April 08, 2016

Stop the Spread of State Laws That Trample on Charity Rights

Connecticut legislators have proposed a bill that would force Yale University either to spend its investment returns or pay taxes on them.

Government control over the words and images on charities’ websites.

Prison time for fundraising across state lines or speaking out to advance a nonprofit’s mission.

Dictates on who can and cannot raise funds within states and how those funds can be spent.

Across the country, state lawmakers are introducing measures like these that trample on nonprofits’ constitutional rights — seeking to invade our boardrooms, muzzle what we say, and control how we spend our funds and run our programs.

Perhaps we should thank them. Demonstrating disrespect for and ignorance of the work of nonprofits and foundations — to say nothing of the Constitution — this year’s rash of hostile bills has jolted many nonprofit and foundation leaders awake to the need to protect our cherished rights through advocacy.

Yet the risks far exceed any benefits.

Among the disturbing measures now under consideration:

  • A New Jersey bill would create a state income-tax deduction for donations to New Jersey nonprofits — but only New Jersey nonprofits. The apparent intent of increasing charitable giving in New Jersey is laudable. Yet if enacted, the measure would establish a disincentive for New Jersey residents who, say, want to support an alma mater in another state or aid victims of natural disasters elsewhere, just as Americans in other states donated to groups in New Jersey to aid the recovery from Hurricane Sandy. Such in-state protectionism was considered last year by lawmakers in Vermont, who eventually rejected it as a clear violation of the U.S. Constitution’s Commerce Clause, which prohibits states from passing measures that improperly burden or discriminate against business transactions conducted across state borders.
  • Connecticut legislators are targeting Yale University’s endowment with a bill that would force Yale to either spend its investment returns or pay taxes on them. This proposal blatantly disregards the bedrock Supreme Court decision of almost two centuries ago enforcing the Constitution’s Contract Clause, which protects the independence of nonprofits from government intrusion.
  • A bill in California  attempts to regulate nonprofit solicitations and advocacy in ways that are constitutionally suspect, including restrictions on the First Amendment's guarantee of free speech. The bill, as amended late last week, would force every nonprofit in the country that seeks funds in California to put a link on its home page – plus a disclosure on all other solicitation materials directing potential supporters to  the California Attorney General’s Office.  That office is instructed to provide “information about charities, informational materials containing consumer rights and protections and charity research resources to allow donors to become informed about a charity before making a decision to give.” Such legislative  language puts nonprofits at the mercy of an elected partisan’s changing views on what’s “appropriate” on such things as overhead, compensation, and advocacy – as well as which charitable causes are worthy. It probably will prompt copycat legislation in other states, transforming nonprofit website homepages into huge advertisements for the offices of state charity regulators, rather than the mission of the actual nonprofit. The California Association of Nonprofits, which is leading the opposition, has called the proposed measure the “warning label bill,” because it requires disclosures to be placed on all fundraising material that  would not only be extremely expensive and burdensome, but would resemble the warning  labels on tobacco products, suggesting subliminally that “nonprofits are dangerous and bad for your health.” [Editor's note: The previous paragraph was updated on April 11 to reflect changes since this article was published.]

But so far the winner of the prize for worst legislation of the year — based on the sheer number of constitutional rights it violates — is Oklahoma’s HB 2250.

This bill, which has passed the state House of Representatives, would make it illegal for anyone associated with an "animal rights charitable organization" to solicit contributions from anyone in Oklahoma with the intent that the money be spent on "program services or functional expenses" outside the state or for "political purposes inside or outside" Oklahoma. Violators would be punished by fines of up to $10,000 and imprisonment for up to five years.

Unlike the previously noted bills, which pick and choose among constitutional protections to transgress, the Oklahoma legislation stomps on an array of fundamental rights, including:

Freedom of speech. The Oklahoma legislation openly attempts to limit "political" speech, in direct violation of the First Amendment. Indeed, a sponsor admitted that one of the bill’s purposes is to prevent a nonprofit from running ads against a ballot measure he supports.

Charitable fundraising. The Supreme Court has repeatedly held that fundraising is protected speech because it often is intertwined with advocacy (as nonprofits explain why they need the money). By banning some types of fundraising, the bill violates the First Amendment’s guarantee of free speech.

Interstate commerce. By attempting to impose restrictions on fundraising across state borders, the legislation discriminates against groups located outside of the state and against Oklahomans who want to support the work of regional, national, and international animal-rights organizations — all in violation of the Commerce Clause.

Due process. The bill uses multiple ambiguous terms that would force Oklahomans and people elsewhere — tens of thousands of board members, paid employees, fundraising consultants, and volunteers across the nation — to guess whether their actions would break the vague law. Those who guess wrong would be subject to civil and criminal prosecution. As a result, the legislation is fundamentally unfair, vague, and overly broad, in violation of constitutionally protected rights to due process.

Bad legislation can spread like wildfire. That’s happened already with Oklahoma’s bill, which has sparked almost identical legislation in Missouri.

If lawmakers are willing to tread on the Constitution regarding animal rights, what would stop them from trampling other rights, such as children’s rights, civil rights, consumer rights, donors’ rights, education rights, property rights, seniors’ rights, veterans’ rights, or even religious rights?

The organization I lead has prepared an analysis of the constitutional threats posed by the legislation in Oklahoma and Missouri. The analysis will be useful to people concerned about legislation in other states as well.

Politicians across the country are ignoring their own oaths of office to support, obey, and defend the Constitution as they craft new schemes to limit the rights and resources of nonprofits. It is up to nonprofit staff, board members, volunteers, and donors to be ever-vigilant in preserving these and other cherished liberties so charities and private foundations are free to do the work our communities need and deserve.

Tim Delaney is chief executive of the National Council of Nonprofits and a former Arizona solicitor general.