Although 2006 brought nonprofit organizations a somewhat hostile legal climate for grassroots advocacy, nonprofits provided leadership on issues in public policy debates and helped get voters to the polls and protect their rights. Nonprofits exposed government surveillance of groups that dissent and resisted efforts to silence debate or use federal grants as a wedge to control speech. To level the political playing field, nonprofits supported efforts to increase transparency in Congress. Some in the sector also called for frozen funds of charities designated as supporters of terrorism to be released for charitable purposes. Issue Advocacy Ethics and Lobby Disclosure While both the House and Senate passed bills to reform ethics practices in Congress and increase disclosure by lobbyists, no conference committee was formed because of disagreement over an additional item included in the House bill. This provision would subject independent political committees (527s) to the same regulations as political parties and candidate campaigns. It is expected to be dropped in 2007 so that the measure can move forward. The bills that evolved in 2006 would increase lobby disclosure. While the House included costs of grassroots communications by lobbying firms and coalition membership, the Senate jettisoned this provision. Since charities and unions must already disclose grassroots lobbying expenditures, disclosure by others would help level the political playing field by exposing sham groups that front for special interests.

• Lobby Reform Bill Squeaks Through House

Nonprofit Accountability An October report from Senate Finance Committee Ranking Member Max Baucus (D-MT) found instances of serious abuse in interactions between five tax-exempt organizations and disgraced lobbyist Jack Abramoff and his associates. The report recommends a broad expansion of the definition of lobbying, increased disclosure requirements and enhanced penalties for violations. Senate Finance Committee Chair Charles Grassley (R-IA) also expressed concerns about nonprofit accountability. In a letter to the Association of Community Organizations for Reform Now (ACORN), Grassley stated that "misuse of tax-exempt organizations for political and lobbying activities is a widespread problem." The letter followed news reports that voter registration drives sponsored by ACORN are being investigated by federal authorities after allegations that fraudulent voter registration cards were submitted in four of its 17 state efforts. At year's end, the ACORN investigation remains open, and advocates are watching the case to ensure that its outcome does not have widespread, negative ramifications for the nonprofit sector.

• Report Details Abramoff Abuse of Nonprofits, Recommends New Rules
• ACORN Voter Registration Drive Investigated

IRS Political Activities Compliance Initiative (PACI) In early 2006, the Internal Revenue Service (IRS) announced that it would step up enforcement of the ban on partisan activities by charities and religious organizations — and would provide quick resolution on investigations. Though several investigations from the 2004 election remained unresolved, the IRS did take action on some issues. The IRS dropped its investigation of the NAACP, finding that the group did not violate the ban on partisan electioneering when its chairman, Julian Bond, criticized several Bush administration policies during a speech given at its 2004 national convention. Investigators also increased their scrutiny of religious organizations, which led Sen. James Inhofe (R-OK) to introduce S.3957, the Religious Freedom Act of 2006. The legislation's vague language is intended to allow religious groups to make partisan statements. The bill did not pass in the 109th Congress, but the issue is likely to re-surface in 2007.

• IRS Investigations of Political Activity Heat Up
• IRS Drops Case Against NAACP
• First Church Electioneering Bill Introduced in Senate
• Ohio Church Complaint Raises Questions of Fairness in IRS Enforcement

IRS Report and Response In February, the IRS released its assessment of its 2004 enforcement program, which found that a significant number of charities investigated had violated the ban on partisan election activity. At the same time, the agency released guidance on permissible activities and published new enforcement procedures for expedited handling of referrals alleging violations. According to the documents, the agency's goal is to deter any ongoing violations. However, OMB Watch published a report in July that suggested that the IRS's PACI program threatens the constitutional rights of nonprofit organizations and churches to speak out on issues of the day.

• Report Finds IRS Program Could Hamper Free Speech for Organizations

Voter Guides and Vagueness Lack of clarity about standards for permissible voter guides became an increasing problem in 2006. A November enforcement decision by the Federal Election Commission (FEC) on a Sierra Club voter guide from 2004 expanded regulation of voter guides if the FEC determines the guide's overall content implies support or opposition to federal candidates - even if the guide does not explicitly endorse or oppose candidates. By moving away from the clear cut standard subjecting only "vote for" or "vote against" statements to federal campaign finance rules, the FEC has moved in the direction of the problematic IRS "facts and circumstances" test. The result of this and other cases could be a widespread reluctance by nonprofits to provide voters with materials that mention one's conscience or values, or to use elections to hold politicians accountable for their records.

• FEC Expands Regulation of Voter Guides
• Catholic Group Responds to IRS Complaint By Forming New Group

Get Out the Vote and Voter Protection A growing body of state laws and regulations governing voter registration drives and the voting process created barriers to voting that discriminate against minorities, new citizens and the elderly. Nonprofits were instrumental in challenging these new voter suppression tactics, including filing several successful lawsuits. For example, federal courts struck down state rules limiting the ability of nonprofits to register voters in Florida and Ohio.

• Roundup: Recent Nonprofit Efforts to Protect Voting Rights

Campaign Finance Rules Continue to Infringe on Issue Advocacy by Charities In December 2005, the Federal Election Commission (FEC) eliminated exemptions for 501(c)(3) organizations to Bipartisan Campaign Reform Act (BCRA) rules that restrict television, radio and cable advertisements that mention a federal candidate 30 days before a primary or 60 days before a general election, setting the stage for a series of attempts to protect genuine grassroots lobbying broadcasts. In response, the AFL-CIO, Alliance for Justice, the U.S. Chamber of Commerce, the National Education Association and OMB Watch filed a petition in February 2006 that asked the FEC to allow nonprofits, corporations and unions to fund grassroots lobbying advertisements if a strict set of conditions that prohibits references to elections were met. In August, the FEC voted down a proposed rule that would have exempted such broadcasts. In a related issue, the U.S. Supreme Court held that the rule on "electioneering communications" can be challenged as applied on a case-by-case basis. The Court's decision opened the door for the Wisconsin Right to Life Committee (WRTL) to pursue its claim that BCRA is unconstitutional as applied to its grassroots lobbying communications.

• Law Meant to Regulate 'Sham' Issue Ads Instead Silences Citizens Groups
• FEC Deadlocks on Grassroots Lobbying Broadcast Exemption
• Grassroots Lobbying Issue Hits the FEC and the Courts

Government Grants and Advocacy Rights In two separate cases, federal courts struck down a United States Agency for International Development (USAID) requirement that public health groups must pledge their "opposition to prostitution" in order to continue receiving federal funds for their HIV prevention work as a violation of the First Amendment. DKT International and the Alliance for Open Society International had challenged the requirements. While the court's decision applies directly only to the organizations involved in the litigation, it could have a broader impact. Another court case provided much needed clarification on how federally funded programs should be separated from faith-based activities. These standards are the first clear guidance on what constitutes adequate separation between federally and privately funded activities, and could be adapted to separate federal programs from lobbying activities, which must be paid for with private, not federal, funds. Under the terms of a February settlement between the ACLU and the Department of Health and Human Services (HHS), HHS agreed to withhold a grant to Silver Ring Thing (SRT), a Pennsylvania-based nonprofit that runs faith-based sexual abstinence education programs for teens across the country. The settlement agreement included steps SRT must take to separate government-funded activities from religious activities before it can be eligible for any more federal funding. These steps include guidance on separate and distinct programs, cost allocation, separate presentations, use of religious materials and invitations to religious programs.

• USAID Pledge Requirement Again Found Unconstitutional
• HHS Gives Guidance on Keeping Federal Funds Out of Religious Programs

Civic Participation and the Right to Dissent Surveillance of Organizations that Dissent As information on the scope of government surveillance continues to accumulate, the ACLU has requested a congressional investigation into use of counterterrorism resources for surveillance of nonviolent domestic organizations by the Pentagon's Threat and Local Observation Notice (TALON) database, the FBI and Joint Terrorism Task Force. The surveillance of antiwar, religious, animal rights and environmental groups was exposed by ACLU Freedom of Information Act requests. At least two Senate committees have shown interest in examining the issue.

• ACLU Seeks Congressional Hearings on Monitoring of Antiwar Groups

Charities and Anti-Terrorist Financing Policies Several discreet issues related to charities and anti-terrorism policies emerged in 2006. These developments may be especially important to U.S.-based nonprofits that seek to respond to natural disasters, famine, and refugee crises in foreign countries.

• In September, the Treasury Department released the third version of its Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities, after allowing public comments on the Dec. 2005 revision. Although the Treasury Department placed greater emphasis on the voluntary nature of the guidelines, the fundamental problems that led the nonprofit sector to call for withdrawal of the Guidelines remain unchanged.
• In a letter sent Nov. 6, a group of nonprofit sector leaders asked the Treasury Department to release frozen funds belonging to charities designated as supporters of terrorism "to trustworthy aid agencies that can ensure the funds are used for their intended charitable purposes." The Treasury Department has not responded.
• A November decision by a federal district court found that two portions of Executive Order 13224 (EO 13224), used to designate organizations as supporters of terrorism, are unconstitutional. The court said EO 13224 lacks standards for designating terrorist organizations, giving the President "unfettered discretion", so that designations could be "for any reason, including for.... associating with anyone listed... or for no reason." The opinion also struck down provisions allowing designation of people and groups "otherwise associated" with terrorism because EO 13224 "contains no definable criteria for designating individuals and groups."

• Treasury Releases Third Version of Anti-Terrorist Financing Guidelines
• Court Says Parts of Executive Order Used to Shut Down Charities are Unconstitutional

Access to Congress Via Email A group of 105 organizations, spanning the ideological spectrum, sent a letter to House and Senate congressional offices asking them to disable the so-called "logic puzzle", designed to stop e-mail spam from reaching congressional e-mail inboxes. The organizations, led by Consumers Union, National Taxpayers Union, and Earthjustice, argued that constituents should not be required to show a basic knowledge of math or English to express their concerns to their elected members of Congress. According congressional offices, the purpose of the program is to cut down on the amount of mass emails the offices receive daily.

• Nonprofits Protest Barrier to Emailing Congress