Friday, June 25, 2010

Florida's Philanthropic Freedom Legislation: A Reaction to California's AB 624

If there is a legislative equivalent to Newton's third law of motion, the recently enacted Florida legislation, SB 998 (pdf -begin page 10, line 288) (signed by Governor Crist on May 27, 2010) must be the equal and opposite reaction to the California legislature's AB 624 (2007-2008 Legislative Session).

AB 624 was a bill proposed in 2007 by Assembly Member Joe Coto and vigorously promoted by the Greenlining Institute. AB 624 would have required a nonprofit corporation or trust, deemed to be a "private, corporate, or public operating foundation," with assets over $250 million, to collect and disclose the racial, gender, ethnic and sexual orientation statistics about its board members and staff, and those of its grant recipients.  FL SB 998, on the other hand, prohibits the government from requiring charitable organizations to collect and disclose such information, or make distributions based upon it. It was the result largely of the legislative advocacy of  the Alliance for Charitable Reform.

In California, many organizations and advocates were taken by surprise by the proposed AB 624. It took some time to understand how this legislation could seriously impact the operation of philanthropic organizations in California. After several months of discussion and analysis, the Nonprofit and Unincorporated Organizations Committee of the Business Law Section of the California State Bar (made up of lawyers who work with nonprofit organizations) voted to oppose AB 624, and expressed its opposition in a letter to the State Bar Office of Governmental Affairs (March 27, 2008). In that letter, the Committee expressed the reasons for its opposition:

The proposed bill would not advance governance of foundations. On the contrary, the bill is unconstitutionally and impermissibly intrusive at many levels, to foundations, their grantees, grantees’ beneficiaries and businesses with which foundations interact, as well as to the boards of directors and employees of each of the foregoing... Even if a foundation and its grantees could lawfully obtain, assemble and make public the data the bill requires, the lack of clarity as to who and what are described...and the immensity of the task (if made clear) would burden nonprofits well out of proportion to any benefit that might result...Many of the key terms purporting to describe data to be assembled are so vague, undefined or ambiguous as to defy collection... As a result, the bill, if enacted, is likely to adversely impact the efforts of California charitable foundations in making, as well as the ability of worthy beneficiaries in receiving such grants.

Clearly, AB 624 was poorly drafted legislation and would have been highly intrusive and burdensome. In addition to the State Bar's NPO Committee, the bill was opposed by many philanthropic organizations and others who recognized that such an overreaching piece of legislation would impede charitable and grant-making activities. In light of the mounting opposition, the bill was eventually withdrawn. An agreement was also made between the Greenlining Institute and some of the large foundations to direct $30 million in grants to diverse communities and organizations. Nevertheless, the promoters of AB 624 have promised to pursue similar legislative efforts in other states, and this appears to have spurred Florida legislators on to take the proactive step of enacting SB 998. 

Friday, June 18, 2010

The "Nonprofit Sector and Community Solutions Act of 2010"

Representative Betty McCollum(D-MN) introduced the Nonprofit Sector and Community Solutions Act of 2010 (H.R. 5533) on Wednesday, June 16.  The bill has the support of several nonprofit advocacy groups, including the National Council of Nonprofits, Independent Sector and America Forward. The purpose of the Act is to research, report on and coordinate the federal government's interaction with nonprofit organizations. The Act promises to do so by facilitating better communication of the nonprofit sector with the federal government, better coordination between the government agencies, and enhanced data collection about nonprofit organizations.

The Act authorizes the creation of a bipartisan, 16-member “ U.S. Council on Nonprofit Organizations and Community Solutions” which would be tasked with considering the relationship between the federal government and nonprofits and making recommendations based upon its findings to the President and Congress. The Council would also be mandated to host an annual summit to inform Congress and the public on its solutions and progress.

The Act would also create the “Interagency Working Group on Nonprofit Organizations and the Federal Government,” to be composed of Cabinet Secretaries, White House officials, and the heads of agencies that interact with nonprofits. The Working Group would convene and engage a coordinated process to achieve better outcomes in addressing federal priorities on national and community challenges.

Finally, the Act authorizes the Department of Commerce to coordinate data collection on nonprofits and the National Science Foundation to engage research on nonprofit organizations.

Part of the rationale for the Act to move the federal government towards an agency for nonprofits analogous to the Small Business Administration. The bill's authors lament that "no Federal agency has responsibility for evaluating, building, or maintaining the capacity of the nonprofit sector." Should there be one? Strikingly absent from the discussion is recognition of the substantial oversight and regulation of nonprofits that the IRS already does and which promises to increase under the new Form 990 and the Service's governance initiatives.

The nonprofit sector is enormously diverse. It is difficult to see how this proposal will lead to a more vibrant nonprofit community as a whole. Rather, it seems directed primarily at entrenching the relationship between the federal government and large nonprofit organizations. This is good for two groups: the federal government and large nonprofits. Perhaps it will also create more efficiencies in the delivery of goods and services to those who rely on these entities. Beyond that, I am skeptical that a large political and bureaucratic endeavor on the federal level offers much benefit to the sector as a whole.