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. 

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