlights for February 2022

[PRELIMINARY NOTE: For more than a decade, the First Tuesday Lunch Group, made up of legal practitioners who are Democrats, Republicans, independents and non-partisans from across the United States, has met monthly to discuss current legal issues in tax-exempt organization, constitutional, and campaign finance law and developments in public advocacy. Participants represent diverse organizations, interests and views spanning the political spectrum – non-partisan, left, right, and center, sometimes in adversarial positions in the legal arena. Yet participants are united in our commitment to the rule of law. These non-partisan discussions help candidates, news media, government officials, and other Americans navigate difficult and complex federal laws.

There is no set FTLG agenda each month, but a draft of possible topics for discussion, based on highlights of the prior month, is circulated; the actual FTLG discussions generally include only a few of these topics and often several other topics. This post includes Barnaby Zall’s suggestions for possible topics and highlights. This draft is intended for active FTLG participants, and thus includes abbreviations and references to government agencies or individuals, legal doctrines and terms, and other shorthand phrases or terms.]

FTLG business:

  • Sign-on letter in support of Dara Lindenbaum nomination to FEC. Andrew Herman is managing this; any updates? Deadline?
  • Sub-groups to contact DCRA and OTR: The two groups will meet in March. Let Susan know if you are interested in joining.

SCOTUS:

  • Nominee Judge Ketanji Brown Jackson on First Amendment and Exempt Orgs: President Biden has announced his nominee for Justice Breyer’s soon-to-be vacant Supreme Court seat: D.C. Circuit Judge Ketanji Brown Jackson. IFS has a summary of Jackson’s First Amendment decisions, one of which is well-known to FTLG participants: Z Street v. Koskinen, 44 F.Supp. 3d 48 (D.D.C. 2014). Z Street held that an applicant for 501(c)(3) status could challenge the constitutionality of the Service’s “Israel Special Policy” which subjected applicant organizations with ties to Israel to higher scrutiny. Judge Jackson’s decision rejected the Service’s defenses of the AIA and the “tax exception” to the DJA because the challenge was not to the applicant’s eligibility for exemption but to the constitutionality of the process used to add the additional “Israel” factor to other requirements for status.
  • Supreme Court to Review Colorado Case Anti-Discrimination that Concerns First Amendment: 303 Creative LLC v. Elenis, No. 21-476, is usually mentioned as an anti-discrimination case involving whether a creative artist can be forced to create an original work which would violate her religious and speech beliefs. Prof. Jonathan Turley writes in The Hill that it also can be viewed as a test of whether an anti-discrimination law can violate the First Amendment. That is because the Supreme Court, in granting cert, expressly limited the Question Presented to the First Amendment’s Free Speech Clause: “Petition GRANTED limited to the following question: Whether applying a public-accommodation law to compel an artist to speak or stay silent violates the Free Speech Clause of the First Amendment.”

FARA:

  • Thanks to DoJ for FARA ANPRM: Politico summary of the nearly thirty comments to DoJ responding to DoJ’s request for suggestions on improving the ancient Foreign Agents Registration Act, which is being increasingly and more rigorously enforced recently. “The details of the comments submitted offer varied perspectives on the statute and offer an array of recommendations, but pretty much every commenter appeared to agree on at least one thing: FARA is in serious need of fixes.” Coalition letter: “The Act’s exemptions are also vague and may privilege commercial conduct over similar types of non-commercial activities. For example, commercial actors are exempt from FARA for soliciting or disbursing funds for non-political activity in the United States, while the Justice Department provides no guidance exempting charities and other non-commercial actors for the same conduct.” The National Wildlife Federation’s comment “continue[d] to protest DOJ’s ordering the conservation group to register in 2020 because of a [2016] grant it received from a Norwegian government agency [to support efforts to limit deforestation], calling it ‘an example of what we believe to be the FARA Unit’s overly expansive interpretation of the reach of FARA, with the result that it is applied to cases where Congress never intended it to apply.’”

On August 15, 2021, Taliban fighters seized the presidential palace in Kabul, Afghanistan, marking the effective collapse of the U.S.-backed government. See Afghan Conflict: Kabul Falls to Taliban as President Flees, BBC (Aug. 16, 2021), https://www.bbc.com/news/world-asia-58223231. The speed of the collapse left thousands of people trapped and desperate to flee the country, including many Afghan citizens fearful of what would happen to them under Taliban rule. In their hour of desperation, many of them reached out to whatever friends they had in the United States, seeking help getting visas approved and getting on flights out of the country. Many of their friends answered the call without stopping to ask for permission: pleading with their congressman or other government officials, going on television, giving print interviews, doing whatever they could to get their government to help their friends. It was in many ways, a reflection of the best of the American can-do spirit in the midst of a terrible tragedy and policy failure.

It was also likely illegal, at least under the plain text of the Foreign Agents Registration Act of 1938, as amended, 22 U.S.C. § 611 et seq. (“FARA”). And that is the problem.

By its plain terms, FARA is an exceptionally broad and vague law that chills free speech and free association by American citizens and sets snares for the unwary, even capturing some of the most sophisticated of Washington players. The Department of Justice should use the opportunity presented by this ANPRM to draft and adopt regulations that set bright line standards and limit the scope of FARA-regulated activity to conform to the First Amendment.

  • FARA Advisory Opinions Limit Academic Exemption: While DoJ considers its ANPRM on improvements to FARA, it has issued several new FARA Advisory Opinions applying registration requirements to nonprofit educational organizations (but also not necessarily applying to individual academics). Covington has a quick cautionary note

FEC/Campaign Finance:

  • Were These Pre-Iowa Caucuses Charitable Contributions Coordination? The Federal Election Commission, in MUR 7425 (Donald J. Trump Foundation), has deadlocked and closed the file in a CLC complaint about alleged coordination between the Trump Foundation and Trump presidential campaign. Shortly before the Iowa caucuses in 2016, Candidate Trump held a Iowa fundraiser ostensibly for veterans’ organizations, half the receipts from which were disbursed by the Foundation to charities in Iowa at the direction of the campaign, and some checks were presented at Trump campaign events. The question apparently turned on the “Charitable Exclusion” under 52 U.S.C. § 30125(e)(4)(A), which permits charitable solicitations not for election-related purposes. Democratic Commissioners Shana Broussard and Ellen Weintraub accused their Republican colleagues of “eroding the public’s trust in the integrity of the federal campaign finance process” by blocking the enforcement of federal law.
  • Pro Tip 1: Plead the Elements FIRST. Self-Inflicted Wounds Doom 10th Cir. Appeal of Challenge to NM Disclosure Requirement: The Tenth Circuit said that “Cowboys for Trump” alleged that it had not and would not make any independent expenditures, and thus had no injury in fact sufficient to support standing to challenge New Mexico’s campaign finance disclosure rules applicable to IEs. Chief Judge Tymkovich’s opinion noted that, while allegations and documentation showing actual injury were included in a reply brief (including the State’s imposition of a $7,800 fine for failure to report), that wasn’t sufficient to rebut a Rule 12(c) request for judgment on the pleadings, since there was no explanation of why the information wasn’t in the original complaint and leave had been granted to file an amended complaint. Even invoking AFPF/TMLC v. Bonta for donor privacy was insufficient in light of the self-abnegation of IEs.
  • Pro Tip 2: Don’t Use “Campaign Consulting Fees” as a category to Report DC dinners. Cong. David Schweikert agrees to $125k FEC fine for misreporting. Schweikert “did not want a whole bunch of dinners in DC showing up on his reports,” so he got his CoS to pay those personally, and then charge the campaign as “consulting fees.” 
  • 3 indicted over alleged ‘straw donor’ scheme that funneled money to pro-Susan Collins group: Bangor Daily News reports that a former defense company CEO was indicted for “allegedly creating a shell company to donate $150,000 to the 1820 PAC, a super PAC created to support Collins. He was also under investigation for paying employees and family members to donate to her campaign in violation of federal campaign finance laws.”

IRS: 

“Dark Money”

  • There He Goes Again; Whitehouse complains about judicial nomination lobbying: Lots of recent coverage of Sen. Sheldon Whitehouse’s effort to expose dark money “scheme” in judicial nominations; The Guardian  “Scheme to Highlight RightWing [sic] Influence on Supreme Court.” Sen. Whitehouse op-ed in Post complaining that his bête noir Leonard Leo, co-Chair of the Federalist Society and the rest of the Right is advertising about liberals using “dark money” to lobby on judicial nominations. “So, for the dark-money enterprise to hurl allegations of dark-money mischief is pretty rich. Yes, progressive groups receive anonymous donations, because Democrats have to play by the rules Republicans set, or else we unilaterally disarm. We came late to the game, but now we’re there. The difference is this: Democrats want to clean up this god-awful dark-money mess; Republicans created it and protect it.” Which begs this important question: is it “dark money” or “dark-money?” The Whitehouse Senate website uses both forms, sometimes in the same article or statement.
  • Cage Match Between FTLG Participants (certainly not the first nor the last): Meanwhile, Axios reports that the Judicial Crisis Network, a Sen. Whitehouse target (though his Post op-ed says: “The group running the ad, the Judicial Crisis Network, isn’t even real”), goes after Arabella Advisors: “Partisans often seek to isolate and elevate high-dollar donors that can be portrayed as hidden masterminds behind their opponents’ success.” Axios twice uses the form “dark money” (including quote marks). Two First Tuesday Lunch Group participants are points of their clients’ spears: Arabella is saber-rattling with its lawyers, led by Ezra Reese; JCN’s lawyers, led by Jason Torchinsky, returned fire. The lawyers’ participation itself became part of the conversation, which centered on complaints about defamation. Just FYI: Ezra used 14 footnotes, Jason only two.
  • After “Dark Money,” “Dark Patterns:” In Brookings’ TechTank, Georgetown U. staff attorney Daniel Jellins writes about “dark patterns:” “innovative, but tricky and deceptive design techniques in emails and on web pages—to extract more donations from their supporters,” and suggests that “government should curtail dark patterns where they apply to fundraising speech.”

Social Media:

  • Facebook Reevaluating Ban on Political Ads for 2022Bloomberg reports that “Facebook owner Meta Platforms Inc. is rethinking its policy of banning new political advertisements in the final days before an election, part of its preparation for the 2022 midterms”.
  • Can Science Help Congress Figure Out How to Fix Social Media Algorithms?bipartisan bill introduced to ask the Nat’l Science Foundation and Nat’l Academy of Science to help. It’s for the children. And speaking of getting some help, “a small but powerful group of former Democratic congressional aides and Obama administration appointees created an organization to help House and Senate Democrats exercise their oversight authority over the executive branch.”

DC and the States:

  • UPMIFA Requires What?! Students weaponize UPMIFA to argue that investments in fossil fuel companies is not “prudent,” and so is illegal in some states. Ted Hamilton, co-founder of the Climate Defense Project, legal advisor to the effort, told the Post: “We are trying to get more of a legal consensus around this idea of fiduciary duties, … A public charity can’t only be thinking about profit, … They have other obligations. We’re trying to make that a concrete legal fact.”
  • D.C. Pay2Play Law Back on Track: Lyndsay O’Reilly of Venable notes that postponed 2020 law will now go into effect on Nov. 9, 2022, affecting businesses that seek or hold D.C. Government contracts valued at $250,000 or more after that date. DC Office of Contracting and Procurement is responsible for issuing implementation rules within six months from the effective date. (What could possibly go wrong?)

Litigation:

  • Are Door-to-Door Political Canvassers “Employees” If Door-to-Door Salespeople Are Not? Ninth Circuit considers an IFS case challenging California labor law exempting for-profit salespeople but not direct democracy advocates; District Court said “there’s no way they’re going to get that exemption.” Do church challenges to pandemic rules under express First Amendment rights show the way? IFS backgrounder.
  • When is Chill Not Enough for Standing? A U.S. District Court opinion found that IFS did not have standing to challenge Washington’s ambiguously-worded threat to enforce campaign finance rules against pro bono legal representation because “There is no credible threat of enforcement against IFS based on its proposed pro bono representation of Mr. Eyman on the appeal because the PDC’s binding Declaratory Order unequivocally states that such action will not trigger FCPA registration or disclosure requirements.” IFS is appealing to the Ninth Circuit.
  • Good Guidelines for Footnotes in Briefs: Prof. Eugene Volokh, who, inter alia, runs a very active amicus brief clinic, had a post commenting on modern footnoting practices. Footnotes are still used copiously in articles, but far less so in modern appellate briefs (of course, individual judges’ preferences may differ); some say that the change was sparked by Justice Scalia’s “I am not a bobblehead when I read”, (though, of course, he was) while others note that having citations in the text allows a reviewer to quickly determine the strength of the assertion.

Misc./Grab Bag:

  • Left and Right Agree on Amending Electoral Count Act? Retired Fourth Circuit Judge Michael Luttig, a perennial short-lister for Supreme Court seat under conservative Administrations whose clerks almost all went on to Supreme Court clerkships, pens NYT editorial (paywall) urging conservatives to support amending ECA. Hasen notes it and Sargent applauds.
  • How American History Really Happens: And speaking of Judge Luttig, we don’t get into the Jan. 6 controversy, but this Politico article about Luttig unwittingly guiding Vice President Pence’s rejections of demands he intervene in the certification of the 2020 election tells so much more about the “backstories” behind American history. The main participants often don’t even know they’re doing it; they just fumble around doing what they think is right. Excerpt: “He called back in 10 minutes, and I said, ‘Alright, I opened a Twitter account a couple of weeks ago, but I don’t know how to use it.’ He said, ‘Perfect.’ And I said, ‘I told you: I don’t know how to use it.’ He said, ‘Figure it out and get this done.’ So I called my tech son who works for Peter Thiel, and I said, ‘How do I tweet something more than 180 characters long?’”
  • American Bridge Goes “Hyperlocal:” And speaking of fragmentation in local politics, for some people that’s a business model. David Brock’s “oppo” SuperPAC American Bridge called itself “the largest research, video tracking, and rapid response organization in Democratic politics. We find what Republicans are hiding and make sure voters hear about it.” After spending a reported $50 million in the 2020 Presidential race, it is expanding into local races.
  • “Milton’s Curse”: Danish free speech advocate Jacob Mchangama has a new book on the history of free speech. Mchangama looks, inter alia, at “Milton’s Curse,” a “selective and unprincipled defense of free speech—which I term “Milton´s Curse”—is nothing new, but has in fact been a recurrent theme throughout the history of free speech.” In other words, as the late Nat Hentoff wrote about it thirty years ago: “free speech for me but not for thee.” Prof. Eugene Volokh has a quick blog post from Mchangama summarizing his work.
  • Free Speech “Under Attack:” CBS News video: “The Price of Free Speech and Censorship.” “When someone says something we disagree with, should we shut them up? In 1927, Supreme Court Justice Louis Brandeis had an answer: ‘The remedy to be applied is more speech, not enforced silence.’ Well, in that case, the internet should have solved everything, notes correspondent David Pogue – it’s nothing but more speech. And yet lately, the news is full of stories about people trying to limit other people’s expression.”
  • Are Philanthropies “Totally Disconnected from Pandemic Reality”? Nearly 86% of funds contributed by donors on the Chronicle of Philanthropy’s top 50 list went to traditional “eds and meds,” rather than to racial justice, sparking complaints from some. ““White billionaires get these ideas about what they think is the right solution, and then they set up initiatives that they think will work, so then they’re spending other people’s money, too. That’s one of the big problems that we want to see changed,” Lori Villarosa, executive director of Philanthropic Initiative for Racial Equity, explained to the Chronicle. And Elon Musk, one of the most wealthy persons on the planet, gave away $5.7 billion last year, but isn’t being transparent about it, which upsets some people, but not others.
  • Research Suggests Moderates Perform Better in Presidential General Elections: In “Candidate Ideology and Vote Choice in the 2020 US Presidential Election,” PoliSci Profs. David Broockman (Berkeley) and Joshua Kalla (Yale) look to recent Democratic primary battles to examine whether, even in these highly-polarized times, moderate candidates actually do better than extreme candidates in general presidential elections. They think that “moderate candidates are electorally advantaged.”
  • Can Only Self-Funders be Moderates in Primaries? In the same vein, Josh Kraasner reports in National Journal (Paywall) thatmajor donors’ willingness to sit out Republican primaries means that only self-funding Republican primary candidates can be moderates; candidates who need to appeal to small money donors seem less moderate. (If blocked by the paywall, you can read Prof. Rick Pildes’s ELB summary.) Pildes also notes a Sarah Isgur (former DoJ spokesperson) paywalled piece asking whether Beto O’Rourke was affected by the same phenomenon.
  • “Blue Texas” or not? Evolving views of Hispanic voters in the Lone Star state. Liberal publication Texas Monthly story (paywall) asserts “Latinas Are Pushing a Political Revolution in South Texas—to the Right.” Key quote: “ San Antonio Express-News columnist Gilbert Garcia questions claim of the rise of “Blue Texas:” “But when?” (paywall). 
  • Startup Helping EOs Find Volunteers Gets $12M Funding Round: Entrepreneur reports on Vee, a startup “on a mission to help nonprofits everywhere find qualified volunteers” by “offering a [CRM-based] marketplace of volunteer opportunities around the world.”
Public Policy Advocacy Highlights for January 2022

Public Policy Advocacy Highlights for January 2022

[PRELIMINARY NOTE: For more than a decade, the First Tuesday Lunch Group, made up of legal practitioners who are Democrats, Republicans, independents and non-partisans from across the United States, has met monthly to discuss current legal issues in tax-exempt organization, constitutional, and campaign finance law and developments in public advocacy. Participants represent diverse organizations, interests and views spanning the political spectrum – non-partisan, left, right, and center, sometimes in adversarial positions in the legal arena. Yet participants are united in our commitment to the rule of law. These non-partisan discussions help candidates, news media, government officials, and other Americans navigate difficult and complex federal laws.

There is no set FTLG agenda, but each month, a draft of possible topics for discussion, based on highlights of the prior month, is circulated; the actual FTLG discussions generally include only a few of these topics and often several other topics. This post includes only Barnaby Zall’s suggestions for possible topics and highlights, not those of the FTLG itself or its participants. This draft is intended for active FTLG participants, and thus includes abbreviations and references to government agencies or individuals, legal doctrines and terms, and other shorthand phrases or terms.]

IRS Form 1024 must now be submitted electronically: Using Paygov. Reminder: not for c3s or c4s. Form 1024-A, for c4s, must also be submitted electronically.

DCRA Confusion: (a recurring topic) Bill Farah’s question about separate corporate filings of certificate and articles.

New FEC Nominee: Dara Lindenbaum, from Sandler Reiff, will be nominated as Commissioner at the FEC, replacing Steven Walther. Walther has announced he will resign as soon as Lindenbaum is confirmed. Lindenbaum was a law clerk at the FEC for Commissioner Cynthia Bauerly while attending GWU Law School, and was an associate counsel at the Voting Rights Project of the Lawyers’ Committee for Civil Right Under Law. In addition to her election law practice, she also advises non-profit organizations on charitable solicitations, corporate governance issues, securing tax-exempt status with the IRS, and the scope of permissible political activities.

Who Says the FEC Can’t Make A Decision? In MUR 7593, the FEC voted 5-1 to dismiss and close a complaint that Fox News made a prohibited indirect campaign contribution when two of its TV personalities made an appearance onstage during a 2018 campaign rally for Josh Hawley, then a Senate candidate.

Broussard Requests Rulemaking Making Definition of “Earned Income” More Fair: FEC Commissioner Shana Broussard voted against designating VA Disability Benefits as “earned income” for calculating permissible candidate compensation, but also seeks a rulemaking to make the definition more “fair.”

Luke Wachob on How Long It Took FEC to Recognize SuperPACs on its Forms Page: “So the registration process for these newfound [in 2010] political entities, which raise and spend billions of dollars each election cycle, was ultimately developed – in the words of Commissioner Ellen Weintraub at Thursday’s meeting [Jan 13, 2022] – “out of something that Commissioner [Don] McGahn and I scrawled on a napkin in a conference room. … Anyone looking to start a super PAC was left to fill out the regular political action committee registration form, then attach a cover letter stating their intention to operate as an independent expenditure-only committee. It’s almost comical. If you want to start a super PAC, get your stapler ready.” Now there’s an actual form.

DoJ ANPRM on FARA: Reminder: the clock is ticking on sending comments to DoJ on its ANPRM on reforms and changes needed to FARA. Comment period closes on Feb. 11. Only three relatively brief comments have been filed as of Jan. 29.

Breyer Retires: It’s official.

Ted Cruz for Senate Argued on Jan. 19: “Ted Cruz: Litigious hot coffee spiller or civil rights champion?” Media comment on the oral arguments in Cruz for Senate v. FEC focused on “only $10,000” and “obscure arguments,” but significant issues were raised. Chief Justice Roberts, for example, asked “How are you supposed to weigh such imponderables such as the marginal burden on the exercise of First Amendment rights against the marginal assistance in preventing corruption?” Transcript, at 24.

Igor Fruman Sentenced to Year and a Day for Soliciting Foreign Campaign Contributions: Fruman pled guilty.

Washington Supreme Court Sustains $18 Million Fine for Failing to Register and Report Contributions to Oppose Initiative: Washington voters adopted a sweeping regime of registration and reporting that covered both candidates and ballot measures. The Grocery Manufacturers Association (now called the Consumer Brands Association) set up a separate account for contributions against a GMO-labeling initiative, as a means of avoiding disclosing donors. The Washington Supreme Court decided that $18 million – roughly the amount spent against the initiative – was the appropriate fine for failing to register and report the contributions properly. Case is headed for the “other” Supreme Court.

“Fair Notice” Law Found Unconstitutional in Montana: Judge Malloy of the U.S. District Ct for Montana, on summary judgment, found that a law requiring contemporary notice of any ad mentioning, but not endorsing, a candidate was unconstitutional. The Ninth Circuit had held earlier that disclosure laws do not limit speech, but provide more speech. Nat’l Association for Gun Rights v. Mangan, 933 F.3d 1102, 1112 (9th Cir. 2019). But here, citing inter alia, AFPF/TMLC v. Bonta, Judge Malloy found that this was a content-based restriction that was not viewpoint neutral. And, that was a kiss of death.

Judge Rules Connecticut Law Requiring Pre-approved Fundraising Scripts Unconstitutional: Pacific Legal Foundation reports that, not only did Connecticut’s law require pre-registration for fundraisers, but pre-approval of their contacts and their scripts. After AFPF/TMLC v. Bonta, a federal judge enjoined the requirement.

Open Secrets Publishes List of Pending Campaign Finance Legislation: What’s next for campaign finance reform?

A Popular Structure Question to Hold Endowments – Trust or Corporation? Tom Antonucci’s question about pros and cons for using a trust or a corporation to hold a 501(c)(3)’s endowment elicited differing views.

Is Donors’ Threat to Withhold Future Contributions Corruption or Coordination? A lively discussion on the Election Law Blog’s mailing list is sparked by Prof. Eugene Volokh’s question of whether a donors’ letter to Sen. Sinema would be considered quid pro quo corruption, and Prof. Mark Scarberry’s followup asking if it would be coordination if sent by an independent PAC. Spoiler: Consensus that the letter was artfully drawn enough to likely not be either. Meanwhile, on the other hand, The Hill notes that GOP megadonor Ken Langone maxed out to Sen. Manchin after his rejection of Build Back Better.

NPR Raises “Red Flags” About Groups Fundraising to Support Jan. 6 Defendants: Quoting “experts,” NPR explores the Patriot Freedom Project.

New York Sched B Filing NPRM: From Robert Tigner of the Nonprofit Alliance (and a longtime FTLG member): “Courtesy NonProfit Times, last week we learned the NY AG has initiated a rulemaking governing the submission of Schedule B to the Charity Bureau.  The AG, evidently, made no public announcement other than the publication of the proposal in the Dec 1 NYS Register (the relevant text is attached here, if it made it through the web and software traps).  It proposes a redacted Schedule B but, as you can see, there is a catch or two. One obvious question: would the rule, eliciting donated amounts and the donor’s state (only) square with Bonta?  And another: what is the rule supposed to accomplish?  If any of you have a theory, please share.”

Text of proposed rule: Subdivisions (c) and (d) of section 91.5 are amended to read as follows:

(c)(1) CHAR500 (annual filing for charitable organizations) or a successor form, which shall include identifying and contact information, annual report exemption claim information (see subdivision [e] of this section), [and ]information regarding the submission of schedules required under article 7-A and, unless a Schedule B to IRS form 990 of a public charity, with the names and addresses of contributors redacted, is attached pursuant to subdivision (3)(i)(b), a statement of the gross amount of contributions received during the reporting period from individuals and entities residing or domiciled in the state of New York. …

(3) CHAR500 attachments.

(i) All organizations that do not claim annual report exemptions for all laws under which they are registered, as described in subdivision (e) of this section, must include a copy of the following IRS forms with their submission of the CHAR500, regardless of whether such IRS forms are submitted or required to be submitted to the IRS:

(a) a copy of the complete IRS form 990, 990-EZ or 990-PF with all required schedules including a Schedule B, unless exempt from such filing pursuant to subsection (b), and

(b) public charities required to submit Schedule B to the IRS must file either (i) a redacted Schedule B with the Charities Bureau, without the names and street addresses of the donors but including the amounts of donations and the states from which those donations were received during the reporting period, or (ii) a statement of the gross amount of contributions received during the reporting period from individuals and entities residing or domiciled in New York (see section C(1)),

BanPACs Act Draft Leaks: Axios reports a leaked copy of legislation to be proposed by Sens. Ossoff and Kelly called “The Ban Corporate PACs Act,” which, not surprisingly, would ban corporate PACs. Both Senators are up for re-election, and both refused contributions from corporate PACs – but not other PACs.

Calif. Bill Would Suspend Tax-Exemption of Organizations that “[p]romotes, engages in, commits to, supports, or aids insurrection against the United States or any state in the Union, at any time, past or present.”: Nonprofit Times expects the bill, SB 834, to be introduced in February. CalNonprofits Public Policy Director Lucy Salcido says: “They (Senator Wiener and staff) are aware of what the senator describes as ‘threading that needle’ to ensure protected activities aren’t affected by the bill, and they are looking forward to working with us to address our concerns.”

Florida Considers “Personal Privacy Protection” Law for Donors: The proposed law would, according to the Tampa Bay Times, “prohibit government entities from requiring corporations, associations, and nonprofit organizations to provide information about their direct or indirect support to any entity. The public entities would also be barred from publicly releasing the information if they have it.”

538 Says Inexperienced Candidates Winning More: One argument offered by supporters of Citizens United is that it helps challengers and inexperienced candidates, which may not be all puppies and rainbows. The statistics-spouting column 538 reports that “the amount of money spent in politics following the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission is likely working in concert with the increased interconnectedness brought about by the internet to collectively boost amateur candidates’ profiles. ‘We don’t think it’s a coincidence that all of this kind of came to a head at the same time,’ said Porter.” 538 says having more inexperienced candidates “may lead to more diversity within Congress, with more women and people of color holding office, as they historically have had more difficulty breaking into the elected offices that have traditionally served as stepping stones to Congress,” but cautions that “if many successful political amateurs are uninterested in governing, Treul and Porter fear Congress will become even more dysfunctional.”

Reading Between the Lines of Public Citizens’ Consultant $1B Double-Dipping Report: Axios reports that Public Citizen “finds extensive overlap in the vendors employed by “regulated” political entities — such as campaigns and party committees — and “unregulated” groups, which include super PACs and 501(c)(4) nonprofits.” The Public Citizen “dual agents” report begins: “Political consulting firms that worked for a candidate or political party and also for an unregulated super PAC or other purportedly independent entity in the same elections (“common vendors”) received $1.4 billion for work in those contests during the past two election cycles.” (Emphasis added.) Probably need to explain how ad-buying works to understand “the scale of the vendor overlap.” As Axios reports: the $1 Billion figure “Much of that was for ad-buying services, meaning the firms didn’t just pocket the funds.”