Statement on Passage in the House of the Federal Housing Finance Reform Act

October 27, 2005 OMB Watch is deeply disappointed that the House of Representatives has passed legislation that unfairly restricts the advocacy voice and civic participation of nonprofit organizations. Passed as part of the Federal Housing Finance Reform Act (H.R. 1461) on Oct. 26, the Nonprofit Gag Provision disqualifies nonprofit organizations from receiving grants under a new Affordable Housing Fund if they engage in partisan or nonpartisan voter engagement activities, electioneering communications, some types of grassroots advocacy, or lobbying during the grant period or the year before the grant. Moreover, "affiliating" with any entity that engages in such activities would also disqualify the nonprofit. These restrictions do not apply to for-profit applicants. Much of the debate in the House centered around whether nonprofits should be forced to make a choice to either provide nonpartisan voter engagement services or housing services. We think framing the debate in this manner is wrong. Our democratic institutions are failing the American people when nonprofit organizations cannot use their private funds to advocate on issues or encourage citizens to vote without jeopardizing the services they provide. Nonpartisan nonprofit organizations represent Americans of all types and help disadvantaged and underrepresented people and communities engage in civic life. Because of this vital contribution to our democracy, nonprofits should be encouraged, not hindered, in their work. Unfortunately, debate over the Nonprofit Gag Provision did not sufficiently address the "affiliation" language contained within it. Organizations that share resources, have overlapping boards or staff, or receive too much money from one entity are automatically "affiliated" under the House bill. Once affiliated, the action of the affiliated entity can disqualify the nonprofit from receiving money under the Affordable Housing Fund. For example, if a private company donates office space or equipment to a housing group, the two entities are now affiliated. If the private company lobbies or endorses a candidate for federal office, the housing group would be barred from receiving money under the Affordable Housing Fund. This would also apply to the relationship between the state and a housing group if the state provides grants totaling more than 20 percent of the nonprofit’s budget. Since states are required by the National Voter Registration Act (commonly called Motor Voter) to provide voter registration services, it would likely disqualify the nonprofit from receiving money under the Affordable Housing Fund. This language that essentially creates guilt by association is un-American, if not unconstitutional. The Nonprofit Gag Provision was most likely created by the conservative House Republican Study Committee as a poison pill to kill the new Affordable Housing Fund. For more than 20 years, conservatives have tried unsuccessfully to silence nonprofit organizations. As with past efforts, we will work to see that this most recent attack, which clearly contradicts our core democratic principles, ultimately fails.
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