In This Issue "Secrets Act" Threatens Public's Oversight of Government   IRS Seeks Input on Application of Tax Rules to Internet Advocacy   Clinton Signs Bill With Charitable Choice, Limits Application   Final Revenue Ruling on New 527 Disclosure Law Released by IRS   Another Continuing Resolution as Appropriations Lurch Along   Government Web Sites Tracking Users   Study Finds Limited Progress on Digital Divide   Tech Help: Online Health Information and Research    Notes and Sidebars   "Secrets Act" Threatens Public's Oversight of Government On October 12, Congress approved the Intelligence Authorization Act for FY 2001, including a provision that criminalizes the disclosure of any information that the executive branch says is properly classified. Critics both inside the Congress and outside it are calling this an Official Secrets Act – something the United States has never had, even at the depths of the Cold War. Under this radical provision, the unauthorized disclosure (but not the subsequent publishing) of any information that the executive branch considers properly classified would become a felony punishable by up to three years in prison. According to a critic of the legislation, Steve Aftergood of the Government Secrecy Project at the Federation of American Scientists, last year alone, the executive branch created over 8 million new secrets, all but a tiny fraction of which are considered "properly classified." The provision passed despite a last minute intervention by Rep. Henry Hyde (R-IL), the Chairman of the House Judiciary Committee, and the Ranking Member, Rep. John Conyers (D-MI). They wrote to the House Intelligence Committee to oppose adoption of the leak statute, pointing out that the measure "has profound First Amendment implications, and goes to the very heart of the ability of the public to remain informed about matters of critical public interest, which often relate to governmental misdeeds." They also noted, "Moreover, since the Executive Branch asserts unilateral authority to define what information should be classified, this extension would grant the Administration a blank check to criminalize any leaking they do not like." This point was reiterated by Rep. Nancy Pelosi (D-CA) on the House floor yesterday: "This provision marks the first time that Congress has placed the full force of criminal law behind the executive branch's classification system." Both the letter from Reps. Hyde and Conyers and floor remarks from Rep. Bob Barr (R-GA) noted the complete lack of hearings on this radical departure from ongoing practice and law. Hyde and Conyers wrote, "We are particularly concerned that there have been no public hearings and no public debate on this measure, which is similar to measures Congress has consistently rejected for the past 50 years." In his floor remarks, Barr stated "This ... will create, make no mistake about it, with not one day of hearings, without one moment of public debate, without one witness, an official secrets act. For those who do not know what an official secrets act is, it is something that we have never had in this country. It has been broached many times, particularly in the Cold War era. But our regard for constitutional civil liberties, our regard for the first amendment ... has in every case in which an effort has been made to enact an official secrets act beaten back those efforts." Back to Top IRS Seeks Input on Application of Tax Rules to Nonprofit Internet Advocacy and Fundraising The IRS has released its long awaited request for public comment on nonprofit Internet legislative and political activities, solicitation and advertising. Announcement 2000-84 said the IRS is "considering issuing guidance that would clarify the application of code provisions governing exempt organizations to activities they conduct on the Internet." No final decision has been made on either the need for guidance or what the IRS position should be if it does proceed. Comments are due February 13, 2001. Noting increasing use of the Internet by nonprofits, the IRS raised general questions on whether or not a website is a single publication and if not, what methods could be used to divide one into distinct communications. Allocation of website expenses and archiving of prior versions are also issues. Political activities of charities present what may be the most problematic questions. For example, when would a link to a candidate website on a 501(c)(3)'s web page constitute voter education, or amount to prohibited intervention in a campaign? Internet lobbying communications raise questions on when a call to action has been made, the effect of linking to a lobbying communication on another site and whether or not a website is an appearance in mass media. The IRS also asks about the extent to which a nonprofit should be held responsible for statements made or content communicated through listservs it hosts. In addition the IRS is also seeking comments on "any other issues concerning application of provisions of the Code in a fair and neutral manner to exempt organizations' Internet activities." Comments will be accepted in written or electronic form.

• Full text of IRS Announcement 2000-84, including addresses for filing comments.
• "E-Advocacy for Nonprofits: The Law of Lobbying and Election-Related Activity on the Net" (Alliance for Justice publication)

Back to Top Clinton Signs Bill With Charitable Choice, Limits Application The Children's Health Act of 2000 (H.R. 4365), signed into law by President Clinton October 17th, reauthorizes programs under the Substance Abuse and Mental Health Services Administration (SAMSHA) within the Department of Health and Human Services. In addition to new funds for health and safety of children in child care, continued funding for curbing substance abuse among youth and greater flexibility in provision of services, the act includes a "charitable choice" provision. The new law allows religious congregations to qualify for SAMSHA grants on the same basis as other nonprofit organizations. In his bill signing statement the President noted the Department of Justice advises that "this provision would be unconstitutional to the extent that it were construed to permit governmental funding of organizations that do not or cannot separate their religious activities from their substance abuse treatment and prevention activities that are supported by SAMSHA aid." As a result, Clinton said he construes the Act to forbid funding for organizations that do not separate religious activity from program services. He also said this standard permits "Federal, state and local governments involved in disbursing SAMSHA funds to take into account the structure and operations of a religious organization in determining whether such an organization is constitutionally and statutorily eligible to receive funding." Additional charitable choice provisions are scattered in different appropriation bills now pending. For more background on charitable choice see the September 25, 2000 issue of the Watcher. Back to Top Final Revenue Ruling on New 527 Disclosure Law Released by IRS Nonprofits that meet the definition of a political organization under Section 527 of the tax code can now get clarification on registration and disclosure requirements that went into effect July 1, 2000. Revenue Ruling 2000-49, released October 12th, is in question and answer format and defines what organizations are required to file in Notice of Status and disclosure reports. The IRS stuck to the position, taken in its draft ruling, that political organizations with separate accounts for federal elections are only exempt from filing for accounts that report hard money expenditures to the FEC (hard money refers to expenditures which directly advocate election or defeat of federal candidates). Soft money accounts, referred to as "non-federal" accounts in the ruling, must file and report under the new law. This prevents PACs that spend large amounts of soft money from evading disclosure by operating a single federal hard money account. Over 50 comments were filed, most of them concerned with application of the law to state and local political committees, which are required to file a separate disclosure form with the IRS even if they report to state election authorities. The statute does not provide an exception for state and local PACs in the same way it does for federal PACs that report to the FEC. To alleviate the reporting burden, the IRS is working on an electronic filing system for the disclosure form. In addition, all political committees can comply with requirements to respond to a request for copies of their filings to post them on their web site and give their web address to persons that make requests. The information is also available to the public on the IRS Political Organization Section 527 web page. State and local PACs could get some relief if two bills pending in Congress become law. H.R. 5277 and H.R. 5265 would extend the exemptions to include accounts of political committees that file reports to state election agencies. Although the bills are similar, and have support from members of both parties, neither is likely to pass this year. The subject is likely to come up again in the next Congress. The final ruling also made it clear that separate segregated funds for electoral advocacy used by 501(c) organizations, such as unions and social welfare groups, are covered by the law and must file a Notice of Status as a political organization, as well as periodic and annual reports. (A political committee that meets one of three exceptions does not have to file. The exemption applies to groups or accounts that anticipate less than $25,000 a year in gross receipts, those required to report to the FEC and 501(c) organizations that pay tax on their electoral expenditures. If a PAC does not anticipate more than $25,000 in gross receipts in a year, but exceeds that level, it has 30 days to comply with the filing requirements.)

• Complete text of Revenue Ruling 2000-49.
• Summary of the new 527 disclosure law.

Back to Top Another Continuing Resolution as Appropriations Lurch Along Before leaving for the weekend, Congress passed its fourth Continuing Resolution (CR) on Thursday, October 19, keeping the government funded through Wednesday, October 25. The President signed the CR on October 20, after chiding Congress for failing to get its work done on time, and saying he will sign no more CRs that last longer than one day. So far, three of the thirteen appropriations bills have been signed into law, and seven more have been passed by Congress and appear to be acceptable to the Administration. But three more (Labor-HHS-Education, Commerce-Justice-State, and Foreign Operations) remain under closed door negotiations while various policy and funding snafus are worked out. If that feat is managed, it is likely that last votes for this session of Congress will be on Thursday, October 26. No tax bill has yet been passed, and it is likely that some such legislation will also be part of the last minute negotiations. Possible tax measures include pension reform, replacement of the foreign sales corporation tax scheme, community renewal, and a package of small business tax cuts linked to a minimum wage hike. The President has said that he will only sign tax relief bills if they are made part of an entire tax package, rather than included as separate measures in the remaining appropriations bills. It will also be necessary to pass legislation raising the $541 billion budget cap for FY 2001, a limit that was so clearly unrealistic that raising it has not even been a political issue. The congressional budget resolution called for spending in the amount of $600.3 billion. An effort to raise the cap to $637 billion was begun last week, but that may not be enough to satisfactorily resolve the remaining funding disagreements. In any event, it looks like the appropriations non-process will finally be over by the end of the week, with considerably more funding for important programs than would have been possible under the budget caps. Back to Top Government Web Sites Tracking Users Confirming what OMB Watch had reported in its October 2nd testimony before the House Subcommittee on Government Management, Information, and Technology, a recent General Accounting Office (GAO) report finds that 13 government agencies –- ranging from the Federal Aviation Administration to the federal offices that provide disaster relief and administer Medicare -– are setting "cookies" (small text files that record information about an Internet user's browsing habits when visiting a site). And, in the case of the U.S. Forest Service's International Programs, the government site was found to be using "third-party cookies" that transmit the visitors’ activities to a private company which had been hired to compile reports for the agency. In each of the 13 cases, the agency’s formal Internet privacy policy claimed they were not setting cookies, and none of the Web site visitors were advised the technology was being used. The study found all 13 tracked where users went during their visit to the site, and some were employing "persistent" text files which have the potential to be read for years after the initial visit. On June 22, 2000, OMB issued Memorandum M-00-13, providing additional guidance on the limited circumstances under which federal web sites may collect information through the use of cookies. OMB advised all federal agencies that they are not allowed to use such text files without approval from the agency head. If they are used, the OMB directive said, Web site visitors must be given "clear and conspicuous notice" of such use.

• Internet Privacy: Comparison of Federal Agency Practices With FTC’s Fair Information Principles (GAO/AIMD-00-296R, October 11, 2000).

Back to Top Study Finds Limited Progress on Digital Divide The U.S. Department of Commerce, through its National Telecommunications and Information Administration (NTIA) and Economics and Statistics Administration (ESA), recently released a report, "Falling Through the Net: Toward Digital Inclusion" [note: Adobe Acrobat required], the fourth in a series of reports on the digital divide. Unlike previous reports, this attempts to show which segments of Americans are able to take advantage of the opportunities afforded by the Internet by comparing access rates among different populations based on those households and individuals with a computer and an Internet connection. For the first time in the report series, data is included on high-speed Internet access and access to online technology by persons with disabilities. Among the findings, drawn from comparisons between December 1998 and August 2000 figures, is some optimistic news on the digital divide in this country:

• 51% of all households have a computer, versus the December 1998 figure of 42.1%;
• 41.5% of American households have Internet access, compared to 26.2% previously;
• 44.4% of individuals are using the Internet, up 35.8%, from 32.7% in December 1998;
• 38.9% of households in rural areas have Internet access, a 75% increase from 22.2%previously;
• 46.1% of households earning $35,000 to $49,000 have Internet access, up from 29%previously;
• 23.5% of Black households and 23.6% of Hispanic household have home Internet access, compared with 11.2% and 12.6% respectively 20 months ago;
• 44.6% of men and 44.2% of women are using the Internet, versus previous rates of 34.2% and 31.4% respectively;
• Internet use among Americans 50 years and older has increased by 53%, more than any other age group, compared to a previous growth rate of 35%.

These numbers, however, do not suggest that the digital divide has gone away, or will vanish anytime soon. There are, for example, still gaps among racial and ethnic groups, between younger and older age groups, across single versus two-parent families, between persons with and without disabilities, and deployment of high-speed Internet access in urban and rural areas.

• Blacks and Hispanics have household Internet penetration rates of 23.5% and 23.6%, compared to rates of 56.8% for Asian Americans and Pacific Islanders. While the gaps in computer ownership for Black and Hispanic households has not changed significantly between December 1998 and August 2000, there is a gap of 18 percentage points for between Blacks and the national average with respect to Internet access rates in general, 23.5% versus 41.5%, and increase of 3 percentage points from December 1998. Moreover, while about a third of the U.S. population uses the Internet at home, only 16.1% of Hispanics and 18.9% of Blacks do so.
• People over the age of 50 made up only 29.6% of Internet users by age group, but were three times more likely to be online if they were working, versus those who are not working;
• Two-parent households have Internet access rates of 60.6%, compared to 35.7% of male single-headed and 30% female-headed households
• 21.6% of persons with disabilities are likely to have Internet access versus 42.1% of persons without a disability. More tellingly, 25% of those without disabilities have never used a computer, compared to 60% of those with a disability, especially those with impairments affecting vision or manual dexterity, even across age groups;
• While only 10% of American homes utilize some form of broadband services, only 7.3% of rural homes have access to broadband, compared to rates of 12.2% in urban areas and 11.8% in central cities.

The report also shows that low-income users are the most likely to use the Internet to find jobs, and that schools, libraries, and community technology centers are the most likely access points for Internet use by the unemployed, Blacks, and Asian Americans and Pacific Islanders. President Clinton, commenting on the release of the report, repeated his call to Congress for support of initiatives designed to bridge the digital divide, including the federal Community Technology Centers program and the Commerce Department's Technology Opportunity Program. In a similar vein, the Consumer Federation of America and Consumers Union also released a report on Internet use, "Disconnected, Disadvantaged, and Disenfranchised," that highlights a persistent gap between those connected to the Internet and those without Internet access- a gap that further disenfranchises vulnerable groups. The report, which is based on a national survey of 1900 respondents and explores attitudes towards and experiences with information technology, reinforces the Commerce Department's findings that, even though gaps with respect to age, income, education, and race are smaller, the digital divide persists and continues to grow, albeit at a smaller rate than previously expected. Back to Top Tech Help: Online Health Information and Research With over 25 million Americans expected to have turned to the Internet for health and medical information in 1999, it is important to address the reliability of the large amount of information being shared on nonprofit web sites with a medical or health focus. NPTalk asks, ">What's the prognosis for online health and medical sites? Subscribe to NPTalk Back to Top Your comments are always welcomed! Notes and Sidebars Not Convinced that Income Inequality is Growing? Can it really be true that even in these economic boom times income inequality is higher than at any other time in the post-war era, and the gap has grown significantly during the past two decades? A recent Economic Policy Institute report, entitled "Any Way you Cut It", addresses this question. (And the answer is a resounding “yes!”) Soft Money Nearly 90% of soft money in this election has come from business interests, outspending labor nearly 17-1, according to a report just released by the Center for Responsive Politics. Hard Sell Senior corporate executives say they are reluctant to give soft money, but many do to "buy access to the legislative process", according to a survey conducted by the Committee for Economic Development. Environmental Governance A new paper by researchers at Resources for the Future finds that state governments are in an early and experimental phase in applying the principles of electronic democracy to environmental decision-making. The paper includes the results of a survey of the 50 states and their use of the Internet to engage citizens in environmental issues. See the Resources for the Future web site. Online Discussion Join the third in a series of online discussions at Helping.org, "Building and Managing Online Communities." From October 23-27, guest moderator Nancy White (President of Full Circle Associates, a communications consulting group), will answer questions and talk about strategies for building and sustaining online communities. She will also assist nonprofits in developing an online community plan. Visit Helping.org for more information.