In This Issue Nonprofit Sector Charities Need Not Establish Financial Need of Sept. 11 Victims Charitable Choice Pushed In Michigan Bill Regulatory Matters OMB Regulatory Data Available Online Federal Budget Economic Stimulus Package It's Official -- The US is in an Economic Recession Appropriations Update Nonprofits and Technology Internet Not A Major Factor In 2001 Campaigns .us Domain Name Registration and Nonprofits Reader Responses Re: Right-to-Know Updates, Corrections Re: Charities and September 11; Faith-based legislation SIDE BAR: Nonprof Sector: New Website on Federal Judge Nominees; Anti-terrorism Legislation & Nonprofs Charities Need Not Establish Financial Need of Victims of September 11 The Internal Revenue Service (IRS) has announced that charities providing disaster relief following the September 11 attacks do not need to worry about sanctions for making payments to victims without first establishing financial need, if the "payments are made in good faith using objective standards." IRS Notice 2001-78 came following IRS testimony in a Congressional hearing in early November on charitable relief efforts. The testimony noted that individuals are not automatically entitled to charitable assistance, but must show need or be in distress. This implied that groups such as New York's Twin Towers Fund may endanger their tax exempt status by making pro rata distributions of funds to families of rescuers that died in the attack. The IRS announcement recognizes "the unique circumstances caused by this tragedy and wishes to alleviate concerns that might otherwise delay relief to victims." The IRS will treat payments made to individuals that have lost a family member or been injured as a result of the attacks as related to a charity's exempt purpose if objective standards are used. Charities can rely on this guidance until Congress addresses the issue legislatively, or December 31, 2001, whichever comes first. While this move will help get relief to families more quickly, it could exacerbate equity issues that have surfaced as relief efforts seek to meet both short-term and long-term needs. For example, should the greatest proportion of aid go to households with the lowest incomes and should aid from government be reduced by grants from charities? Should the standards in a disaster be different from a general rule that requires aid be based on need? Charities will need to respond to these questions if Congress takes up these issues. One bill in Congress, H.R. 3192, would create a "Charity Accountability Board" that would collect information and make recommendations on:

• How much disaster relief money is raised and how it is spent;
• What portion of relief funds is spent on administrative costs; and
• What criteria charities use to provide relief to affected households.

The Board would have five members, including representatives of the Federal Emergency Management Agency (FEMA), two members appointed by the President, one appointed by the Senate and one appointed by the House. The Board would also provide information on relief funds to victims of disasters and report to the President and Congress on the status of relief funds. While it is appropriate for Congress to exercise oversight of tax-exempt organizations, it cannot expect charities to substitute for government in disaster situations. Even though charities have raised over $1 billion to aid victims of the September 11 attacks, the size of the disaster creates problems that are far too big for charities to handle alone. Congress needs to ensure that an adequate safety net is in place to protect people when they are sick, injured, unemployed or lose a breadwinner. Charities can fill in the cracks, but should not be criticized for failing to do the job of government. Back to Top Charitable Choice Pushed In Michigan Bill A bill that would allow the Michigan Family Independence Agency (FIA) to fund religious organizations or convert social welfare programs to vouchers is scheduled for a second hearing in the Michigan House Family and Children Services Committee on Tuesday, November 29 in Lansing. The bill (H.B. 5316), sponsored by Rep. Mark Jansen (R-72), would extend problematic provisions of federal welfare reform into every program funded through FIA. It could also result in the dismantling of programs in favor of vouchers. Known as "charitable choice," this legislation would impact Michigan by:

• Violating the state constitution's ban on direct state funding of religious organizations;
• Forcing people in need to seek alternative services if they object to the religious character of a state funded provider;
• Eliminating grant programs in favor of vouchers; and
• Steering people in need toward programs that include religious worship

Although H.B. 5316 prohibits grant programs from using state funds to try to convert people, there are no procedures or safeguards to ensure that worship is separated from services. Congregations would merely self-certify that they are not using state funds for religious purposes. For voucher programs, congregations could include worship activity in services and discriminate against people seeking help based on religious affiliation. Although religious congregations that received funds under this bill would be subject to the same regulations as other nonprofits and would be required to keep state funds in a separate account, there is one big exception: congregations would be allowed to discriminate on the basis of religious affiliation or practice when hiring staff to work in state funded programs. Currently congregations are allowed to discriminate on the basis of religion when hiring staff for religious related purposes (i.e. ministers, rabbis, priests, etc.). H.B. 5316 would stretch this exception to cover non-religious, publicly funded activity. Back to Top OMB Regulatory Data Available Online OMB's Office of Information and Regulatory Affairs (OIRA), which must approve all major regulations, is now providing HREF="http://www.whitehouse.gov/library/omb/OMBRCYTD.html">statistics on regulatory reviews through its web site. OIRA is also in the process of making available HREF="http://www.whitehouse.gov/omb/oira/meetings.html">logs documenting meetings (with participant lists) about specific rules under review at OIRA. As OIRA works to make this information available, OMB Watch is already providing all meeting logs from 2001 on our site; OIRA's online logs will only include meetings after late October. We are also providing HREF="/execreport/oira-tables.html">data on OIRA regulatory reviews here for the year 2001 by month, as well as for previous years, going back to 1994. Also available on OIRA's web site are HREF="http://www.whitehouse.gov/omb/inforeg/prompt_letter.html">prompt letters, asking agencies to take a look at a particular issue (discussed further in HREF="/regs/2001/grm1001.html">this OMB Watch analysis), and OIRA's HREF="http://www.whitehouse.gov/omb/inforeg/other_letter.html">post-review letters and HREF="http://www.whitehouse.gov/omb/inforeg/return_letter.html">return letters to federal agencies for regulations that were not approved by OIRA. Back to Top Economic Stimulus Package Some commentators have suggested that it would be better for Congress to pass nothing in the way of an economic stimulus package than to pass something that will be ineffective and worsen our long-term fiscal picture. In terms of accelerating the income tax rate cuts that were passed this summer, or eliminating the alternative minimum tax for corporations, they may be right. However, there seems to be general agreement on the need to extend the number of weeks that unemployment benefits can be claimed, to provide tax rebates to workers who did not qualify for the previous rebates, and to accelerate depreciation in tax write-offs for businesses. All of these measures would provide some economic stimulus, by increasing consumer and business purchases, and none of them will worsen the budget situation over the long term, since unemployment costs will decrease when employment increases and the rebates will be one-time only. There is also broad agreement that assisting the unemployed with health insurance, by providing help in purchasing COBRA benefits and expanding Medicaid coverage, is also important. Like expanding unemployment benefits, this cost will also decrease in cost as employment rises. More information has been appearing daily about the state budget deficits prompting proposals for tax increases or cuts in services -- exactly the wrong things to do in a recession. Assistance to states, whether through some kind of revenue sharing program or by additional federal contributions towards state Medicaid costs, would help to stimulate the economy, avoid some of the cuts in important state services, and, again, would be designed as temporary measures. There is also general agreement to spend a substantial amount of money for an economic stimulus package -- somewhere in the $60-$70 billion dollar range. A sound economic stimulus package is an opportunity to help the economy as well as the families who have been hurt by unemployment and the September 11 attacks. This is an important issue. Now that the recession is official (see story, this issue), we should urge our representatives to pass a bill that conforms to the original principles for economic stimulus -- a bill with measures that go into effect quickly, are temporary, are directed at those individuals most likely to spend the additional income, and are most likely to spur businesses to increase investment and employment. Permanently eliminating the corporate alternative minimum tax or accelerating tax rate cuts that will benefit higher income taxpayers do not conform with those principles. Those measures will not help those who are most vulnerable to an economic downturn, they will not help the economy recover, and they are fiscally irresponsible. Even those who are ideologically opposed to government spending for programs that help the unemployed or struggling working families should be urged to support provisions like expanded unemployment benefits, assistance with health insurance coverage for the uninsured, and federal assistance to states, and to forgo permanent tax cuts and tax cuts that will primarily benefit corporations and higher income Americans without providing economic stimulus. Spending vs. tax cuts is an ideological divide, but providing an economic stimulus is pretty straightforward -- spending that is directed towards the unemployed and low-income families, who are least likely to save and more likely to consume, and spending that will actually cause businesses to purchase more of what other businesses make, and thus increase employment, make economic sense -- all ideology aside. There are a wealth of other economic stimulus ideas -- see our resource page, and then call your representative today, since the economic stimulus package will be a major item of business during the next few weeks. Back to Top It's Official -- The US is in an Economic Recession The National Bureau of Economic Research (NBER) announced today that the US economy peaked in March 2001, after ten years of growth -- signifying the end of the economic expansion and the beginning of an economic recession. Having the NBER, considered to be the official authority on US business cycles, actually name the current economic downturn a "recession" -- a period of declining industrial production, employment, real income and wholesale-retail trade -- will likely intensify the effort to get an economic stimulus package passed into law. Since the diminishing activity began in March 2001, it is not directly attributable to the September 11 attacks, but the NBER noted that, absent the attacks, the downturn might have been too mild to be classified as an actual recession. Back to Top Appropriations Update The fifth continuing resolution extends funding for all appropriations for FY 2002 that have not yet been passed through Wednesday, December 7. Five bills (Energy and Water, Interior, Legislative Branch, Military Construction, and Treasury-Postal) have been signed into law. Three bills have been cleared and will likely be signed by the President (Agriculture, Commerce-Justice-State, and VA-HUD). Three bills are in conference (Foreign Operations, Labor-HHS, and District of Columbia). That leaves the Transportation bill which should move forward quickly since passage of the Airport Security bill last week, although the issue of Mexican truck safety is still a sticking point; and Defense, which is being held up over allocation of the $20 billion September 11 emergency supplemental bill, which was added to it. For updates, and links, see Thomas' Appropriations Bills Status Page. Back to Top Study Shows Internet Not A Major Factor In 2001 Campaigns -- FEC Taking Comments On Proposed Rules For 2002 A recent study by the Democracy Online Project reviews online campaign fundraising in the 2001 gubernatorial races in Virginia and New Jersey and the New York City Mayor's race to measure development of websites and e-mail as campaign tools. The project found that campaigns did not spend much on Internet services, and although the Internet is no longer a novelty in campaigns, "it has clearly not reached its potential." The study compared Internet use this year with federal campaigns in 2000, and found that online fundraising has not grown significantly, but has the potential to attract small donors in the future. The report noted the result may bring about reforms that have not been achieved through legislation. Positive developments cited in Internet use in the 2001 campaigns include websites that were easy to find, standardization of privacy policies, e-mail lists to give voters the opportunity to get follow-up information and links from endorsing organizations. The report found several shortcomings, including lack of site maps and search engines, absence of lists of campaign contributors, lack of statements contrasting candidates and features on everyday supporters. In 2002 and 2004, use of the Internet may expand, since the Federal Election Commission (FEC) has proposed new rules that encourage development of online campaigning. These rules would exempt volunteers from federal campaign regulations, allow public posting of press releases announcing organizational endorsements and not treat links to candidate websites as regulated contributions or expenditures. For more information on the proposed rules see the October 1 edition of the Watcher. Nonprofits that want to comment on new rules should submit their statements to the FEC on or before Monday, December 3. They can be sent by e-mail to internetnprm@fec.gov or mailed to: FEC ATTN: Rosemary Smith 999 E Street NW Washington, DC 20463. Comments can also be submitted by fax to (202) 219-3923. Back to Top .us Domain Name Registration and Nonprofits In late October 2001, the U.S. Department of Commerce selected a vendor to oversee the ".us" domain name registry. Originally created to give municipal governments, schools, and libraries a means to be easily identified online, the domain namespace is now seen as an increasingly important remedy for the increasing shortage of available domain names. As NPTalk explains, the process through which the vendor was selected, as well as details of the procedures that will be employed for future ".us" registrations present a number of issues for nonprofits. Back to Top Reader Responses RE: OMB Watch's Right-to-Know Statement Just read your post-September 11 statement. Thanks for taking a strong and responsible stance for open information. It's distressing to see what sorts of info we're losing access to elsewhere... Keep up the good work! Mike Ewall Philadelphia, PA Back to Top Updates, Corrections Since the November 13 issue of the Watcher was published, more information has become available regarding the classification of recipients of charitable aid to the events on September 11. The new information has been added to the November 13 Watcher article, "Congress Looks At Nonprofit Response To September 11." Also, the November 13 article on faith-based legislation used the wrong title for S. 592. It's actually the "Savings Opportunity and Charitable Giving Act of 2001," not the "Faith-Based and Community Initiatives Bill." Back to Top Notes and Sidebars New Website Offers Info on Nominees for Federal Judge Positions The Alliance for Justice has launched a new website that gives citizens and nonprofits information about how federal judges are selected, the records of current nominees and the status of confirmation proceedings. The site also includes a "You Be the Judge" section that lets you compare your position on important issues to past rulings by current judicial nominees. Since federal judges serve for life once they are confirmed, the selection process can have a huge impact on every one living in this country. Anti-terrorism Legislation & Nonprofs Could recent anti-terrorism legislation impact your nonprofit? See OMB Watch's analysis to find out what the new anti-terrorism bill means for your org.