Policy Report II: The States’ Actions

Mike Beard
Executive Director, Coalition to Stop Gun Violence

Thomas Hart, Esq.
Slevin & Hart, P.C.
The Jurisdiction of States to Regulate Out-of-State Nonprofits

Mack Canter, Esq.
Copilevitz and Canter
Testing the Constitutionality of State Regulations

Richard Steinberg, Ph.D.
Center on Philanthropy, Indiana University
Fundraising Costs and Rational Economics


MR. BEARD: Ladies and gentlemen, we're ready to begin. Welcome back this afternoon. We have one more panel with four white males. That seems to be the order of the day. I hope next year we will be a lot more inclusive in preparing for these panels.

My name is Mike Beard. I'm President of the Coalition to Stop Gun Violence, which is a 21-year-old coalition with some 44 national organizations working toward legislation to ban the manufacture and sale of hand guns, and for other restrictive measures on hand gun violence in our society.

I'm glad to be able to follow Larry Pratt. I am very honored to be here. One of the great things about this event is our opportunity to share, as we've all said throughout the day, a wide variety of ideas.

I get the feeling this week that things had gone a little bit too far when I found myself on the Pat Buchanan radio show promoting a book by Wayne LaPierre, President of the National Rifle Association. I think that's about as far as we can go with this issue.

As you know, we've been talking for the last part of this program about the federal actions affecting non-profit groups. Now, for the next 45 minutes we want to concentrate on states' actions.

To begin the discussion, I'd like to introduce our first panelist Thomas Hart. Tom is a Washington, D.C.-based attorney with Slevin and Hart. They specialize in the representation of non- profit organizations and employee benefit plans. They have been doing so since 1974.

Tom is a Member of the District of Columbia and the Commonwealth of Pennsylvania Bars. He has litigated numerous cases in Federal, District, Bankruptcy and Appellate Courts, as well as before the United States Supreme Court.

He also served as a Professional Staff Member of the House of Representatives' General Subcommittee on Labor. Tom Hart.



MR. HART: The topic that I've been given today is to sort of create a framework to discuss what is going on out in the states and what are the limitations, if any, that are imposed on what the states are trying to do? Now, if you don't mind, I'd like to take an informal poll of you all for just a moment.

I assume that everybody out here in the audience are advocacy groups, but how many of you use the mails? Would you raise your hand?

(Show of hands.)

Almost everybody. How many of you use the phones, too, to raise money?

(Show of hands.)

Still a very good number. How many use -- stations?

(Show of hands.)

A few.

Well, as you know, that when you're going out and soliciting donations or interest around the country, it is not very long until you start buying into the various Attorneys General around the country; all of whom feels that they've got particular expertise and interest in regulating your activities.

Sometimes these regulations aren't particularly onerous. Although in the aggregate, little regulations can add up to one very big headache. But in a number of cases, they get to be really pretty startling. In some places, professional fund-raisers, for example, have to post extremely large bonds; and not in even the kinds of jurisdictions you'd expect.

There are, I understand, there's a county in Florida that is requiring special fund-raisers to post large bonds for that county. You think about this for a minute, and as I said, you know, little problems can become big headaches; big problems become even bigger ones.

Think about it for a minute as to what would happen if jurisdictions all around the country started asking you to do similar, forgetting about the money that it would cost you to do these sorts of things. Imagine what it would cost you just to fill out this piece of paper that would be required to go through all of this.

Well, what we're going to be talking about in this panel, is what kinds of limitations, if any, are there from the states to make you all do this sort of thing? Now, let me start off by saying that while there is a fair amount of law on certain aspects of what the states can and can't do, as I was starting to look into this, I was kind of amazed to realize how many areas are really up in the air, where there really are no clear -- there is no clear delineation as to what the states can do and what they can't do.

Indeed, there are a lot of Constitutional principles which don't seem to have been addressed either by the Attorneys General's at all in thinking about these regulations, and have not yet come through the various courts systems challenging them.

Let me just start off for a minute by saying, by addressing one issue. Do the states have any legitimate interest in regulating non- profit organizations? Well, I don't think there is much argument that they do have some. The question, of course, is how much?

Traditionally, almost since the beginning, since the founding of this country, the States Attorney Generals have had a large hand in regulating charitable institutions within their states. Obviously, in the early days of this country, there wasn't much mailing from one state into another for this sort of thing.

But, there's been a long tradition of Attorneys Generals feeling that they not only have the right as sort of parents patriae to regulate these things but, in fact, a duty as sort of a super-trustee. Well, one can make an argument that they do have a legitimate interest in making sure that what you think of as the traditional charities, I think the word is eleemosynary institution. I have been looking for an excuse to use that word for awhile; you know, the traditional charities, money for medical research, providing Bibles, or whatever. But the kind of tradition that led to a lot of this kind of regulation really isn't applicable to the kind of group that's represented by the people sitting in this audience.

Most people here are really associated with what are really corporate forms of political organizations. So, the first question comes up that you ask is, do the states really have much of an interest, a legitimate interest, I should say, obviously, they think they have one, in regulating what is, essentially, political activity?

As I'm looking at the cases and preparing for this, and much to my amazement, there really isn't very much thought given to this; although there is a little bit that gives us some hope. The Supreme Court in the Massachusetts Citizens for Life Case which dealt with the right of a state to limit political activities, seemed to make a great deal out of the fact that Massachusetts Citizens for Life, which was a pro-life organization, was really an incorporated political organization.

It was not really a corporation against whom the kind of anti- fraud laws that were enacted into the election laws was aimed. So, that's really the only thing that I could find. Perhaps Mack, who has studied it more closely than I do, may have some other instances, but one at least has a hope that maybe the courts will start looking a little more carefully in making the distinction between the traditional type of charitable institutions and what are, essentially, political advocacy organizations.

Now, another issue that sort of comes up as part of this is, well, if they do have some interest in regulating political advocacy organizations, what is it? I guess there's still the basic issue that they have a right to be concerned about fraud. But how the heck do you determine that there is fraud in a political organization?

About the only thing that I can think of is that the solicitor isn't really representing the people that they say they are. I mean, what else is the fraud; that you don't really mean what you say?


Then, the next question is, well, if you don't mean what you say, who is going to determine that? There basically are two kinds of restrictions that are out there on non-profit organizations in the states. The first deal principally with restrictions on solicitations.

As I indicated a few minutes ago, most of these sort of derive out of the old concern with charitable solicitations in the states. There are generally four kinds of these requirements that create problems for us here.

First is, that there are registration fees. Again, they may not be very much for one state but you magnify these by 52; or as the Supreme Court pointed out in, I think it was, the Riley case, there are some 6,000 taxing jurisdictions in the United States. Think about filing 6,000 registration fees.

Another issues that's particularly vexatious to groups here are that many of these groups are -- and some of them quite significantly. A lot of them have disclosure requirements. A lot of them have mandatory disclaimers and things of that nature.

The second form generally is on political activities, the contribution limitations, and the disclosures of contributions. Well, the Attorneys General in their zeal to regulate all of these things and to sort of protect "their constituents," basically lose sight of their limitations on what they do. I think that we are going to find that a lot of these limitations are going to be enforced and litigated.

Sort of to paraphrase something I once heard that many of these Attorneys General think that the U.S. Constitution is a loophole to their charitable solicitation laws. The United States Constitution does impose a lot of restrictions upon what the states can do. Again, Mack, I understand, will go into a lot more of these things in detail and tell you about current litigation that's going on.

There are really five basic restrictions, most of which I'm sure you all are familiar with. First, of course, is the First Amendment guarantees free speech. At what point does the effort to control fraud trample upon the right of free speech? There are basic due process issues. Can the states regulate them all?

There are equal protection issues, which I'm not going to go into here. Surprisingly enough, there are a lot of issues that relate to the old commerce clause. To what extent is regulation of kinds of activities that we do here create an impermissible burden on interstate commerce in violation of the Constitution?

Due process is pretty much I think a dead issue constitutionally these days because the Supreme Court has now said that if you basically target the residents of a state so that a state has jurisdiction over you for purposes of due process. [sic]

The free speech issues, I think you probably heard a lot about this morning, and so I won't go into them in any great detail, but the commerce clause is one area that I find particularly intriguing. And that is, to what extent are these regulations burdening free speech?

You remember a minute ago I said that these little registration issues and bonding issues may not be a problem when you look at them individually, but when you look at your activities across the whole country, they are a tremendous impediment in getting across your message and raising funds.

The Supreme Court in other areas has talked about that these are things that you can look at. For example, why would the analysis as to the activities of our kinds of organizations be significantly different than, say, a mail order company?

It is now well-established that mail order companies cannot be compelled to simply mail in, and solicit by mail, or otherwise into a state, cannot be compelled to collect use taxes or sales taxes from people in a particular state.

Well, those same kinds of analysis I think can be applied to the sorts of things that we do. Generally, in order to pass muster under the commerce clause there has got to be a meaningful nexus between the entity that is being regulated and the state. That any kind of tax or fee has got to be fairly proportionate.

In the case of taxes or levies, they have got to be fairly related to the services that are provided by the states. I can see that already, I've been too ambitious about what I want to say. I'm going to try to summarize real quick.

There is a lot that's clear now as to what our kinds of organizations can do constitutionally as a result of the Shamburg, Munson, and Riley trilogy. But there are lots of issues, a surprising number of issues that are still open dealing with the issues of bond requirements.

Finally, all of these issues can't really be looked at in isolation. They all kind of interact and interrelate with one another. So that an issue of, say, bond requirements also involves issues of chilling free speech. If you have got a high bond requirement, does this effectively chill your rights to free speech; in addition to the fact that it creates an improper restraint on interstate commerce? The same kind of issues deal with all of these issues: registration fees.

In fact, you could even make an argument, although I'm not going to be presumptuous enough to make it at this point, that merely requiring lengthy registrations may have that kind of effect. I guess Mack, who is now out there actively litigating these kinds of cases is going to talk a little bit more about some of these.

I'll turn it over to Mack.

MR. BEARD: First of all, as you know we are all up here suffering under the same problem that all of you are suffering under and that's lack of time. I'm sorry that we have to keep rushing people along.

Our next presentation will be from Nolan McKenzie Carter, III. I always love to say that. Mack is a lawyer with a firm that represents over a hundred non-profit organizations, as well as professional fund raisers and other vendors who provide services to non-profit organizations.

Mack is the co-editor of the Federal Tax Update and is a Certified Professional Educational Lecturer for Virginia's Institute of CPAs and the Maryland Association of CPAs in the area of tax- exempt organizational law. Mack has a sort of rare mix in his background.

He is a graduate of Randolph Macon College. He received his Master's Degree from George Washington University, and his Master's of Divinity from Yale University and Oxford University, and a law degree from the University of Virginia. Mack Canter.



MR. CANTER: Thank you very much. Let me first make one slight modification about what Tom said about the trilogy, Shamburg, Munson, Riley. We call that the holy trinity because really you begin with those three cases. They laid the frame work for understanding the limits upon state regulation of solicitations and charities.

It is important to first of all note that, and I'll repeat this several times. It is so important. A charitable solicitation is not commercial speech. Justice Rhinquist, Chief Justice Rhinquist, who descended in the Shamburg, Munson, and the Riley decisions has been diligent in descent in arguing that asking for money makes a communication commercial, despite the fact they are sent out on behalf of an advocacy organization or on behalf of a charity.

So far, the federal courts have held the line. Restrictions which can be imposed, in fact, are imposed in great volume on commercial speech and do not pertain to protected speech; that is the, First Amendment speech. That means to charitable contributions and solicitations asking for those contributions.

That's a very important distinction because a state has to meet a fairly low threshold in order to regulate the content of commercial speech. Simply if the regulations are reasonably pertinent to a legitimate government interest; and that's a fairly low standard which is generally upheld by the state and federal courts.

There is in contrast a much higher standard, if you have what is called fully-protected constitutional First Amendment speech.

Because of the holy trinity, there is no doubt that at the present time, a solicitation sent for charitable purposes, and for political purposes, is fully-protected, is as protected as a novel, or a play, or a screen play, or a movie.

It demands and receives the highest protection available under the First Amendment. What that means is before a state can put its hands on your solicitation and blue pencil it, it has to meet a much higher standard. It has to show that in fact there is a compelling governmental interest involved, and that the state has adopted the least intrusive means reasonably tailored as narrowly as feasible to accomplish that compelling state interest.

The burden of proof is on the state to establish that the statute, or the ordinance in the case of a country, or the regulation in fact meets all those criteria. I can tell you, given the number of state legislatures that have consistently ignored the holy trinity, that from a lawyer's point of view, we are living in a target, rich environment.

Consistently, repeatedly, in fact in a vary recalcitrant manner, you find states and counties ignoring three very clear emphatic and consistent Supreme Court decisions. What we have done in the last six months as a law firm is to puncture and to destroy some of these more ludicrous statutes.

In the material in front of you, I have summarized a few of the more recent decisions. I think these are helpful in putting context, in filling out the frame work, and flushing out the frame work that Tom has articulated previously. Let me give you a good example of why it is important.

First of all, test case litigation is extremely important to the non-profit community. It is our means of fighting back when the weight of Big Brother comes to visit your organization. And test cases which are used to shape and clarify issues involving the Constitution have in many ways been the battle lines drawn to protect the First Amendment in the context of solicitations and also seeking contributions to political action committees. First of all, there are several principles which you can derive very readily from the holy trinity. First is, in a content-based regulation there is strong presumption in validity. If the regulation issue, the ordinance, the statute is based upon the content of speech, there is a very slight chance that it is going to pass muster on the First Amendment.

A good example occurred this past summer. The State of Georgia, in its infinite wisdom, passed a statute called the Law Enforcement Integrity Act of 1994. This was a euphemism for protecting the home boys and girls in the state police organizations.

The statute said that if you come in to the state using any what are called law enforcement terminology, that is to say that you go to a state in a telemarketing outfit and you raise funds for the, in this case, American Association of State Troopers, which is our client, if you use any term such as "State Trooper," or "Sheriff," or "Police," these types of so-called law enforcement terminology terms, in the State of Georgia this was a felony, which would send you to jail for one to five years.

Now the steps to that major problem, it was based in terms of content. It proscribed the use of certain plain old vanilla English words. Because the State of Georgia has a legislative finding that held that these terms were used in a solicitation whether telephonically, or on television, or by in person, or by mail, that would confuse the public.

Therefore, rather than going to the more detailed case-by-case, painstaking, and perhaps laborious manner of investigating actual fraud, Georgia simply cut through the whole problem, and just made it illegal to use certain terms, unless you got prior permission from the State Officials of Georgia to use those terms.

Well, the Federal Court in Georgia had little difficulty in declaring the statute, on its face, unconstitutional, because it was based upon a content based regulation of speech, which flies directly into the face of the First Amendment. So, if you found a statute, a regulation, which has as the core's operating principal, the prohibition of a certain type of speech, that ladies and gentlemen is a very tempting target for a lawsuit.

Let me also stress in terms of picking lawsuits that it is far, far, far better to pick your own battle ground. You can do that very readily in the case of challenging these state statutes of filing an action for what is call declaratory, injunctive relief. That makes you the plaintiff. That allows you to pick the issue, the jurisdiction, the defendant and the target. That allows you to conserve resources and to focus your money.

Money for non-profits is a precious commodity; to focus that money to where you are going to do the best good; where you chance of succeeding is enhanced because of that jurisdiction's own precedents. So, test case litigation is often very fruitful with any type of content based regulation.

Let me give you an example of another type of regulation which is, I guess, the flip side of prohibiting certain types of speech. The First Amendment also bands a state requiring speech. The next case I want to discuss briefly is a case called Kentucky State Police Professional Association v. Gorman. Mr. Gorman is the Attorney General of Kentucky.

In this case what was involved was a mandatory requirement that Kentucky imposed upon telemarketers. The statute said that if in fact the funds going to the charity are going to be less than 50 percent of the funds raised in campaigns, or conversely, if the solicitor will keep more than 50 percent, the person making the solicitation to the consumer must disclose that at the point of solicitation.

Those of you who are lawyers will recognize that, that provision in Kentucky law directly contradicts the second holding of the Riley decision where the Supreme Court struck down a North Carolina statute which required exactly the same thing. Kentucky just tried it again. We filed a lawsuit in Federal Court in Kentucky.

We are at the level of seeking a preliminary injunction against enforcement. The Court in Kentucky, Federal Court, said, yes, we are going to grant the injunction against enforcement which put the statute out of operation about six hours before it was scheduled to take effect in Kentucky.

That case is now on cross-motion for summary judgment. It has been briefed by both Kentucky and by the plaintiff. Eventually, it will be decided on the merits and probably the appeal. What the Gorman case does is to raise one more time the same identical issue which was decided in the Riley case.

In the Riley case, the Supreme Court said certain things. But for purposes here today, in regard to this case, what the court said was, is that North Carolina cannot require a solicitor to disclose before the solicitation is made the percentage of funds actually paid to the charity over the prior 12 months. That was said by the Supreme Court to be an intrusion, which was not necessary and not reasonably calculated to serve the interest in North Carolina from preventing fraud.

Since Riley, there has been some, what I would call, not erosion, but some change in moderating an environment; in two other decisions that are upheld by the State, this situation in West Virginia, the Famine Relief Fund case and in the Commonwealth of Virginia in the Telco case.

In both of those decisions the Fourth Circuit, United States Court of Appeals, held that a state can require a solicitor to disclose where about the availability of financial information, if the consumer first request access to such information. So, you have to first be invited to dance. That's the rule of law.

You cannot require the solicitor to affirmatively volunteer the information. If the law says that if the consumer asks the organization soliciting, the solicitor can be required to provide information as to the availability of that data. Let me just briefly bring this to close. In one final case in Florida, there is a statute prohibiting any solicitation made by a non-profit firm after eight o'clock at night. This statute did not ban solicitation of a commercial nature. So, the pest control exterminator could call you at nine o'clock at night and it would be perfectly okay.

If the Red Cross calls you at eight o'clock at night, it was a crime in the County of Pennillus, Florida. We also succeeded in knocking down that statute. The basis there was, again, content based speech. The law did not apply to commercial solicitors. It did apply if you are a charity. That distinction, in terms of being under inclusive, made the statute repugnant to the First Amendment.

Let me go ahead and defer to Richard at this time.

MR. BEARD: Our final presentation is from Dr. Richard Steinberg. Rich is Associate Professor of Economics, Philanthropic Studies and Public and Environmental Affairs at Indiana University, Purdue University in Indianapolis. He is Co- President of the Association for Research on Non-Profit Organizations and Voluntary Action.

Rich has written extensively on public policy in the non-profit sector and on regulation and fundraising. Rich is a graduate of MIT, with a Bachelor's Degree in Economics. He has received his Doctorate in Economics from the University of Pennsylvania. Rich Steinberg.



MR. STEINBERG: Thanks a lot. As an academic, I'm supposed to be neutral, and objective, and let you think that; both sides. It is a wonderful chance to speak to an audience of advocates who actually understand the academic approach because we have conservatives and liberals here.

Nonetheless, I'll start off with some rhetoric. I'm not as good as you people at it, but it is my only chance. The speech rights of non-profit organizations are under attack around the world. In a study by Harry -- named the number, not the word six -- and Diana Lee documented the erosion of speech rights, the taxation of organizations that speak in different ways around the world.

It does seem that the rest of the world is following American trends. The same sorts of factors behind that erosion, politicians upset that some tax-exempt organization helped their opponent get elected. Attorney Generals looking for publicity. Large charities protecting their turf, and people just finding an excuse to tax.

Then we have around the world a lot of people who sincerely believe that they are doing good to all of these things and are misinformed, as we say. I think given these world trends, given that we are supposedly the birthplace of the First Amendment, although the French argue with us, we have a special obligation of leadership and we are not doing a very good job.

What are Poland, and Slavenia, and Russia, and Serbia to make for the recent history in the United States? They are not trying to form a civil society in which there is a protected space to *descent from the state and to argue with the state. They view us as the model; what they were fighting for. Solidarity got that, and now what are they trying to do; pass a law to regulate charities and when they can have tax-exemption modeled on the United States.

We've got calls from non-profit efficiency and accountability; if you fight government, we'll tax your donors. If you raise funds for yourself instead of using government money, and if you have an unpopular cause, we will tax you. This seems like a problem that's going to last and that we have to vigilant infighting.

I want to point out that the attack on free speech of non-profits is not just an attack on advocacy organizations. We need every kind of organization to be in this fight because -- and it is also not just an attack on the free speech rights. It is an attack on freedom of assembly and an attack on what the non-profit sector is supposed to be here for.

The role of the non-profit sector is not to provide public services efficiently and accountably. That's what government is here for. It is not professionalism. It is to allow the expression of the voluntary impulse and to form a space between the government and the individual.

In America, any idiot should be allowed to form a non-profit. You shouldn't need to be a tax accountant to be on the board of directors and know what is legal and what is not. Quite a few things organized as non-profits ought to be governed and organized as associations. When we make it expensive to raise the funds for these things, we impair the freedom of assembly.

I'd look at intermediate sanctions. I got a chance to use my rhetoric in the last session. But the point is, is that if the board members can face sanctions for making a good faith mistake, and the government says, oh, we won't do it if it's good faith; if they can do it with this kind of a vague standard, then it chills membership on boards. It distracts the board from the attention to delivering service that should be its primary focus.

Let's see, am I don't with the rhetoric part? Yeah, pretty much. Time for a joke. I don't have any good jokes that will compete, but I will tell you one example that perhaps leads to a call for state regulation. A gentleman in the 1950's successfully collected money for the Fund for the Widows of the Unknown Soldier.


I just have to say that Attorney Generals and the government are lazy and egoistic. They can call me names too. They will. Some of them are in it for headlines and other reasons. Some of them are in it to do good. They think they are catching the bad guys. They are sincere. They are smart. They say, it's hard to catch them abusing the drug laws. So, we are going to catch them in something else. And that's where they are lazy.

They have been rebuffed by the Supreme Court three times and they still keep trying the same things instead of thinking carefully about how they can narrowly tailor and actually catch bad guys, rather than catch something that both bad guys and good guys engage in, and use their judgment in each case.

We can't prove fraud, but we know it is there, is what they say. Well, we couldn't ban all guns on the basis that we can't prove murder, but if you own a gun, you must have done it. There has to be a fairly tight nexus; especially given the nature of the speech issues. Too many non-profits today also feel that they can cut their losses by supporting simplistic notions that others are guilty, and just trying to distinguish themselves from the scapegoats.

One-by-one they might, as the political climate change, need the help of those scapegoats when they are attacked. So, now I have to turn to being an academic again. Two minutes? Oh, well, good. You were saved from all two minutes of it. My research on non-profits and fundraising, the regulation of fundraising, long preceded any advocacy that I did within the area. So, it was nice and neutral. I have looked at the issues about whether a fundraising share is germane and narrowly tailored to regulating non-profits for any legitimate state interest.

One, I argued that the share is not correlated with efficiency. An unpopular cause will have a higher cost for its fundraising than an inefficient but popular cause. By looking at cost, we cannot ascertain the efficiency. United Way of America, remember, has advertised that they are efficient, but their fundraising and administrative costs are much lower than the competition, and it is.

But they managed to do according to the newspapers, which I don't trust on these matters, they managed to do quite a lot of things that were inefficient. On this matter, by the way, I take on the independent sector again who joined with the three health charities arguing against an amicus curie brief on United Cancer Council.

If an organization can't survive without having high costs, since we think high cost is fraud, then that organization, if there is no way then can do it non-fraudulently, they should go out of business. Well, the independent sector usually stood for pluralism. So, I'm very confused. An organization should go out of business because it is unpopular and therefore its fundraising costs are high is not what -- wrote about.

Second, I would argue that share is a bad measure of cost. Fundraising is an investment. To do the measurement of the fundraising share properly, you should advertise prospecting cost. It is not done. The accounting standards for fundraising allow enormous variations. The high share might be the honest organizations and the low share are the ones that twist the accounting rules.

Fundraising has side effects that should be included as benefits and not just contributions, volunteers, advocacy, education. Since I'm running out of time, I think that the two most important things here are: one, fundraising share has nothing to do with advancing the charitable purpose. How can organization best advance its purpose? By spending the most money on its purpose.

If the purpose is to help poor people, how much they spend on fundraising is irrelevant to how many poor people than can help, as long as the dollar more than pays for itself. So, I argue that the right measure is dollars raised, minus the cost of fundraising. If you can maximize that, you are best serving your charitable purpose.

Others argue that that's bad for donors. I argue against that. There is no time to discuss it, but I've written this. It is in writing. You can read. A simple example; we could have a ten percent fundraising share and raise $100 or we could have a 50 percent share and raise $2 million. The starving millions might prefer the second option.

The last thing is, if we really are faced with what happened in the United Cancer Council where they couldn't directly regulate fundraising, so they withdrew tax exemption, and they might be able to get away with that on constitutional grounds in light of Ridlin v. Taxation With Representation. That denial of a tax benefit is not the same as impairing free speech.

If they do all of these things, then how can an organization cut its fundraising costs? Lie. If you do fraud, if you do high-pressure stuff, you can cut your costs and raise your rates. Stop going for the little man. Go for only major donors. Eliminate the participation of the masses. All of these will cut your share and they are counterproductive for any legitimate state interest.

I'll do one last thing. That is, I'll preach. Probably this is the best group I could preach to. Probably you guys are for free speech wholeheartedly and always. But when you go back to your role in an advocacy organization fighting the other side, I hope you are for free speech always.

When we think about the political correctness debate in which the right is saying the left isn't paying attention to the First Amendment, and then we think about the flag-burning controversy where the left says the right isn't paying attention to the First Amendment, I think we should all be very careful to carry this ethic into our working life. Thanks.

MR. BEARD: Once again, time has caught up with us and been a slave to us all. We have time for just one question, I think.

PARTICIPANT: I wanted to ask Mack, in light of the Riley and Kentucky cases you were speaking about, what would be your view of the constitutionality of the rule that Congress recently passed that IRS is enforcing? That where gifts of $250 or more are made to a charitable organization, it is necessary for a charity, in order to avoid a fine, to make a distribution of information about the amount that was contributed, the kinds of property that was received in return, and the value of that kind of property. Do you thin it is possible that, that is in firm under the Constitution?

MR. CANTER: This question goes to the required information given by the charity for accounting purposes. When the gifts exceed $250 I think it is probably going to be constitutional. I think they can impose that. That is again imposed as a condition of being a (C)3.

If you have filed a (C)3 status, you have attained a privilege and can be conditioned upon certain record keeping requirements.

PARTICIPANT: It is sort of beyond record keeping. It is a requirement that you communicate that to the donor. In a sense, it is mandatory speech.

MR. CANTER: It is also tied to a privilege status. As Rich mentioned in the Tax With Representation case, there is a distinction between a privilege granted by government, which can be conditioned by meeting certain criteria. First, a fundamental First Amendment right. We all share the First Amendment. Not all of us are exempt. That's the distinction.

So, this really relates to status as opposed to the First Amendment right. I think it probably would be upheld by a federal court.

PARTICIPANT: If I could add a comment though. The Regan case is still very confused because of unconstitutional deductions of unconstitutional conditions. Even if it is a privilege, if it is a privilege that is withdrawn on content base, it may be found unconstitutional.

MR. BEARD: We have time for one last question in the back.

PARTICIPANT: This is a question for Mack. Do you view the new rules regarding what is required, well, not required, what is prohibited on envelopes on the government look-alike envelope issue, either the prohibition of using those words, or symbols, or logos, with a disclaimer that is clear that says that this is not printed at government expense and not related to any government organization, do you view those as restraints?

MR. CANTER: That's a very good question. I could argue it both ways. I could argue it well both ways. I think probably that would be upheld by a federal court. They would uphold the statute, would be my guess.

MR. HEART: I'm very much like Mack. I think it is an awfully close case. It is very difficult to know. I think what may help is to see how the statutes are enforced and make a decision later as you see. It really is close. It seems on the surface -- it is very obnoxious on the surface, but it is not so far over the line that I can feel comfortable predicting it would be struck down if it ever was a test case.

MR. BEARD: Thank you all very much.