December 19, 1975
Page 42028
By Mr. MUSKIE (for himself, Mr. HUGH SCOTT, Mr. NELSON, Mr. DOLE, Mr. BAKER, Mr. BAYH, Mr. BROCK, Mr. BROOKE, Mr. BURDICK, Mr. CHURCH, Mr. CLARK, Mr. CRANSTON, Mr. CULVER, Mr. CURTIS, Mr. EAGLETON, Mr. GOLDWATER, Mr. GRAVEL, Mr. GARY HART, Mr. PHILIP A. HART, Mr. HARTKE, Mr. HASKELL, Mr. HATHAWAY, Mr. HUDDLESTON, Mr. HUMPHREY, Mr. JACKSON, Mr. JAVITS, Mr. MANSFIELD, Mr. MATHIAS, Mr. MCGEE, Mr. McGOVERN, Mr. MCINTYRE, Mr. METCALF, Mr. MONDALE, Mr. PACKWOOD, Mr. PERCY, Mr. RANDOLPH, Mr. RIBICOFF, Mr. STEVENS, Mr. SYMINGTON, Mr. TUNNEY, Mr. WILLIAMS, Mr.YOUNG, and Mr. LEAHY)
S. 2832. A bill to amend the Internal Revenue Code of 1954 with respect to lobbying by certain types of exempt organizations. Referred to the Committee on Finance.
REFORM OF INEQUITABLE TAX TREATMENT OF PUBLIC CHARITIES
Mr. MUSKIE. Mr. President, for the past 4 years the Congress has been studying and debating the problem of inequitable limitations imposed by the Internal Revenue Code on tax exempt public charities which advocate the public interest directly before the Congress.
Today, I am introducing with Senators SCOTT of Pennsylvania, NELSON and DOLE and other Senators a bill which we hope will write the final chapter in this debate in the 94th Congress.
I first introduced a proposal of this kind in 1971 when presented with studies of the uneven application of our tax laws relating to public charities. That proposal was patterned after a resolution adopted by the American Bar Association. Again in the 93d Congress, I was joined by Senators SCOTT, NELSON, DOLE and 35 other Members of the Senate in an effort to define the amount of legislative activity in which those charities could be involved.
Under current law, publicly supported charities may lose their sources of revenue from tax deductible contributions if a substantial part of their activities involve efforts to influence legislation. This vague standard, set forth in section 501 (c) (3) of the Internal Revenue Code, has unpredictably, unreasonably and unnecessarily restricted the worthwhile and legitimate activities of these organizations.
By imposing an uncertain and unclear measure on the scope of an institution's activities, they are likely to play safe and not do anything that might jeopardize their financial support. The code, in effect, has a chilling effect on the exercise of their first amendment rights, and as a result the Congress and the public lose valuable sources of information.
Current law makes the standard even more inequitable because it allows businesses, under a tax code provision adopted in 1962, to deduct all expenses incurred in lobbying even though the public charities are not allowed a similar privilege. Our bill would help reduce this inequity.
When I first offered a reform of section 501(c) (3), an organization named American Labor and Industry for the SST was running advertisements in the New York Times and the Washington Post. The organization had been formed to develop and coordinate industry and grassroots support for the supersonic transport. The organization was a business association, organized pursuant to section 501(c) (3) of the Internal Revenue Code. As such, it was tax exempt, and for Federal income tax purposes contributions to it were deductible. Thus the massive lobbying effort which was launched in support of the SST, was, in effect, subsidized by the Federal Government by means of favorable tax treatment.
Mr. President, in 1962 I supported the amendment to section 162 of the Internal Revenue Code which permits tax exempt business associations such as the SST coalition to engage in lobbying activities. I did so to assure that Congress would have the most complete record possible as it considers legislation. I did so with the feeling that the denial of tax exempt status for such organizations would hamper their ability to communicate effectively with the Congress on matters where their expertise, experience, and interest were directly involved. The 1962 amendment which added section 162(e) to the tax laws has resulted in a flow of valuable information to the Congress.
Public interest and environmental organizations, however, are legally prohibited from contributing to the legislative process. These organizations can be a valuable source of information; they can broaden legislators' understanding of proposed legislation, and they can suggest valuable legislative alternatives.
Accordingly, I am today introducing a bill to amend Section 501 of the Internal Revenue Code. The amendment is identical to H.R. 8021, introduced by Representative CONABLE and cosponsored by 22 other Members of the House of Representatives. It reflects more than 4 years of study of this issue by Members of Congress, the Joint Committee on Internal Revenue Taxation, and the Coalition of Concerned Charities. The bill provides that a specific portion of an organization's budget may be expended for lobbying activities, and that the proportion would decrease as the total annual budget increases in size up to an overall limit of $1,000,000. The limitations in the bill would apply to "carrying on propaganda, or otherwise attempting to influence legislation." However, certain activities could be engaged in without regard to the limitation, including communications between an organization and its members with regard to legislation of direct interest to the members; the provision of technical advice to a governmental body or committee; making available the results of nonpartisan analysis, study or research; communications with the executive branch; and communications with legislative bodies concerning issues of direct concern to the life of the organization, such as its existence or tax exempt status.
The bill would not apply to those charitable organizations which are private foundations. Therefore, it would not affect the activities of any private foundation as defined in the Tax Reform Act of 1969.
The limitations in the present law have had a severe impact on the ability of charitable and public interest groups to participate meaningfully in the formulation of public policy. A determination that such an organization has engaged substantially in attempting to affect legislation will result in a denial of tax exempt status and a consequent denial of deductions for contributions which the organization receives. This is the equivalent to death for many of them. Even a review of their tax exempt status can dry up desperately needed funds. It makes no sense to decide that these organizations operate in the public interest and grant them tax exempt status and then silence them when they attempt to speak to those who must decide public policy.
The groups which suffer most under these limitations of the Internal Revenue Code are civil rights organizations, consumer end environmental groups and public interest law firms. The outstanding characteristic of these groups has been their advocacy of the views of those who are under-represented before governmental agencies, in the courts, and Congress. It is fundamental to our constitutional system that they should have equal access along with business groups and others in presenting views to Congress. This is so, not because the views of the public interest groups are necessarily correct, but because in considering the increasingly complex matters which come before it, the Congress should hear and weigh all views to the fullest extent possible.
On this point, it is instructive to review the language of the Senate committee report which accompanied the 1962 trade lobbying provision. The committee stated:
It is also desirable that taxpayers who have information bearing on the impact of present laws, or proposed legislation, on their trade or business not be discouraged in making the information available to the members of the Congress or legislators in other levels of Government. The presentation of such information to the legislators is necessary to a proper evaluation on their part of the impact of present or proposed legislation. S. Rept. No. 1881, 7th Congress, 2nd Session.
This reasoning is eminently sound and should be applied fairly to all groups which represent interests affected by legislation.
Today the business community spends enormous sums of money trying to influence public opinion and Congress on legislative matters. Yet public interest groups, conservation groups, and other nonprofit tax exempt organizations speaking for other parts of our society, have their voices stifled by the tax code. Why should the Government encourage private business to communicate with Congress by making lobbying a business expense which can be deducted from taxes, while preventing strong efforts of public interest groups to speak to lawmakers by removing their tax exempt status when they raise their voices?
I believe that voices of the environmentalists, of the civil rights and poverty groups, of public interest law firms, are just as important — if not more important today — than the already finely orchestrated views of private business pursuing private policy.
Nor would it change the provision of existing law which denies exempt status to organizations which participate in political campaigning on behalf of a candidate for public office.
The amendment would allow charitable organizations which rely on public support to express their views in appropriate ways before the Congress, without the fear of losing their tax exemption.
Those who control the power of government are not responsive enough to the needs of our people. Congress itself is not as accessible as it should be, and it is often accessible only to the privileged few. If we are to maintain a democratic form of government in practice, and if the Congress is to reach reasoned judgments on the important issues before it, we must assure that every segment of our society is able to communicate with Congress. With its present restrictions, the Tax Code seriously impedes such communication. I hope the Congress will amend that impediment and allow us the information which we need in order to consider fairly the issues which come before us.
The Deputy Administrator of the Environmental Protection Agency, John R. Quarles, Jr., in a speech earlier this month to the National Council on Philanthropy gave a thorough discussion of the problems facing charitable organizations involved in environmental issues. What the limitations in the IRS Code mean, he said, is—
That a substantial number of large, important, conservation organizations are unable to effectively present their views to the Congress ... Only those groups which do not seek tax exempt status are permitted to lobby. Unfortunately these are few and far between.
Together with the bill and its summary, I ask unanimous consent to have printed in the RECORD the speech by John R. Quarles, Jr. and a list of the organizations supporting this legislation.
There being no objection, the bill and material were ordered to be printed in the RECORD, as follows:
S. 2832
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION. 1. LOSS OF EXEMPT STATUS.
(a) Section 501 of the Internal Revenue Code of 1954 (relating to exemption from income tax) is amended by redesignating subsection (g) as subsection (h) and inserting after subsection (e) the following new subsection:
"(g) Expenditures by Public Charities to Influence Legislation.
"(1) GENERAL RULE.— In the case of an organization described in paragraph (2) that has elected under paragraph (3) to have this subsection apply, exemption from taxation under section 501(a) shall not be denied because a substantial part of the activities of such organization consists of carrying on propaganda or otherwise attempting to influence legislation, unless
"(A) with respect to the total of the amounts (including administrative expenses) paid or incurred by such organization (other than amounts chargeable to capital account) to accomplish one or more purposes described in section 170(c) (2) (B) (relating to religions, charitable, educational, etc., purposes),
"(B) amounts paid or incurred by such organization during each taxable year to carry on propaganda or otherwise attempt to influence legislation, normally exceed the lesser of $1,000,000 or the sum of 20 percentof the first $500,000 of the amounts described in subparagraph (A), 15 percent of the next $500,000 of the amounts described in subpargarph (A), 10 percent of the next $500,000 of the amounts described in subparagraph (A), and 5 percent of the excess over $1,500,000 of the amounts described in subparagraph (A).
"(2) ORGANIZATIONS TO WHICH THIS PROVISION APPLIES.— An election under paragraph(3) to have this subsection apply may be made by an organization described in
"(A) section 170(b) (1) (A) (ii) (relating to educational institutions) ,
"(B) section 170(b) (1) (A) (iii) (relating to hospitals and medical research organizations),
"(C) section 170(b) (1) (A) (iv) (relating to organizations supporting government schools) ,
"(D) section 170(b) (1) (A) (v) (relating to governmental units), or
"(E) (i) section 170(b) (1) (A) (vi) (relating to organizations publicly supported by charitable contributions), section 509(a) (2) (relating to organizations publicly supported by admissions, sales, etc.), or section 509(a) (3) (relating to organizations supporting certain types of public charities) (except that for purposes of this subsection, section 509(a) (3) shall be applied without regard to the last sentence of section 509(a) ),
"(ii) which is neither described in section 170(b) (1) (A) (i) (relating to churches and conventions or associations of churches) nor is an integrated auxiliary of a church.
"(3) ELECTIONS.
"(A) Any organization described in paragraph (2) may elect, in such manner and at such time as the Secretary or his delegate may prescribe, to have the provisions of this subsection apply to such organization.
"(B) With respect to those organizations which are not eligible to elect to come under the provisions of this subsection or which, being eligible, do not elect to come under such provisions, nothing contained in this subsection shall be construed to affect the interpretation of the terms 'influencing legislation' or 'substantial' under section 501 (c) (3).
"(4) YEARS FOR WHICH ELECTION IS EFFECTIVE.— An election by an organization under paragraph (3) shall be effective for all taxable years of such organization which—
"(A) end after the date the election is made, and
"(B) begin before the earlier of (i) the date the election is revoked by such organization (under regulations prescribed by the Secretary or his delegate) or (ii) the date such organization ceases to be described in paragraph (2).
"(5) INFLUENCING LEGISLATION.— For purposes of this subsection—
"(A) the term 'influencing legislation', with regard to an organization, does not include—
"(i) making available the results of nonpartisan analysis, study, or research,
"(ii) providing of technical advise or assistance to a governmental body or to a committee or other subdivision thereof,
"(iii) communicating with any official or employee of an executive branch of Government,
"(iv) appearances before, or communication to, any legislative body with respect to a possible decision of such body which might affect the existence of the organization, its powers and duties, its tax exempt status, the deduction of contributions to the organization, or such attributes of members of the organization; and
"(v) communication between the organization and its bona fide members with respect to legislation or proposed legislation of direct interest to the organization and such members;
"(B) the term 'legislation' includes action with respect to Acts, bills, resolutions, or similar items by the Congress, any State legislature, any local council, or similar governing body, by any similar governing body outside the United States, or by the public in a referendum, initiative, constitutional amendment, or similar procedure;
"(C) the term 'action' is limited to the introduction, amendment, enactment, defeat, or repeal of Acts, bills, resolutions, or similar items.
"(6) AFFILIATED ORGANIZATIONS.
"(A) If for a taxable year two or more organizations described in section 501(c) (3) are affiliated within the meaning of subparagraph (B), and an election under paragraph (3) is effective for at least one such organization for such year, then such organizations shall be treated as constituting one organization in applying paragraph (1) (A) (relating to expenditure limits) and if the expenditure limits of that paragraph are exceeded, such organizations shall be treated as constituting one organization for purposes of applying subsections (a) and (c) (3), and this subsection.
"(B) For purposes of subparagraph (A), organizations are affiliated with each other only where
"(i) the governing instrument of one such organization requires it to be bound by decisions of the other organization on legislative issues, or
"(ii) the governing board of the organization includes persons who are also members of the governing board of the other organization and who, by aggregating their votes, have sufficient voting power to cause or prevent action by both organizations on legislative issues.
"(C) If affiliated organizations have different taxable years, their expenditures shall be computed for purposes of subsection (1) in a manner to be prescribed by regulations promulgated by the Secretary.".
(b) Section 501(c) (3) of such Code is amended by striking out "no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation"and inserting in lieu thereof "no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation (except as otherwise provided in subsection (f) ),".
SEC. 2. DISALLOWANCE OF DEDUCTION FOR CONTRIBUTIONS TO INFLUENCE LEGISLATION.
(a) Section 170(f) of such Code (relating to disallowance of charitable contribution deductions in certain cases) is amended by adding at the end thereof the following new subparagraph:
"(7) DEDUCTIONS FOR OUT-OF-POCKET EXPENDITURES.— No deduction shall be allowed for an out-of-pocket expenditure made by any person on behalf of an organization described in subsection (c) if the expenditure is made for the purpose of influencing legislation (defined in accordance with section 501(q)(5) (A), (B),and (C)).".
SEC. 3. CONFORMING AMENDMENTS.
(a) (1) The following sections of such Code are amended by striking out "no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation,"and inserting in lieu thereof "which is not disqualified for tax exemption under section 501(c) (3) by reason of attempting to influence legislation,";
(A) Section 170(c) (2) (D) (relating to the definition of charitable contributions) ;
(B) Section 2055(a) (2) (relating to transfers for public, charitable, and religious uses);
(C) Section 2106(a) (2) (A) (ii) (relating to transfers for public, charitable, and religious uses) ;
(D) Section 2522(a) (2) (relating to charitable and similar gifts of citizens or residents) ; and
(E) Section 2522(b) (2) (relating to charitable and similar gifts of nonresidents).
(2) Sections 2055(a) (3) and 2106(a) (2) of such Code (relating to transfer for public, charitable, and religious uses) are each amended by striking out "no substantial part of the activities of such trustee or trustees, or of such fraternal society, order, or association, is carrying on propaganda, or otherwise attempting, to influence legislation," wherever it appears therein and inserting at the end of each such section "and such trust, fraternal society, order, or association would not be disqualified for tax exemption under section 501(c) (3) by reason of attempting to influence legislation.".
(b) Sections 2055(e) and 2522(c) of such Code (relating to disallowance of charitable contributions in certain cases) are each amended by adding at the end thereof the following new paragraph with the appropriate consecutive number
"( ) DEDUCTIONS FOR OUT-OF-POCKET EXPENDITURES.— No deduction shall be allowed for an out-of-pocket expenditure made by any person on behalf of an organization described in subsection (c) if the expenditure is made for the purpose of influencing legislation (defined in accordance with section 501(g) (5) (A), (B), and (C)).".
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall be applicable to taxable years beginning after December 31, 1974, and to estates of decedents dying after the date of the enact.ment of this Act.
THE ENVIRONMENTAL MOVEMENT AFTER FIVE YEARS — AN ASSESSMENT AND A PROPOSAL
(21st Annual Conference of The National Council on Philanthropy on December 4, 1975 — John R. Quarles, Jr., Deputy Administrator, Environmental Protection Agency)
The Environmental Protection Agency is five years old this week. Official birthdays for government agencies rarely evoke much sentiment, but I would like to take this opportunity to pause a moment — to reflect on where we have been, where we are, and where we are going. For those of us who have been with the Agency since the beginning, these have been five years of excitement, five years of struggle, five years of change and growth.
From the start EPA has been somewhat special — special in the sense that it has always been part of a much larger national movement. To a large degree, that movement was responsible for the creation of the Agency. Early in 1970 public demands for stepped-up efforts to protect the environment reached the groundswell stage. In every part of the country voices were raised against abuses which had accumulated for over a century. In Cleveland, it was the Cuyahoga River — a river whose surface was so polluted with oil that it frequently caught fire. In Houston, it was the Houston Ship Canal — one of the world's most notorious industrial sewers. In Los Angeles, it was the air — air so dirty that people could not see through the smog. All across the country citizens organized to protest such abuse. These efforts culminated in Earth Day — one of the largest, spontaneous demonstrations in our nation's history. Hundreds of separate rallies and protest meetings were held on that day throughout the country, and the environmental movement was launched.
That movement and EPA are now five years old. What I would like to do this afternoon is briefly review where EPA stands after five years, and then take a close look at the movement which played such an important role in getting us off the ground. There are signs the environmental movement is in trouble and needs assistance. Before turning to these problems, however, it may be useful to understand where we have been during these past five years.
First, there is no question that progress has been made in cleaning up the environment since 1970. In the air pollution area, sulfur dioxide concentrations have been reduced nationwide by roughly 25 percent since 1970. Overall particulate levels have dropped almost 14 percent. On the other hand, we still have not achieved the statutory standards for both pollutants in a number of areas.
The record on controlling auto pollution is equally mixed. We have made significant progress in reducing new car emissions. Emission levels from new 1975 vehicles are almost 85 percent below pre-1970 autos. On the other hand, we still have not achieved the statutory standards for auto pollutants in many of our large metropolitan areas. The main reason for this is congestion — there are simply too many cars on the streets of our major cities. We have tried to reduce auto use in these areas, but without much success so far.
In the water pollution area, there is room for considerable optimism. Our lakes, streams and rivers are getting cleaner. Lake Erie, once thought dead, is reviving. Major rivers such as the Mississippi, the Snake and the Cuyahoga are showing signs of real improvement. On the other side, it now appears that only one half of the nation's municipalities will have installed secondary treatment facilities by the 1977 statutory deadline. While most industrial dischargers have been placed on compliance schedules, there are a number of permits which are being challenged. These challenges could delay compliance beyond 1977 to certain areas. On the whole, however, we are making good progress against water pollution.
We have also made progress in other areas of Agency responsibility. In the pesticide area, we have banned three products — DDT, aldrin and dieldrin — all of which represented a serious threat to human health. Although some of our actions in the pesticide program have been controversial, we feel that the steps we have taken have been both reasonable and responsible.
We have also made some progress in attacking the noise pollution problem, but not as much as we would like. Although we have only limited statutory authority, we have made significant strides in solving the nation's solid waste problems through a program of technical assistance to states and localities. A number of demonstration projects involving the use of municipal garbage as boiler fuel are now underway and look quite promising.
In short, a great deal of progress has been made in the last five years. But today I don't want to dwell on the past. Today I would like to talk about the future with you, particularly the future of the environmental movement. As I said earlier, there are indications that these groups are in trouble. The movement has never been particularly strong. Despite the best efforts of these groups in the 1960's to bring environmental problems to public attention, little happened until early 1970 when the problems themselves became so bad that everyone, environmentalists and everyone else, realized that something had to be done. Only then, could real progress begin.
For a short time, the environmental groups enjoyed great prominence. Virtually everyone agreed that they had been right — that we all should have listened to their warnings much earlier.
Constant media attention created the illusion of great influence — and yet within a matter of two or three years, the activity of the groups began to decline. Much of the blame lies with the recession. Always strapped by tight budgets, these groups have been particularly hard hit by the steady drop in foundation support and individual contributions. Several of them have been forced to lay off key people, and there has been little money for new projects. As a result, a great deal of important work is going undone.
This work really falls into two categories. First, the environmental groups play a very important role in what might be called public education. Without these groups, public awareness of the threat posed by environmental abuses might have been even further delayed. As such, these groups served as an important catalyst for the much wider movement which developed after Earth Day.
But the role of these groups did not end at the education stage. Many of them have continued to play an extremely important role in our efforts to implement the statutes which were passed by Congress after the excitement of Earth Day had subsided. This is not very glamorous, but still vitally important work. Much of it involves such things as reviewing proposed water pollution permits to make sure they conform to statutory requirements. It involves attending numerous public hearings and meetings to make certain that the state has an adequate air pollution control plan. And on occasion, it involves suing EPA for a failure to push hard enough against certain polluters. None of this is very exciting, and yet it is absolutely essential if progress is to be made.
To make sure these activities continue, it is essential that the major environmental groups continue to receive adequate financial support. Those foundations which are now funding environmental groups must not cut back further on their support. To do so would put many of the groups in real jeopardy. These foundations must recognize that individual membership fees can supply only a portion of the funds needed for an effective operation. The groups are already struggling to retain their present membership as a result of hard economic times. To expect them to significantly expand their memberships at this time in order to become "self-sufficient" is unrealistic. At the same time, those people who are members of these groups must recognize that it is now more important than ever that they retain those memberships. Individual contributions continue to play an important role in funding virtually all the groups, and it is unlikely that their role will become less important in the near future.
Up to this point, I have focused on the educational and "watchdog" functions performed by environmental groups. We have seen that these activities are an integral part of the public policy process, and thus directly in the public interest.
But there is a second function which is equally in the public interest which, up to now, many of these groups have been unable to perform. That function is to lobby for new environmental legislation. Very few people associate the activities of a lobbyist with the public interest. And yet, everyone knows that legislation is not passed in a vacuum. No one questions the right of business and industry to lobby Congress. But if not the environmental groups, who will speak for the environment before Congress?
Congress needs to hear both sides of the story before acting on important environmental legislation. To encourage one side to tell its story and not the other is not only unfair, it is unwise. It enables the group with superior resources, but not necessarily superior logic, to exercise a disproportionate influence on public policy. To enact legislation which is truly in the "public interest," Congress must hear from all segments of that public — not just the business sector.
Up to now, most environmental groups — at least those that depend on tax exempt contributions — have not been able to directly lobby Congress. This is a result of the way the nation's laws are written. Under section 501(c) of the Internal Revenue Code, no private tax exempt organization can devote a significant portion of its income to lobbying activities. If they do, the groups run the risk of losing their tax exempt status, and thus their major source of income. What this means is that a substantial number of large, important conservation organizations are unable to effectively present their views to Congress. This is why the environmental movement can support so few full time lobbyists. Only those groups which do not seek tax exempt status are permitted to lobby. Unfortunately these are few and far between. To understand just how great the disparity between industry and the environmental groups is, consider the following:
In Washington, D.C., industry and trade associations maintain well over 100 lobbyists who devote some or all of their time to environmental issues. The number of full time lobbyists maintained by the environmental groups is perhaps 10–15.
But these numbers alone do not tell the whole story. Behind the industry and trade association lobbyists are large staffs of researchers, secretaries, lawyers and consultants. Behind the environmental lobbyists are a handful of paid staff and a few volunteers, many of them part time.
The industry and trade association lobbyists work out of large impressive office buildings, the environmentalists largely out of a collection of storefronts and converted town houses. Environmental lobbyists frequently arrive on Capitol Hill by foot; most of their industry counterparts by limousine or taxi.
The reason for this disparity is quite simple: money. The industry and trade association lobbyists simply have a great deal more money available to them than do the environmental lobbyists. This is not surprising. But what is surprising, and what must be changed, is the additional tax break given to industry. Under section 162 of the Internal Revenue Code, a business is permitted to deduct many of the costs associated with lobbying activities. This means that, in the case of large corporations, Uncle Sam is, in effect, footing almost half the bill for corporate lobbying activities. The top corporate tax rate is 48 percent — that means that every dollar which is spent for lobbying activities only "costs" the corporation 52 cents since if that same dollar were taxable income, the corporation would only get to keep 52 cents out of it. The other 48 cents would go to Uncle Sam. Thus, the government in effect subsidizes corporate lobbying activities by permitting their cost to be deducted from corporate income which in return reduces total corporate taxes. In short, the tax laws merely aggravate an already overwhelming imbalance.
What is needed is legislation which will correct this imbalance. Private nonprofit organizations which have an interest in public policy issues should be permitted to devote a certain percentage of their budgets to legitimate legislative activities without running the risk of losing their tax exempt status. This is only fair if corporations and trade associations are permitted to deduct their lobbying expenses. The Senate Finance Committee's rationale for permitting business deduction of lobbying expenses applies with equal force to private nonprofit groups — as the Committee put it, "the presentation of such information to the legislators is necessary to a proper evaluation on their part of the impact of present or proposed legislation."
I submit that information from environmental groups is just as necessary to a "proper evaluation" of the "impact of present or proposed legislation," as information from corporations and businesses. It makes no sense to encourage one group to submit information, and not the other. The public interest demands that both views be heard and weighed before important legislative decisions are made.
Such a change will not solve all the problems of the environmental groups. But it will go a long way toward redressing a long-standing imbalance. It will not solve the resource problems of the environmental groups, but it will at least put them on an equal tax footing with their industry counterparts. This is a step in the right direction. And I believe it is a step which should be taken as soon as possible.
Despite these current problems, the role of private nonprofit groups in the environmental movement is as important today as it was in 1970. In some respects it is more important. The changes which need to be made during the next five years to achieve environmental goals will require broad public support. Fundamental changes in commuting habits, land use patterns, and individual lifestyles will be essential if the nation is serious about achieving a truly healthy environment. Cleaning up industrial sources is not enough. Regulating new car emissions is not enough. To finish the job which Congress gave us in 1970, we must reduce our dependence on the auto. We must make sure new industrial sources are located in areas which can absorb the additional emissions without creating new health hazards. These types of changes will require broad public understanding and support. Nonprofit citizen groups will have to assume much of the responsibility for creating that public understanding and support. Without it, EPA cannot do its job. In short, these groups are an integral part of the process which produces sound public policy. For all of these reasons, we cannot let them perish.
In conclusion, we have come a long way since that warm spring day in April of 1970. After a very fast start, we were confronted first by the energy crisis, and then the recession in our efforts to turn back the tide of environmental abuse. At times our progress has slowed. But through all of it, one thing has remained unchanged — the dedication of those who would not give up. And it is this quality which will guarantee our ultimate success. For we will not give up — whether it takes five, ten or twenty more years to do the job. We will get the job done. Today is the beginning of the next five years.
COALITION OF CONCERNED CHARITIES MEMBERSHIP LIST
American Association of Blood Banks.
American Association for Respiratory Therapy.
American Cancer Society.
American College Health Association.
American Diabetes Association.
American Heart Association.
American Jewish Committee.
American Jewish Congress.
American Littoral Society.
American Lung Association.
American Medical Technologists.
American Public Health Association.
Association for Voluntary Sterilization, Inc.
Association of Schools of Public Health.
Audubon Naturalists Society of the Central Atlantic States, Inc.
Big Brothers of America.
Camp Fire Girls, Inc.
Center for Study of Responsive Law.
Child Welfare League of America.
Community Council of Greater New York.
Community Services of Pennsylvania.
Community Service Society of New York.
Council for Advancement and Support of Education.
Council for Financial Aid to Education.
Defenders of Wildlife.
Environmental Defense Fund.
Environmental Policy Center.
Epilepsy Foundation of America.
Family Service Association of America.
Girl Scouts of the U.S.A.
Goodwill Industries of America.
Muscular Dystrophy Association of America.
National Assembly of Voluntary Health and Social Welfare Organizations, Inc.
National Association for Mental Health.
National Association of Social Workers.
National Audubon Society.
National Cancer Foundation, Inc.
National Center for Voluntary Action.
National Council on the Aging.
National Council on Alcoholism.
National Council for Homemaker Home Health Aide Services, Inc.
National Council of Jewish Women.
National Council of State Garden Clubs.
National Council of Women.
National Cystic Fibrosis Research Foundation.
National Easter Seal Society for Crippled Children and Adults.
National Environmental Health Association.
National Federation of Settlements and Neighborhood Centers.
National Foundation.
National Health Council.
National Hemophilia Foundation.
National Kidney Foundation.
National League for Nursing.
National Medical Association.
National Multiple Sclerosis Society.
National Safety Council.
National Society for Autistic Children, Inc.
National Society for the Prevention of Blindness.
National Wildlife Federation.
State Communities Aid Association.
Student American Medical Association.
The Garden Club of America.
The Nature Conservancy.
The Wilderness Society.
Travelers Aid International Social Service of America.
United Cerebral Palsy Association.
United Service Organizations, Inc.
United Way of Delaware.
United Way of America.
Wildlife Management Institute.
World Wildlife Fund.
Y.W.C.A. of the U.S.A.
SUMMARY OF A BILL To PERMIT LIMITED LOBBYING FOR CERTAIN TAX EXEMPT ORGANIZATIONS
Purpose: To clarify rules governing lobbying for certain tax exempt groups classified, for tax exemption purposes, under Section 501(c) (3) of the Internal Revenue Code. A quantitative budget limit for lobbying activities is proposed. Groups under 501(c) (3) would be free to come under the new rules or stay with current status. Definitions of permissible activities are offered. Groups which violate the proposed lobbying limits would be subject, as now, to a possible loss of tax exempt status if audited and acted against by IRS.
Budgetary limits on lobbying: The bill provides that a specific proportion of each organization's budget may be expended for lobbying activities. (See Table I). The proportions decrease as total annual budget increases in size. An overall limit of $1 million is proposed.This limit would be reached only by organizations with budgets of $17 million or more. (The formula was proposed as a reasonable limit on lobbying activities by larger organizations.)
Coverage: If your organization is classified under Section 501(c) (3) you may elect to be covered by the proposed lobbying provisions. You need not do so. If you do not do so, you would continue to be judged, for lobbying purposes, by legal interpretations of existing rules, i.e., the "substantial" test. If you are not under Section 501(c) (3) the new lobbying rules do not apply.
Activity included: The bill would apply to "carrying on propaganda or otherwise attempting to influence legislation ..." Budgetary limits noted above would apply to this kind of activity, unless an activity is specifically excluded. The bill applies to national, state and local government relations.
Activity excluded: The following activity could be engaged in without limit:
Making available results of nonpartisan analysis, study, or research;
Provision of technical advice to a governmental body, committee, etc.;
Communicating with the executive branch;
Communications with legislative bodies concerning issues of direct concern to the life of the organization, e.g. its existence, tax exempt status, etc.;
Communication between the organization and its members with regard to legislation of direct interest to the members.
Affiliated organizations: Organizations considered "affiliated"under the proposed bill (see p. 6, line 11 of bill) would have their total lobbying activities counted as if they were one organization. To be "affiliated" the organization would have to meet one of these tests: the governing instrument of one "requires it to be bound by decisions of the other organization of legislative issues" or, "the governing board of the organization includes persons who are also members of the governing board of the other organization and who, by aggregating their votes, have sufficient voting power to cause or prevent action by both organizations on legislative issues."
Mr. DOLE. Mr. President, I am pleased to join the distinguished Senator from Maine (Mr. MUSKIE) in introducing a bill to provide equitable treatment for tax exempt public charities which advocate the public interest directly before the Congress.
With some modifications, this legislation is similar to S. 1036, a bill we introduced in the 93d Congress, along with over 30 cosponsors. It will provide more specific rules than present law with respect to the rights of publicly supported charitable organizations to communicate with legislative bodies without jeopardizing their tax exempt status.
Since introduction of the original bill on February 28, 1973, much discussion of this topic has occurred, hearings have been held in the Ways and Means Committee, and, on June 18, 1975, Congressmen BARBER CONABLE and JAMES C. CORMAN introduced H.R. 8021, the House counterpart of the measure we are introducing today.
Each bill has broad bipartisan support and both accomplish two important objectives:
First. To give the operating charities rules they can follow with reasonable certainty, instead of having possible argument with the Internal Revenue Service as a result of disagreement as to the meaning of the present vague wording of section 501(c) (3) of the Internal Revenue Code.
Second. In addition to being more definite, to liberalize the rights of charities in certain specific areas, such as intracharity communication by Members.
This bill will not give public charities the same rights which businesses and trade associations have to influence legislation without restriction, but would correct what appear to be unfair restrictions on their lobbying activities.
Charities can be and should be important sources of information on legislative issues. The bill we are introducing today permits such limited lobbying within carefully prescribed boundaries. Its provisions extend only to public charities and do not alter the restrictions imposed by present law on private foundations.
Over the past few years the principles of this bill have received broad public support. In addition, only last week the Commission on Private Philanthropy and Public Needs concluded a 2-year study of all matters pertaining to charitable organizations. That report recommended even broader rights for the charities than provided for by this legislation.
With this background, I am pleased to join Senator MUSKIE in introducing this important legislation and I urge my colleagues to lend the bill their support.