In an apparent attempt to derail a constitutional challenge to a requirement that all grantees in an HIV/AIDS prevention program adopt formal policies against sex trafficking, the United States Agency for International Development (USAID) and the Department of Health and Human Services (HHS) have issued guidelines for grantees that allow affiliations with groups that do not adopt such pledges. The guidelines, issued July 23, are even more restrictive than similar requirements for legal services programs that are also the subject of a constitutional challenge. They require separate "management and governance" and complete physical separation "between an affiliate which expresses views on prostitution and sex-trafficking contrary to the government's message…" and the grantee. Four leaders in the House have written to USAID urging it to adopt the less restrictive standards that allow faith-based organizations to keep religious and government funded activity separate in time and place without the need for a separate affiliate. Although the guidance is already effective, HHS intends to publish the rule for public comment.

On Aug. 3, OMB Watch sponsored a panel discussion to address the pros and cons of creating a bright line rule defining what is and is not prohibited partisan intervention in elections by charities and religious organizations. The panelists addressed problems created by the current "facts and circumstances" test, which allows the Internal Revenue Service (IRS) to apply its interpretation of the standard on a case by case basis. They also discussed action the nonprofit sector can take to propose and promote a bright line test.

Following the June U.S. Supreme Court ruling in Federal Election Commission vs. Wisconsin Right to Life, Inc., which found the federal electioneering communications ban unconstitutional when applied to genuine issue ads, there has been a fast-paced effort to tie up loose ends in related cases and set the stage for the 2008 election. The Federal Election Commission (FEC) announced that it will issue a proposed rule in August to incorporate the decision into its regulations. In two related court cases, the FEC conceded that certain ads in question were genuine issue ads, including one that was critical of a senator's position on a bill. The "electioneering communications" provision of the Bipartisan Campaign Reform Act of 2002 (BCRA) prohibits corporations, including nonprofits, from paying for broadcasts that refer to a candidate for federal office within 30 days of a primary and 60 days of a general election.

The House and Senate have now overwhelmingly passed their respective pieces of lobbying and ethics reform legislation, but a partisan impasse in the Senate has stalled progress. Before the Independence Day recess, Senate Majority Leader Harry Reid (D-NV) was unable to reach an agreement with Republicans to go to conference. The House and Senate bills both increase current disclosure requirements for paid lobbying activities under the Lobbying Disclosure Act, but a few discrepancies between the two have to be worked out in conference. Reid promised to complete work on the lobbying and ethics bill before the August recess.