Vol. V, No. 2
March - April 1997
FSC Member Scores Victory Against North Carolina
Regulators
When North Carolina regulators refused
to renew the charitable solicitation license of Free Speech
Coalition member Citizens United, the nonprofit fought back,
arguing that the Department of Human Resources'
interpretation of the state's charitable solicitation law
violated both the First Amendment and the Commerce
Clause.
In the end, the state capitulated,
demonstrating that the Commerce Clause can serve as a
powerful weapon in the battle against overly burdensome
state regulations.
The battle lines in Citizens United v.
North Carolina Department of Human Resources were drawn last
fall when an official of the Department's Solicitation
Licensing Branch informed the Virginia-based Citizens United
that the organization's license to solicit charitable
contributions in North Carolina was not being renewed
because Citizens United did business in Virginia with a
fundraising consultant who was not licensed to do business
in North Carolina.
In its petition seeking reversal of the
agency's actions, Citizens United argued that it is a
Virginia-based organization and that its only contacts with
the State of North Carolina were through direct mail
communications with its members and the public. The group
also claimed that its fundraising consultant was a
Virginia-based corporation with no direct contacts with the
State of North Carolina. Indeed, the contract between
Citizens United and its consultant was entered into in
Virginia and all services by the consultant were fully
performed in Virginia.
While the state generally did not dispute
Citizens United factual allegations, it nevertheless
defended the Department's actions on the grounds that North
Carolina's state's charitable solicitation act prohibited
charitable organizations from using the services of
unlicenced fundraising consultants in connection with
solicitations to persons in North Carolina. Interestingly,
however, Citizens United consultant was licensed under
Virginia's charitable solicitation laws.
At a December 11, 1996 hearing, North
Carolina Assistant Attorney General June S. Ferrell said,
"We have told Citizens United that, in order for them to be
licensed, they must contract with licensed entities in this
State, that are licensed by this State."
The state's position was that, although
the fundraising consultant did not perform any services in
North Carolina, at least some of the mailings involving the
services of the consultant were sent by Citizens United to
persons in North Carolina, and, therefore, the consultant's
services could be regulated in North Carolina.
Citizens United, on the other hand,
questioned whether the state had any authority to regulate
solicitations sent by mail. In Quill Corporation v. North
Dakota, 504 U.S. 298 (1992), and Bella Hess v. Illinois, 386
U.S. 753 (1967), the U. S. Supreme Court recognized that use
of the U.S. mail is an exclusively interstate activity over
which the states have no regulatory authority.
Citizens United also cited Healy v. The
Beer Institute, 491 U.S. 324 (1989), to argue that even if
North Carolina had authority to regulate solicitations sent
by mail, it could not regulate business transactions between
Citizens United and its fundraising consultant, when those
transactions occurred wholly in Virginia. "The 'Commerce
Clause precludes the application of a state statute to
commerce that takes place wholly outside of the State's
borders, whether or not the commerce has effects within the
State.'" Healy, 491 U.S. at 336 (quoting Edgar v. MITE
Corp., 457 U.S. 624, 642-643 (1982)).
Finally, Citizens United challenged the
Department's actions on First Amendment grounds, arguing
that the law, as interpreted by the state, imposed unduly
burdensome restraints on its ability to communicate with its
members and the general public.
In the end, the state decided that it was
better to issue Citizens United a renewal license than risk
a precedent-setting decision that could have ultimately
brought down the state's regulatory regime. In March, state
officials executed a settlement agreement, in which the
Department of Human Resources agreed to renew Citizens
United's license.
While the settlement has no legally
binding effect in future cases, the fact that the state
capitulated demonstrates that the Commerce Clause provides
nonprofit groups and their fundraising consultants with a
powerful weapon in the battle against overly burdensome
state laws which regulate charitable solicitations and
communications with the public.
McCain-Feingold: A Hidden Attack on Nonprofits
While the McCain-Feingold bill (S.25) is
most noteworthy for the expansive new powers it would give
the federal government to regulate political campaigns,
additional dangers for nonprofits exist in the bill.
McCain-Feingold attempts to redefine the campaign finance
term of art, "express advocacy."
Under current law, express advocacy means
the explicit call for the election or defeat of any
candidate. McCain-Feingold, however, changes the Federal
Election Commission Act to include "express advocacy" to
include:
(ii) a communication that is made through a broadcast
medium, newspaper, magazine, billboard, direct mail, or
similar type of general public communication or political
advertising that involves aggregate disbursements of $10,000
or more, that refers to a clearly identified candidate, that
a reasonable person would understand as advocating the
election or defeat of the candidate, and that is made within
30 days before the date of a primary election...or 60 days
before a general election. [Emphasis added.]
Further, for the time periods more than
30 days before a primary and more than 60 days before a
general election, McCain-Feingold adds a supposedly
narrowing qualification to the above standard: and that is
made for the purpose of advocating the election or defeat of
the candidate, as shown by one or more factors such as a
statement or action by the person making the communication,
the targeting or placement of the communication, or the use
by the person making the communication of polling,
demographic, or other similar data relating to the
candidate's campaign or election. [Emphasis
added.]
McCain-Feingold would rely on the FEC as
the "reasonable person" to interpret which communications
that do not explicitly call for the election or defeat of
any candidate should be viewed as "express advocacy."
The FEC's responsibility would include
investigation into an organization's motive, as evidenced by
statements, geographic targeting, and research &emdash;
which could mean broad and intrusive subpoenas covering the
private records of nonprofit organizations.
McCain-Feingold seeks to revive the FEC's
failed efforts to expand the reach of the "express advocacy"
standard. The "express advocacy" provision of
McCain-Feingold &emdash; using the FEC as referee &emdash;
would greatly limit the freedom of groups to communicate
with their members and supporters as well as with the
public. This interpretation of electioneering subject to
regulatory restriction would encompass any public discussion
of policy issues and candidates that might be viewed as
having any impact upon voters' opinions. Such an approach
would necessarily chill First Amendment rights and
represents a grave threat to the free speech rights of
nonprofit organizations.
McCain-Feingold is radical legislation.
It reflects beliefs that the courts who developed the
express advocacy standard are wrong, the FEC is right, and
the First Amendment can be, in effect, amended by
statute.
Doolittle Proposes Disclosure Without Regulation of
Political Speech
Congressman John T. Doolittle (CA-4),
proposed a very different type of campaign finance
regulation with H.R. 965, the Citizen Legislature and
Political Freedom Act. Doolittle said his bill would
"provide real reform without sacrificing First Amendment
rights." H.R. 965 would:
repeal existing limits on individual, PAC, and
political party contributions to federal candidates, and
require full disclosure of contributions so that
voters receive accurate, timely and complete information on
the sources of campaign funds.
According to Kevin Ring, Legislative
Director for Congressman Doolittle, the bill currently has
51 co-sponsors from both sides of the aisle, exceeding the
number for H.R. 493, Shays- Meehan, the House version of the
McCain-Feingold campaign regulation bill.
Of additional interest to nonprofits is
H.R. 965's passive acknowledgment of the unconstitutionality
of attempts to regulate issue advocacy. Unlike other
campaign "reform" bills, Doolittle's bill does not seek to
regulate or limit the amount or kind of issue advocacy done
by nonprofit organizations.
FSC Capitol Hill Legislative Breakfast with Sen.
McConnell
The ornate Russell Senate Caucus room
was the site for the Free Speech Coalition's Spring
Legislative Breakfast, held April 10, 1997. Ninety-five
members and friends of the Coalition heard U.S. Senator
Mitch McConnell (R-KY) tell attendees that the dangers to
free speech from political campaign regulation such as the
McCain-Feingold bill are serious and that nonprofits must
work together to "drive a stake through the heart of
McCain-Feingold."
Following Senator McConnell's speech, a
panel of four experts discussed the specific dangers to
nonprofits that McCain-Feingold would create for nonprofits.
The panel included:
Robert Dahl, Esquire, an attorney in private
practice;
Curtis Gans, Director of the Committee for the Study
of the American Electorate;
Brent Thompson, Esquire, Executive Director of the
Fair Government Foundation; and
James Bopp, Jr., Esquire, General Counsel for the
National Right to Life Committee.
Senator McConnell's speech and the panel
discussion can be heard by visiting policy.com on the world
wide web.
The Free Speech Coalition, Inc. is a
nonpartisan, nonprofit 501(c)(4) organization which
educates, lobbies, and litigates to defend the rights of
advocacy organizations and their members. FSC needs your
support to continue its fight to protect the rights of
citizens to associate together and exercise their First
Amendment right to petition their government for redress of
their grievances. Contributions to the Free Speech
Coalition, Inc. are not tax-deductible.
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