In This Issue Regulatory Action Lieberman, Waxman Question Card Memo on Regulation OMB Reg Review Standstill Reg 'Reform' Bill Introduced Administration Stays Procurement Rule Public Citizen Report Points to Safeguards at Risk Tax/Budget Tax Cut Bills Here, There and Everywhere A Surplus for Tomorrow Estate Tax and Government Revenue Flurry of Estate Tax Bills Introduced Nonprofit Sector Issues Nonprofits Send Recommendations to Bush Bush Re-Institutes Global Gag Rule Bush Announces Faith-Based and Community Initiative President Proposes Tax Incentives to Increase Giving to Charities Campaign Finance Bill to be Considered by End of March Information and Technology Clinton-Gore Report on E-Commerce Tech Help: Free Web Hosting for Nonprofits Lieberman, Waxman Question Card Memo on Regulation In one of the first actions of the new administration, President Bush's Chief of Staff, Andrew Card, issued HREF="http://www.whitehouse.gov/omb/inforeg/regreview_plan.pdf">a memorandum temporarily prohibiting agencies from publishing new rules in the Federal Register, effectively blocking last-minute regulatory actions by the Clinton administration. This memo signals the start of a review of Clinton-era regulatory activity, and could result in the abandonment of ongoing work, including proposed rules, as well as the repeal of standards already on the books. In response to this action, Sen. Joseph Lieberman (D-CT) and Rep. Henry Waxman (D-CA) sent a joint letter to the new administration today expressing their concern that "the Card memorandum could be used to undermine long-needed safeguards." "Many of the public protections finalized in recent months were the culmination of years of study, public comment, and scrutiny by both government and private parties," Lieberman and Waxman write. "For example, the Card memorandum could affect measures to protect the public against breathing air contaminated by diesel fumes, drinking polluted water, and eating contaminated food. Also potentially caught up in the net of this memorandum are measures to protect wilderness areas, to implement energy-conservation measures, to protect mine workers against toxic underground pollution, and to support the pubic's right-to-know about toxic lead releases in their communities. We would be very troubled if the years of effort by both government and private parties to devise solutions to these and other substantial risks to the public's health and the environment were seriously delayed or reversed." To monitor the implementation of the Card memo, Lieberman and Waxman specifically ask the Bush administration to provide:

• A description of each proposed or final regulation to protect health, safety, consumers, or the environment that has been put on hold by the Card memo;
• Any written or oral instructions provided to the agencies in implementing the Card memo, including an explanation of how the administration intends to maintain transparency and accountability in this process;
• A description of each request by an agency for a rule to be made exempt from the Card memo (and allowed to move forward), and the Administration's response to that request;
• A description of each regulation that was excluded from the Card memo as a result of a statutory or judicial deadline; and
• "A copy of any written comments or other contacts, and a description of any oral comments or other contacts, by persons outside of the executive branch regarding particular regulations."

Back to Top OMB Reg Reviews at a Standstill; Paperwork Reviews Continue Apace Under E.O. 12866, OMB’s Office of Information and Regulatory Affairs (OIRA) reviews all major proposed and final rules, as well as other designated rules, to determine whether the agency proposal is consistent with administration policies and priorities. In addition to regulatory review, OIRA reviews all information collected by agencies from 10 or more people, including paperwork required by regulations. This paperwork review, required under the Paperwork Reduction Act, is to be done by OIRA within 90 days of receipt and gives OIRA the power to approve or disapprove the paperwork. OMB Watch has reviewed the number of paperwork and regulatory submissions by agencies and actions taken by OIRA during the month of January, 2001. The review is divided in two parts highlighting the differences between Clinton and Bush administration actions. The results show that under President Bush the regulatory review process has slowed to a near halt, and that agencies have withdrawn many of the proposed and final rules that were pending review at OIRA. Unlike the regulatory review process, the paperwork clearance process does not seem to have changed much under the Bush administration, at least not during the first few weeks of the new administration. Regulatory Review From January 2 to January 19, agencies submitted 50 regulatory proposals for OIRA to review. From January 20 to February 5, there were a total of 12 submitted. As this table shows, the largest number of Clinton submissions came from EPA. In the first weeks of January, EPA submitted 10 regulatory proposals; in the last weeks of January, EPA submitted one rule for review. OIRA was extremely busy from January 2 to January 19. They reviewed and approved 88 proposed and final rules, some of which had been pending for some time. By comparison, OIRA reviews roughly 500 rules per year or about 42 per month, meaning OIRA doubled the number in half as much time. Of these approvals, OIRA required agencies to make changes to 70 of them; the extent of change is not known. On average, over the past four years, OIRA requires agencies to make changes roughly 55% of the time. From January 2 to 19, 80% of the rules required some change. From January 20 to February 5, OIRA reviewed and approved only 7 proposed and final rules, a significant drop in work load. For half of these, OIRA required agencies to make some type of change. Most striking is that between January 20 and February 5, 47 rules were withdrawn from OIRA review, many happening within the last week. By comparison, none were withdrawn during the January 5-19 period. The largest number of withdrawals came from the Departments of Health and Human Services (13) and Justice (12). On average about 30 rules each year get withdrawn from OIRA review. In two weeks, the Bush administration has had 1.5 times this number. Among those withdrawn was an HHS-FDA proposed rule to control salmonella enteriditis in shell eggs; a final rule from DOI-BLM dealing with onshore oil and gas leasing and operations; a DOI-NPS proposed rule on conservation in the national park system; and a final rule from DOL’s Mine Safety and Health Administration (MSHA) on verification of underground coal mine operators’ dust control plans. A January 20 memo from Chief of Staff Andrew Card instructed agency heads to withdraw from the Office of Federal Register rules that had been approved but were not yet printed, and to postpone by 60 days the effective date of new rules that have not yet taken effect so long as a deadline is not statutorily or judicially mandated. HREF="http://www.citizen.org/congress/regs-/regsdelay.htm">A report from Public Citizen has catalogued the impact of the Card memo. It would appear, based on the data from OIRA, that in addition to stopping the rules at the Office of Federal Register and slowing down the effective date of some rules, regulatory review at OIRA under the Bush administration is at a near stand still. Paperwork Review Paperwork review, on the other hand, does not seem to have been dramatically affected by the change in administration – at least based on a cursory review of the data. (See table) From the period January 2 to January 19 – the Clinton period – 139 information collection requests were submitted to OIRA from agencies. From January 20 to February 1 – the Bush period – 131 paperwork requests were submitted. OIRA reviewed more paperwork requests during the Bush period than the Clinton period. During the Clinton period, OIRA approved 119 requests; during the Bush period, OIRA approved 165 requests. During each period, 5 agency requests were withdrawn. During the Bush period, 3 requests were disapproved; none were disapproved during the Clinton period. Beyond the Data OMB Watch will begin monitoring and reporting on the regulatory and paperwork review process at OIRA. This monitoring will include the type of data analysis above, along with anecdotal information to supplement the numbers. For example, although OIRA has only 90 days under law to review paperwork requests, several requests have been languishing at OIRA. These include the American Travel Survey and the National Personal Transportation Survey, which were both submitted to OIRA on July 5, 2000 and still have not been acted on. We will try to explain the numbers that are provided. For example, while there were a number of paperwork approvals from the Department of Labor during the Bush period, it turns out many were OSHA forms that had been sitting there for awhile, such as those dealing with noise, formaldehyde, lead in construction, and OSHA Data Initiative. Another example, two of the paperwork withdrawals during the Bush period dealt with citizenship application forms submitted by the Department of Justice – a general one and one for adopted children. Back to Top Reg 'Reform' Bill Tempered, But Problems Remain Rep. Dan Burton (R-IN) introduced the "Small Business Paperwork Relief Act" (H.R. 327) last week, and is pushing to put it up on suspension as early as this week. This legislation is identical to what was known in the public interest community as the HREF="/regs/1999/sbpra-vote.html">Lawbreakers Immunity Act (H.R. 391) from the last Congress, only it has dropped the most objectionable provision, which required agencies to waive fines for first-time violations of paperwork requirements. That leaves several troubling provisions that were mostly ignored in the fight over H.R. 391. In particular, Burton's bill requires each agency to "publish in the Federal Register on an annual basis a list of the requirements applicable to small-business concerns ... with respect to collection of information by agencies, organized by North American Industrial Classifications System code and industrial/sector description..." Given the expansive definition of small business, this would presumably require a listing of virtually every collection of information undertaken by an agency. This would place a heavy burden on agencies, and one that may be impossible to fulfill. In testimony before the Senate Governmental Affairs Committee in October of 1999, former OIRA Administrator John Spotila urged that the section be dropped, explaining, "It would be hard to implement, resource intensive, and difficult to keep current and complete." He noted that SBA's Office of Inspector General also raised questions about the feasibility of the provision since it would require agencies to predict what collections of information they would require in the future (agencies cannot possibly foresee all the circumstances that would require immediate investigation and new collections of information). Moreover, if an agency fails to include a paperwork requirement in its list, a small business may have grounds to challenge it in court. In another objectionable provision, H.R. 327 requires representatives from EPA, OSHA, and the departments of Transportation and Health and Human Services to sit down with advocates from the Small Business Administration to examine the feasibility of "consolidating requirements regarding collections of information" to address small business concerns, including requiring reporting only once per year. This could prove highly problematic since reporting is frequently required throughout the year. For instance, reporting once per year could undermine pollution disclosures under the National Pollution Discharge Elimination System. The bill also creates a point of contact in each agency to serve as a liaison to small business with respect to information collections and the control of paperwork. The bill does not suggest that this person serve as an advocate as exists within SBA, but this potential exists. Back to Top Administration Stays 'Contractor Responsibility' Rule On January 31, the Bush administration issued a stay of HREF="/ombwatcher/ombw20000717.html#rcr">a rule - finalized toward the end of the Clinton administration - that requires government contracting officers to take into consideration a company's record of complying with the law (including tax laws, labor laws, employment laws, environmental laws, antitrust laws and consumer protection laws) before awarding federal dollars. This represents the first step toward revoking the rule altogether - which business interests have been clamoring for since Bush became president. And it is also the first direct shot by the new administration at a major Clinton-era safeguard. Bush has authority under the Administrative Procedure Act (5 USC 705) to issue the stay pending judicial review of the standard (the Chamber of Commerce and others have already filed suit to overturn it), even though it has already taken effect. Read the AFL-CIO's response to this opening attack on commonsense safeguards. Back to Top Public Citizen Report Points to Safeguards at Risk As reported in last week's Watcher, President Bush has put a temporary freeze on regulatory activity pending a review by the new agency heads. This move will likely serve as a precursor to a series of attacks on public and environmental safeguards. Public Citizen recently released a valuable new report that chronicles various standards that are impacted by Bush's action. This includes standards in the following areas:

• Control of deadly microorganisms in food
• Genetically modified crops
• National organics standards
• Clean air in national parks
• Protection of federal forests
• Energy conservation
• Arsenic in drinking water
• Public's right-to-know about industrial releases of toxic lead
• Pollution from diesel engines
• Protecting wetlands
• Lead poisoning in children
• Snowmobiles in national parks
• HMO protections for Medicaid patients
• Workplace dangers
• Mine safety

Read the Public Citizen report. Back to Top Tax Cut Bills Here, There and Everywhere On January 22, 2001, Republican Senator Phil Gramm (TX) and Democratic Senator Zell Miller (GA) introduced a tax cut bill based on President Bush's proposals, named the "Tax Cut with a Purpose Act of 2001" (S.35). This bill includes:

• A phased-in across-the-board reduction in marginal income tax rates for individuals. According to the provisions of this bill, the marginal tax rates of 39.6% and 36% would gradually be reduced to $33% and the marginal tax rates of 31% and 28% would be reduced to 25%. The minimum tax rate of 15% would remain the same, except for the lowest income taxpayers (about one-fourth of this category), for whom there would be a new lower minimum rate of 10%. Since those who earn more pay a higher percentage, any across-the-board tax cut like this will give more of a benefit to higher income taxpayers. The estimated cost of this over ten years is $727 billion, according to the Joint Committee on Taxation.
• A phased-in reduction of the marriage penalty. This would exclude 10% of the lower earning spouse's income up to $30,000 by 2006. A phased-in increase in the child tax credit from $500 to $1000 over 5 years. The estimated cost of these two provisions over ten years is $250 billion.
• A phased-in complete repeal of the estate tax. (For more about the effects of repealing the estate tax, see OMB Watch's Estate Tax Resource Page and other stories in this issue.) The estimated cost of this provision over ten years is $236 billion.
• A phased-in expansion of education IRA's up to $5,000 in 2006, at a ten year cost of $3.5 billion.
• An allowance for a deduction of charitable contributions for people who don't itemize their income tax; a provision that charitable contributions from an IRA distribution will be nontaxable; and a higher limit on charitable contributions by corporations. These provisions would cost $80 billion.
• A provision that makes the "research credit," which currently expires in 2004, permanent, at a cost of $24 billion over ten years.

Back to Top A Surplus for Tomorrow How to Spend a Growing Surplus? What to do with a $5.6 trillion surplus? The battle lines are now being drawn in Washington over what to do with so much money. OMB Watch has taken a firm position that a large portion of the surplus should be used to address the need for public investments in our people and communities. This position is consistent with a large coalition, called Invest in America (IIA). IIA has a sign-on letter for its Statement of Priorities. We encourage you to endorse it. Here are three different approaches emerging on how to use the surplus – or, at least, large portions of it:

• The Bush Plan The President proposes to use nearly all of the non-Social Security surplus for an across-the-board tax cut. The President argues that the new estimates of the surplus make it possible to do a large tax cut and still address the spending priorities he identified on the campaign trail, such as prescription drugs and education, and reduce the national debt. The plan has been criticized as "fuzzy math," a term Bush used to attack Gore during the campaign, to indicate that there would not be enough of the surplus to do taxes, debt reduction, and increased spending in certain areas. Some have accused him of playing a budget game by locking in large, long-term tax cuts. When it is clear that there is no surplus left for the spending initiatives, he can either cut spending in other program areas or tap into the Social Security surplus. The criticism of the tax cut is that it is too large, too heavily weighted to the wealthy, and does not fully kick in for many years (commonly called back loaded); a large tax cut of this type is difficult to fix later without appearing to support a tax hike.
• The Conrad Plan Sen. Kent Conrad (D-ND), who sits on both the Budget and Finance Committees, has put forth a compromise plan. He would set aside the $2.5 trillion in the Social Security Trust Fund as well as the $400 billion in the Medicare Part A Trust Fund. That money would only be used for Social Security and Medicare respectively. The remaining surplus – $2.7 trillion – would be divided in thirds with one-third for tax cuts, one-third for spending on national priorities, and one-third for reducing the national debt. He would use part of the $900 billion for tax relief to pay for interest costs that would accrue from not using the money to reduce the debt. Thus, there would be roughly $750 billion for tax cuts. The plan has not been endorsed as a Democratic alternative. And Sen. Robert Byrd (D-WV) criticized the plan by saying he wanted less than one-third for tax cuts.
• The Freeman-Appelbaum Plan Richard Freeman of Harvard University and Eileen Appelbaum of the Economic Policy Institute proposed giving a one-time dividend to the public instead of the Bush tax cut. Their plan would cost roughly $140 billion, leaving a large portion of the surplus for other initiatives, such as debt reduction or spending on investments. But they do not address how to use the remainder of the surplus. They argue that the dividend – a tax-free $500 check for every permanent resident – could be done immediately. Thus, a married couple with two children would get $2,000 in the mail. They argue this is large enough to provide the economic stimulus that Federal Reserve Chair Alan Greenspan called for, and would likely encourage consumer spending. Another advantage, they note, is that, unlike a tax cut, the government is not locked in to any long-term commitments. It is unclear whether this idea will catch on with the politicians.

Back to Top Estate Tax and Government Revenue Because of the debate over repeal of the estate tax, OMB Watch has been doing a series of articles providing background on the tax. The last two articles described the impact repeal of the estate tax would have on charitable giving. While there is no definitive figure on the amount of lost charitable contributions, it is clear that repeal of the tax would have a significant, adverse impact of charitable bequests. The best estimates peg the loss at between $5 billion and $6 billion per year, and likely to increase sharply in future years. This will have an impact on many charities – those that depend on charitable bequests, such as universities, museums, and service delivery organizations, as well as those who depend on grants from foundations. Roughly one-third of private foundation revenue comes from charitable bequests under the estate tax. We have created a web resource page providing background information and links to other sites. That resource page continues to be updated. Federal Revenue This article focuses on the impact the estate tax has on government revenue. As with other discussions of the estate tax, we include the gift tax and generation-skipping transfer taxes in the discussion when we use the term estate tax, since it is a unified tax. Since 1996, estate and gift tax revenues have grown at a pace that far exceeds the annual growth of government's general revenues, called on-budget revenue. (Off-budget revenue includes such items as Social Security payroll taxes.) The figure below shows the difference graphically and the table provides specific figures. On average, the estate and gift tax grew at nearly double the rate of annual increase of the on-budget revenue – an annual 14.1% rate for the estate and gift tax and a 7.25% pace for on-budget revenue. This rapid growth in the estate and gift tax is likely to continue as the transfer of inter-generational wealth continues to grow. Chart: Annual Revenue Change Table: Annual Revenue Change The Congressional Joint Committee on Taxation published a 1999 report projecting revenue from the estate and gift tax. According to JCT, from 2000 to 2008, the tax will generate $303.4 billion. An excerpt from their table follows: Table: Projected Revenue from the Estate Tax: 2000-2008 On average, this is $33.7 billion per year, a sizable amount of federal revenue. To put it in perspective, you could fund each of the following programs and still have a little left over: Table: Potential Recipients of Estate Tax Funds If Congress were to repeal the estate tax – and President Bush successfully gets his massive tax cut – it will cut substantially into the surplus. Along with other planned spending increases, such as for prescription drugs and military spending, it is likely that Congress will be faced with difficult funding choices in the near future. One might expect that programs without powerful constituencies, possibly some of the ones listed above, would be targets for spending cuts. Thus, in very direct ways, the estate tax repeal can result in significant cuts in human needs programs. State Revenues All states and the District of Columbia impose estate, gift or inheritance taxes. Most states – 35 states – impose a "pick-up" estate tax. Under a "pick-up" tax, the state specifies the amount allowed as a credit against the federal tax. The revenue goes to the state but it does not increase tax payments made by the decedent's estate. Instead, the amount paid to the state is listed as a credit on the federal tax. Thus, the repeal of the federal tax would mean a full or partial loss of state revenue. The Joint Committee on Taxation (JCT) acknowledges that "repeal of the Federal estate tax would eliminate this source of revenue sharing. The burden of estate taxation would rest with the States." While it is very difficult to estimate the impact repeal of the estate tax would have on state revenues, the Center on Budget and Policy Priorities has put together figures that show once the tax has been fully phased out at the federal level, "state revenue loss would approach $9 billion" per year. Comparison to Other Countries Is the estate tax and gift tax higher in the United States than other countries? Since our estate tax structure is different from other countries – some tax the heirs instead of donor – a direct comparison is not easy to do. The JCT, however, has made such a comparison among OECD countries. According to the JCT, Belgium, France, Greece and Japan collect more such revenue as a percentage of GPD than the U.S. Switzerland and the Netherlands collect about the same or slightly less revenue from such taxes as a percentage of GDP as the U.S. The remaining 17 countries in the table below collect less revenue from such taxes as a percentage of GPD than the U.S. Table: Revenue from Estate, Inheritance & Gift Tax as Percentage of GDP in OECD Countries, 1996 Back to Top Flurry of Estate Tax Bills Introduced At least 19 bills to modify or repeal the estate tax have already been introduced in the 107th Congress. Although President Bush has yet to identify specific legislation, it is clear that there will be opposition to a straight repeal of the estate tax. Many of the bills call for phase out of the estate tax, gift tax and taxes on generation-skipping transfers over a 10-year period. Those bills calling for modification tend to focus on making clear that the tax should be levied only on the super-rich. Some examples of bills introduced include: Repeal:

• A bill introduced by two Ways and Means Committee members, Reps. Jennifer Dunn (R-WA) and John Tanner (D-TN), would repeal the estate tax, gift tax, and the tax on generation-skipping transfers. The business community seems to be organizing around this bill, which would also increase the amount of income to be exempted from estate taxation for people dying after December 31, 2000, to $1.3 million (until the tax is phased out in 2010).
• The following bills would also repeal the estate tax, gift tax and the tax on generation-skipping transfers:
  • Death Tax Termination Act (H.R. 130), introduced by Rep. Scott McInnis (R-CO) also a Ways and Means Committee member, H.R. 153, introduced by Rep. Joseph Pitts (R-PA), H.R. 193, introduced by Rep. Bob Stump (R-AZ), and the "Tax Cut With a Purpose Act" (S. 35), introduced by Sens. Phil Gramm (R-TX) and Zell Miller (D-GA), repeal the estate tax, gift tax, and the tax on generation-skipping transfers, among other items.
  • Estate and Gift Tax Rate Reduction Act (S. 31), introduced by Sen. Ben Nighthorse Campbell (R-CO), repeals over 10 years the estate and gift tax.
  • Estate and Gift Tax Repeal Act (S. 83), introduced by Sen. Richard Lugar (R-IN), repeals the estate tax, gift tax, and the tax on generation-skipping transfers. Lugar also introduced a bill that would modify the tax in several ways, including exempting small businesses and farmers (S. 84).

Modify:

• A tax relief bill (S. 9), introduced by Sen. Tom Daschle (D-SD), to increase the amount of income excluded from estate taxation from a planned $1 million to $2 million in 2010, and increase the family business exclusion to $3,375,000 in 2010, among other items. This is the Democratic alternative to the Bush plan.
• Estate Tax Relief Act (H.R. 42), introduced by Rep. Doug Bereuter (R-NE), would reduce the estate and gift tax rates and would increase the amount of income excluded from estate taxation from a planned $1 million to $10 million.
• Family Equity Preservation Act (H.R. 88), introduced by Rep. Mark Foley (R-FL), would increase the amount of income excluded from estate taxation from a planned $1 million to $5 million. It would also increase the $10,000 annual gift exclusion to any number of people to $30,000.
• Private Land Conservation Tax Act (H.R. 110), introduced by Rep. Joel Hefley (R-CO), would expand the definition of land which may qualify for a conservation contribution as an estate tax deduction, among other items.

Back to Top Nonprofits Send President Agenda for Strengthening Sector The Nonprofit Agenda: Recommendations to President George W. Bush to Strengthen the Nonprofit Sector has been sent to the administration by The Advocacy Institute, the National Committee for Responsive Philanthropy, OMB Watch and The Union Institute. The recommendations were developed by an Advisory Committee of 25 state and local nonprofit leaders, using the results of a first ever online survey conducted by OMB Watch during the fall of 2000. The Nonprofit Agenda recommends action in seven major areas cited as primary concerns by nonprofits: campaign finance reform, government investment in people served by nonprofits, giving and volunteering, simplification of the federal grantmaking process, capacity building for community based organizations and nonprofit accountability. The project sponsors have contacted the administration to set up a meeting to discuss the recommendations. The Advisory Committee members will be invited to Washington for the meeting. The complete text of the recommendations are now available online. Back to Top Bush Re-Institutes Global Gag Rule In one of his first acts after his innauguration, George W. Bush signed an executive memo banning any international family planning organization that receives federal funds from providing abortions, giving abortion counseling, or lobbying its government on abortion issues - even with its own private money. Under this policy, if a group receives federal funds, either directly from the US Agency for International Development (USAID) or through a US-based organization, it cannot spend its own funds on these family planning activities. This action is similar in substance to attacks on nonprofits led by Rep. Earnest Istook (R-OK) in the mid 1990's, which would have banned "political activity," including lobbying, by any nonprofit that received even $1 in federal funds. It is ironic that a few days after announcing this policy, Mr. Bush announced plans to allow federal funds to go to service programs run by churches and other faith-based organizations, even if religious activities are part of the programs, stating that a strict wall of seperation could exist between funds used for service and funds used for religious purposes. Read more on this topic from OMB Watch's Nonprofit Advocacy Division. Back to Top Bush Announces Faith-Based and Community Initiative In his second week in office President Bush launched the White House Office of Faith-Based and Community Initiatives, which "will be the engine that drives the Administration's goal of reorienting Federal social policy across the board." The White House Office is charged with expanding "charitable choice," assessing federal funding procedures to identify barriers that make it difficult for churches and small nonprofits to obtain federal funds, providing them with technical assistance and developing pilot programs. Five federal agencies (Labor, Health and Human Services, Housing and Urban Development, Education and Justice) were ordered to set up similar offices within their agencies. These offices will review existing funding practices and promote compliance with "charitable choice." By the end of June they must report on their progress, detail what technical assistance will be available to congregations and nonprofits and announce performance indicators for grantees. These performance indicators will be used to make funding decisions, as funding will go to groups with proven track records. In a Foreword to the Summary of the Faith-Based Initiative, the President said "The paramount goal must be compassionate results, not compassionate intentions...We must be outcome based, insisting on success and steering resources to the effective and to the inspired." Many details are not yet available, particularly on how expansion of "charitable choice" will work. "Charitable choice" was first introduced in welfare reform legislation in 1996, and has been expanded to include some education and drug dependency programs. It allows congregations receiving federal funds to discriminate on the basis of religion when hiring for federally funded positions, and has a mixed record on integration of religious and program activity. While the Administration is stressing that agencies must ensure that secular services are available, there is no clear plan on how this will be carried out. In a press briefing held the day after Bush's announcement, White House officials were unable to describe how agencies will provide these "alternative" services. It was also unclear how much mixing of religious and federally funded service activity will be allowed, but it appears that substantial integration of the two will be permitted. The Administration points out that there is no pot of money being set aside for faith-based programs, and that all community groups, especially small grassroots organizations, will be encouraged to participate. If this is the case, the program can be a real benefit for nonprofits. However, while the Administration says it only wants to remove barriers to faith-based participation in federal programs, the emphasis in the announcements last week were clearly on faith-based groups. The picture will become clearer as details are announced and the new White House Office begins its work. Both the Executive Order establishing the office and that outlining its responsibilities are available on the White House web site . Back to Top President Proposes Tax Incentives to Increase Giving to Charities The President is promoting tax incentives to increase charitable giving as part of his social policy initiative, announced in late January. Many of the proposals have widespread support and were part of bills introduced in the last Congress which did not pass for other reasons. These include:

• Allowing the 70% of taxpayers that do not itemize their returns a deduction for charitable contributions. Individuals could deduct up to $500 per year, and couples $1,000 per year. The Congressional Joint Committee on Taxation has estimated that this proposal can cost the federal treasury $52 billion over ten years. The goal is to stimulate new giving, and studies show it could result in $80 billion over five years.
• Allow people age 59 and over to make tax free withdrawals from individual retirement accounts when the amounts are donated to charities.
• Allow corporations to donate up to 15% of their income (current law limits the amount to 10%) and provide liability protection for good faith donations of equipment and facilities.

In a more controversial proposal, President Bush proposes to allow states to use TANF (Temporary Assistance to Needy Families) funds to offset the cost of state tax credits for contributions to charities that address "poverty and its impact." This could hamper a state's ability to plan and use TANF funds effectively, and, depending on how "poverty and its impact" is defined, result in discrimination against charities whose activities include advocacy to eradicate the root causes of poverty. The President also proposes to create a Compassionate Capital Fund, which would use federal funds to match private donations for technical assistance to small and faith-based groups and start up funds for smaller groups to replicate model programs. Back to Top Campaign Finance Bill to be Considered by End of March The Bipartisan Campaign Reform Act of 2001 (S. 27), introduced by Sen. John McCain (R-AZ), Sen. Russell Feingold (D-WI) and Sen. Thad Cochran (R-MS) on January 22nd, is an ambitious attempt to close the soft money loopholes that made the 2000 election the most expensive ever. It contains bans on soft money, restrictions on "sham" issue advocacy and strict disclosure requirements. A few days after the bill was introduced Senate Majority Leader Trent Lott (R-MS) announced that an agreement had been reached to bring up the bill by the end of March. The bill would prohibit soft money contributions to political parties, increase individual contribution limits and prohibit unions and corporations (including nonprofits) from referring to federal candidates in broadcast communications within 30 days of a primary or 60 days of a general federal election. Broadcast communications are defined as television and radio, cable and satellite communications, and do not include the Internet, direct mail or distribution of printed voter guides. This provision, promoted by Sen. Olympia Snowe (R-ME) and Sen. James Jeffords (R-VT), is intended to address campaign ads that escaped regulation because they did not directly ask viewers to vote for or against a federal candidate. The impact of the Snowe-Jeffords provision could extend well beyond broadcast communications aimed at elections. Unintended consequences could be prohibiting many nonprofits, including charities that cannot support or oppose any candidate, from broadcasting messages that promote or oppose legislation when a session of Congress or their state legislature happens to overlap with a primary or general election period. Public education and fundraising activities could also be affected. The bill would allow 501(c)(4) social welfare organizations to use broadcast media that refers to federal candidates within the 30/60 day window if they disclose their identity, the cost of the communication and the names and addresses of all contributors of $1,000 or more. Only individual contributions could be used for these purposes. As a result, donors and members that contribute to a lobbying or public education campaign could have their names publicly listed. This runs counter to privacy and freedom of association rights and the Supreme Court's 1958 decision in NAACP v. Alabama, which held that such disclosure is unconstitutional. The President has not taken a position on the bill, but is expected to support so-called "paycheck protection" amendments. These would require labor unions (and possibly nonprofits) to get written permission from their members before spending any funds on election activities. Sen. Feingold has stated that such a provision could sink the legislation. Back to Top Clinton-Gore Report on E-Commerce Leadership for the New Millennium: Delivering on Digital Progress and Prosperity is the third and final annual report from the U.S. Government Working Group on Electronic Commerce. The report is the Clinton-Gore Administration's compendium of its accomplishments towards moving from a National Information Infrastructure to a Framework for Global Electronic Commerce. The listing of initiatives and successes is impressive, but also telling with respect to gaps that continue to need addressing. (This article continues on the OMB Watch Information Policy site.) Back to Top Tech Help: Free Web Hosting for Nonprofits Nonprofit organizations, especially small groups, continue to look for ways to take advantage of the benefits of the Internet while incurring the least amount of expenditures. While there are a range of services that provide free e-mail and other Web-based services, what should nonprofits interested in free web hosting keep in mind? NPTalk looks at whether free options exist and are worth nonprofit attention... Subscribe to NPTalk Back to Top Notes and Sidebars MAKE YOUR VOICE HEARD! SIGN ONTO THE INVEST IN AMERICA STATEMENT OF PRIORITIES The Invest in America coalition continues to press for increased domestic investment in programs that will provide opportunities to low-income people and create stronger and safer communities. We have revised our original Statement of Principles and will be sending the new Statement of Priorities to the Administration and Congress. We hope to get even more organizations on the list of supporters, so sign on now! REMINDER: SEND THE IRS YOUR COMMENTS ON NONPROFIT USE OF THE INTERNET The IRS has set FEBRUARY 13th as the deadline for public comment on issues pertaining to use of the Internet by exempt organizations. Last fall the IRS issued an announcment that asked a series of general questions, as well as specific ones about legislative and political activities, solicitation and advertising. The IRS said it is "considering issuing guidance that would clarify the application of code provisions governing exempt organizations to activities they conduct on the Internet." It is very important that the IRS hear from nonprofits on these issues. Nonprofits have only begun to tap the enormous potential of the Internet,and over-regulation could severely hamper our ability to communicate with each other and with the public. OMB Watch will be filing comments, and a copy will be posted on our website. A copy of the announcement is available online. Public comments should be submitted in writing on or before February 13, 2001. Comments may be sent electronically via the Internet to: *TE/GE-Exempt-2@irs.gov (Be sure to include the * at the beginning of the address). Alternatively, you can also sign onto comments drafted by the Alliance for Justice. The Responsible Investor The World Resources Institute (WRI) and The Calvert Group, an investment company geared to the socially-responsible investor, today called on corporate managers to fully comply with government requirements on reporting their environmental risks, and called on the Securities and Exchange Commission (SEC) to strengthen its enforcement of rules intended to protect investors. Their actions are based on the findings of two recent WRI reports, Coming Clean: Corporate Disclosure of Financially Significant Environmental Risks and Pure Profit: The Financial Implications of Environmental Performance. For more information, see press release issued January 30, 2001. Social Justice Movements and the Internet The Peace Review Journal, an international and multidisciplinary journal of peace, social justice and human rights, is seeking papers for a special issue on social justice movements and the Internet. This issue aims to examine whether the Internet is really a significant force for progressive political practice and how social justice movements are using the Internet. More information, including the Peace Review's Writer's Guidelines and suggested topics, is available online. In addition, questions may be addressed by e-mail to Dorothy Kidd or Bernadette Barker-Plummer or by calling 415.422.6680. The Century Institute Summer Program for Undergraduates Applications are now being accepted for The Century Institute Summer Program, a two-week fellowship designed to introduce undergraduate students to the progressive tradition in American public policy. The program will be held at Williams College in Williamstown, MA from July 1 through July 14, 2000. The program is open to any student who is a sophomore or junior in the 2000-2001 year, who has an interest in public policy and civic engagement. More information and an application is available at the The Century Institute's web site.