Summary of the Istook Ammendments
by Matt Carter, 2/26/2002
From "Handcuffing America's Charities" SUMMARY OF THE ISTOOK AMENDMENTS The Silence America Amendment The Revised Istook Amendment The Simpson-Craig Amendment The Silence America Amendment On August 4, 1995, the House of Representatives passed a bill sponsored by Reps. Ernest Istook (R-OK), David McIntosh (R-IN), and Robert Ehrlich (R-MD) that would significantly limit the ability of nonprofit organizations to continue advocating on behalf of people and issues. Started as an effort to "defund the left," the bill will have a devastating impact on the entire nonprofit sector especially smaller community based organizations. The bill is unprecedented in that it would restrict the amount of privately raised funds a federal grantee can use to do advocacy and lobbying. If a federal grantee spends more than the specified threshold, it will be barred from receiving federal grants. The Congressional Research Service pointed out that this raises "significant First Amendment difficulties." Interestingly enough, the same restrictions would not apply to federal contracts, loans, or tax subsidies. Thus, the bill is targeting nonprofit organizations. Proponents of the Silence America Amendment claim there is a need for grant reform, but really they are concerned about limiting the advocacy voice of groups they believe oppose their political agenda. Their amendment incorporates five points:
- They expand the existing prohibition on using federal funds for lobbying to include general advocacy activities in this way, federal funds could not be spent on advocacy activities even if permitted by statute. Advocacy includes virtually all work on public policy matters at the local, state, or federal level, including litigation involving the government.
- They bar nonprofit organizations from federal grants if they use too much of their private funds for advocacy activities. If during any one of the previous five years, you spend 5% or more of your non federal grant expenditures on advocacy, you will be prohibited from receiving a federal grant. This will force many community based groups to face a difficult decision: continue advocating on behalf of people they serve or take federal grants to provide services both activities consistent with their missions.
- They limit any association with other entities that use 15% of their money for advocacy activities. No federal grant money can be given to such entities (e.g., rent, purchasing goods, etc.). Additionally, if you associate with such entities even with your private funds you will be engaging in advocacy yourself. This will limit the ability to create coalitions and work with other organizations.
- They require posting on the Internet information from all federal grantees on how much of their private funds were used for advocacy activities and a description of those activities. Only federal grantees are required to provide such information; powerful business lobbyists, for example, are not required to do so. This will create a new publicly accessible database that can be used for political purposes.
- They create new enforcement procedures, including licensing nonprofit "bounty hunters" to find groups in violation of the various provisions of the bill. Anyone can bring a lawsuit against a grantee for up to ten years after the violation. Those organizations found not in compliance with the bill may be fined $5,000 to $10,000 plus three times the value of the grant. The bounty hunter can collect up to 25% of the recovery.
- Since the Istook bill covers federal grants that pass through the state or local government (and may be commingled with state or local funds), many nonprofits may not even know that they receive federal grants and are covered by the Silence America Amendment. The burden of proof is not on the government to demonstrate that the grantee is not in compliance with the bill. Rather, the burden is on the federal grantee to demonstrate with "clear and convincing evidence" a standard not part of normal accounting terminology that they are in compliance with the bill.
- There are many other concerns about the amendment, some that may result from poor drafting. For example, the definition of grant is overly broad, potentially including the beneficiaries of government programs (e.g., children receiving school lunches, families receiving WIC vouchers). This would limit their First Amendment rights also. There are also some provisions in the bill that may create similar problems for individuals who work for nonprofit organizations as well as individuals who receive federal grants.
- Probably one of the greatest concerns is that proponents of the Silence America Amendment have promoted a number of myths. For example, proponents, such as Rep. David McIntosh, claim they are trying "to root out one of Washington's best kept little secrets: welfare for lobbyists." Yet nonprofit organizations are prohibited by law and regulation from using federal funds to attempt to influence legislation, commonly called lobbying. They are also prohibited from using federal funds to attempt to influence the awarding of federal assistance and must disclose such attempts even when done with private funds. Nonprofit organizations must also file disclosure of lobbying expenses (with their non federal funds) to the IRS each year.
- The limitations on advocacy in the Silence America Amendment and the limitations on lobbying in the tax code are very different. The Amendment applies to federal grantees and is more expansive than lobbying; the IRS limits apply to electing 501(c)(3) organizations. To compare the difference between the two as it applies to limits on privately raised money, the average service delivery nonprofit in Washington, D.C. spends $1,587,862 per year. Roughly one third of the revenue comes from federal grants. According to the Silence America Amendment, the permissible advocacy threshold would be $53,193 (5% of expenditures, excluding federal grants). The IRS permissible lobbying threshold would be $229,393.
- Despite three hearings on the subject and numerous press conferences, proponents of the bill have yet to demonstrate any systemic pattern of violations of the grant rules. In fact, there has been no specific verifiable example of using federal funds for lobbying purposes. Even if there was a violation, nonprofit organizations face significant penalties, such as suspension of grants and debarment from future grants. If there is a need for greater enforcement, fine. But why create new law?
- Like the Istook Amendment, the Simpson-Craig Amendment would impose major new recordkeeping requirements on federal grantees.
- Like the Istook Amendment, the Simpson-Craig Amendment would impose substantial restrictions on federal grantees' use of private funds for lobbying activities. The Simpson-Craig Amendment's definition of lobbying activities, while less sweeping than the Istook Amendment's definition of "political advocacy", nonetheless encompasses a considerably broader range of federal advocacy activities than the current federal tax or grant rules.
- The Simpson-Craig Amendment also establishes an absolute prohibition on the receipt of federal grants by section 501(c)(4) organizations (i.e., social welfare nonprofit organizations) that engage in lobbying activities and have annual expenditures of $3 million or more.
- Perhaps as the result of a drafting error, the Simpson-Craig Amendment would have a much more restrictive effect on noncharitable grantees than would the Istook Amendment.
- Unlike Istook, The Simpson-Craig Amendment would not impose extraordinary burdens on the use of affiliated organizations to separate grant-funded activity and privately-funded advocacy.
- Like Istook, the Simpson-Craig Amendment would create an unjustified disparity between federal grantees and federal contractors.