Recent lobby and ethics reform bills in the Senate and House have become targets for proposals designed to chill nonprofit advocacy. While these proposals have failed so far, their emergence after the anti-advocacy provisions inserted into a housing bill in the fall of 2005 indicates that some members of Congress may continue attempts to silence nonprofits. This requires ongoing vigilance from the sector. On Feb 2, 2006 Rep. Michael Fitzpatrick (R-PA) introduced H.R. 4667, the Lobbying Transparency and Accountability Act. The lobby reform part of the bill was identical to one introduced by Rep. Chris Shays (R-CT), but also included a section on "political advocacy" that would create limits on advocacy paid with privately raised of federal grantees and new, burdensome paperwork. The provision would have:

• Expanded the existing prohibition on using federal funds for lobbying to a prohibition on "political advocacy" to include virtually all work on public policy matters at the local, state and federal level, including litigation involving the government;
• Barred nonprofits organization from using federal grants if they use "too much" of their private funds for advocacy activities. If during any one of the previous five years, an organization spends 5 percent or more of their nonfederal grant expenditures on advocacy, they would be prohibited from receiving a federal grant;
• Limited association with other entities that use 15 percent of their money for advocacy activities by prohibiting grant funds to organizations that associate with such entities — even with their private funds;
• Required nonprofits to file a detailed annual report to each federal entity that awarded or administered a grant.

The House leadership did not take up Fitzpatrick's bill, instead preferring to craft its own legislation, H.R. 4975, the Legislative Transparency and Accountability Act. On April 26, 2006 Fitzpatrick tried to get his "political advocacy" provision considered as a floor amendment, but the Rules Committee did not approve it. Similarly, on March 8, 2006 Sen. James Inhofe (R-OK) introduced two amendments, S. A. 2935 and S.A. 2982 to S. 2349, the Legislative Transparency and Accountability Act. The amendments would have added penalties to Sections 7 and 18 of the Lobbying Disclosure Act that would impose imprisonment for up to five years and fines on officers of any 501(c) organization that engages in lobbying activities with federal funds. No similar provision was proposed for for-profit entities. The Senate did not allow a vote on the Inhofe amendments, largely in part to an intense lobbying campaign by the nonprofit sector. For more on the Senate's bill, see Senate Overwhelmingly Approves Lobby Reform; House to Take Up 527s , OMB Watcher, April 4, 2006. The Fitzpatrick and Inhofe amendments are similar to anti-advocacy legislation that passed the House on Oct 26, 2005. Rep. Michael Oxley (R-OH), pressed by the Republican Study Committee (RSC), introduced a manager's amendment to H.R. 1461, the Federal Housing Finance Reform Act. The legislation would bar nonprofits from applying for federal funds if they have participated in lobbying, voter registration or affiliate with groups that do the same. At the time, Rep. Tom Feeney (R-CA) said, "I'd rather burn the money than give it to advocacy groups." The Senate is considering a housing bill that does not include the anti-advocacy provisions. Proponents of these proposals claim they are trying to "root out one of Washington's best kept little secrets: welfare for lobbyists", as former Rep. David McIntosh once said. Yet current law already prohibits federal grantees from using federal funds to lobby or intervene in elections. Since 1984, OMB Circular A-122 Cost Principles for Nonprofit Organizations has barred nonprofit use of federal funds — and non-federal funds used as matching funds to pay any costs of legislative lobbying at the federal or state level. This includes direct and grassroots lobbying; urging the executive branch to sign or veto legislation; and legislative liaison work, including monitoring legislation. Additionally, organizations organized under Section 501(c)(4) of the tax code, commonly known as "social welfare organizations" are already prohibited from receiving federal grants if they lobby. There was bipartisan support for this restriction in 1995 on the condition that the 501(c)(4)s were not barred from establishing affiliated organizations, such as a 501(c)(4) that does not lobby or a 501(c)(3) to receive federal funds. The ability of nonprofit organizations to affiliate is often essential to their success. Nonprofits frequently work collaboratively in coalitions, task forces and associations that make their work more effective and efficient, in part by sharing resources. Even when the Supreme Court has restricted nonprofit speech, it expressly noted that nonprofits can conduct the restricted speech through an affiliated organization. (See Regan v. Taxation With Representation Washington 461 U.S. 540 (1983)). Supporters of the anti-advocacy restrictions claim that money is "fungible." However, recordkeeping requirements and public disclosure laws effectively prevent indirect use of federal funds for lobbying. Audit requirements established under OMB Circular A-133 ensure compliance with these restrictions. Grantees must keep detailed records, file financial reports with federal agencies, and be audited. If an organization wants to be reimbursed for indirect (administrative) costs, it must first submit an analysis to the government of all expenditures included in the indirect cost pool. In this way, indirect costs that support lobbying or electioneering cannot be included in administrative costs paid with federal funds. The Fitzpatrick and Inhofe amendments would set negative, unwarranted and potentially unconstitutional conditions for the entire nonprofit sector. It could cause nonprofit organizations that receive federal grants to curb their own legally-permissible advocacy activities. These provisions have anti-advocacy antecedents that reach back more than 20 years to other attacks on nonprofit advocacy, such as the proposed changes to OMB Circular A-122. However, recent anti-advocacy provisions have appeared as amendments to must-pass or popular legislation, often through backdoor mechanisms — such as the manager's amendment to H.R. 1461. All nonprofits should be concerned about the precedent that would be set by any anti-advocacy provision. OMB Watch will continue to monitor the situation closely, and work with coalitions, federal grantees and the nonprofit sector to catch, report and respond to any further threats. Be ready to take action!