March 30, 2011
Oregon Attorney General's Uncharitable LegislationBy Mark J. Fitzgibbons
Oregon Attorney General John Kroger raised $1,048,841 for his 2008 election. Of that, $312,500, a little over 30 percent of his entire campaign's funding, came from SEIU. Much of that money came from what's called Citizen Action for Political Education, "a voluntary, nonprofit, unincorporated association limited to members of the Service Employees International Union Local 503, Oregon Public Employee's Union."
Kroger also received "a fat $150,000" from the Democratic Attorneys General Association, and $50,000 from the Oregon Education Association People for Improvement of Education, the state's National Education Association (teachers' union) affiliate. He also got plenty of money from lawyers.
In other words, his campaign was bankrolled by liberal special interests.
Kroger has asked the Oregon legislature to eliminate the tax exemption for certain charities that, unlike him, aren't fortunate to have a cadre of fat-cat special interest donors at their beck and call. (Or could it be he who is at the beck and call of fat-cat donors?)
Kroger's bill would, as he describes it, allow him "to disqualify charitable organizations from receiving tax-deductible contributions" for organizations that spend 70 percent or more of their funds on administrative and fundraising costs.
This is trickery. It is designed to limit the First Amendment rights of tax-exempt organizations that rely on small-donor contributions, and is a boon to organizations that receive taxpayer money or large grants from foundations such as George Soros' Open Society Institute.
Mr. Kroger claims a 1983 Supreme Court decision, Regan v. Taxation with Representation of Washington, which upheld the legislative ban on 501(c)(3) nonprofit organizations from lobbying, as the legal justification for his attack on privately funded nonprofits. That ban was the legislative child of Lyndon Johnson when he was a senator. It was the retribution of power after Johnson was criticized by several nonprofit organizations.
The Supreme Court in Regan called tax-exempt status a "subsidy" from the government, and as a "subsidy," the government could impose the condition that such organizations may not lobby. The subsidy rationale from Regan has not been extended beyond the lobbying ban. Under Mr. Kroger's logic extending the Regan decision, the government could impose a vast array of conditions on organizations maintaining tax-exempt status.
Charities and religious organizations that actually receive taxpayer subsidies -- real money -- are already subject to conditions on hiring and other practices. They can choose to receive federal or state funding and be subject to those conditions, or choose not to receive taxpayer money and operate without those government-imposed conditions, yet still maintain their tax-exempt status.
Kroger's application of Regan, however, could extend to churches, educational institutions, homeless shelters, soup kitchens, etc. that receive no government funding, but are merely tax exempt. Moreover, it would apply to 501(c)(3) organizations whose missions are primarily informative, and whose educational materials are combined with appeals for contributions. Under accounting rules, those educational materials are classified disproportionately as fundraising.
Kroger's bill is an unwise, even harmful extension of the limited, and in my opinion, incorrect Regan rationale that tax-exemption is the same as an affirmative government subsidy of taxpayer money.
Some leftwing big brother (is that redundant?) to Mr. Kroger may want to explain to him the downsides of his position. Nonprofits are protesting reductions in real taxpayer subsidies resulting from state budget shortfalls. Oregon is experiencing that. (Great time for an Oregon government official to be discouraging contributions to Oregon tax-exempt organizations, don't you think?)
There is a mood to eliminate real taxpayer subsidies for ideological nonprofits such as National Public Radio and Planned Parenthood. Politicians are being caught in taxpayer-funded nonprofit scams.
If the government may eliminate or limit tax-exempt status based on the Regan notion of "subsidies," why shouldn't conservatives insist the same for tax-exempt organizations that receive real taxpayer subsidies? Why 'double subsidize' some organizations but not others?
Mr. Kroger in his blind zeal may unwittingly touch off a tax-exemption revocation war. Which political party can revoke the most tax-exemptions for organizations associated with the other side?
Kroger's position is not only unwise, it's an ill-conceived, badly disguised attempt to violate the First Amendment. Given that more than 50 percent of his tax-exempt campaign was financed by just three sources, it's disgraceful.
State charity regulators have long tried to associate high administrative and fundraising costs with fraud. That, of course, disadvantages charities that rely on low-dollar contributors, and whose costs of fundraising for those low-dollar contributions are naturally higher as a proportion of funds raised. On the other hand, charities subsidized by taxpayer money or wealthy foundations tend to have lower costs-to-funds-raised ratios.
Who's hurt and who's helped by those ratios? Hint: conservative organizations eschew taxpayer money, and state charity regulators tend to be liberals and statists.
Recognizing that charitable appeals for money are interwoven with facts, opinion and persuasive speech on issues such as religion, science, health, politics and other societal interests, and for a host of other reasons, the Supreme Court said in 1980 that the First Amendment prohibits states from punishing charities with high administrative and fundraising costs.
The Supreme Court reaffirmed its position against statist charity regulators three more times since 1980, much to the chagrin of the regulators overseeing charities. Kroger is simply trying to evade the First Amendment by stealth and deception.
Mr. Kroger is among a group of statist public officials who get fat-cat financing, but who want to restrict the rights of those who don't. Maybe it's time to revoke the tax-exempt status of political campaigns financed more than 10 percent by a single source. States are looking for sources of revenue, you know. As the Brits might say, how delicious.