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LEGISLATIVE ACTIVITY BY CHARITABLE ORGANIZATIONS
Mr. MUSKIE. Mr. President, the enactment of the Tax Reform Act of 1976 brings to a conclusion an effort undertaken several years ago to provide more equitable treatment under the tax laws for public charities which engage in legislative activity.
Nearly a majority of the Members of the Senate have cosponsored legislation to achieve this goal in the 94th Congress. I first introduced a similar proposal 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 public charities could become involved.
Under current law, publicly supported charities may lose their sources of revenue from tax deductible contributions if a substantial part of their activities involves efforts to influence legislation.
Although the present law has been in effect for approximately 40 years, neither the courts nor the Internal Revenue Service has been able to arrive at a universally acceptable definition of "substantial."
Dr. Elvis J. Stahr, chairman of the Coalition of Concerned Charities, outlined the practical problems facing public charities in a statement submitted to the Senate Finance Committee as follows:
In addition, the Service, as a result of the vague regulations, inevitably interprets the law differently from district to district and even from revenue agent to revenue agent, resulting in even greater confusion to the charities. As former Commissioner Mortimer Caplin pointed out in testimony before the Ways and Means Committee in 1972, revenue agents are normally experts in accounting, not ideology: this, combined with the vagueness of the tests used, inevitably results in widely varying applications of the rule, and in subjective rather than objective determinations. All this is unconscionable in a nation which believes in fair play. Surely, at the very least, a charitable or educational organization is entitled to a clear statement of "the rules of the game".
When a charity's exemption is revoked, no matter how tenuous or unfounded the grounds, it takes a considerable period of time to get the action reversed, whether by administrative or Court action. During this period, the charity cannot assure contributors that their contributions will be deductible, and the normal programs of the charity inevitably suffer drastically. In many instances, loss of contributions will result in severe crippling and even total and permanent cessation of the organization's charitable activities. In either case the eventual finding that the revocation of exemption was itself mistaken and illegal cannot repair the damage. In a nation whose basic traditions include strong reliance on and encouragement of voluntary citizen service and activity, this is indeed an ironic situation.
Mr. President, in 1962 I supported the amendment to section 162 of the Internal Revenue Code which permits tax-exempt business associations 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 legislator's understanding of proposed legislation, and they can suggest valuable legislative alternatives.
As a result, I introduced a bill which would have amended section 501(c)(3) of the Internal Revenue Code. My bill was identical to a measure introduced in the House by Representative BARBER CONABLE.
Our proposal has since been modified by the Committees on Ways and Means and Finance with the able assistance of staff of the Joint Committee on Internal Revenue Taxation and assistance from the Coalition of Concerned Charities.
The new provisions approved by the conference set expenditure limits according to a percentage of a charity's budget for certain legislative activities. A reverse graduation feature permits smaller charities to spend a greater percentage than larger ones.
Certain activities are excluded from a definition of "lobbying" so that organizations may engage in various types of communications with their membership.
Attempts to influence the general public are considered to be grassroots lobbying and spending for such efforts is limited to 25 percent of an organization's total lobbying limitation.
Communications with members of the organization which directly encourage them to lobby is not grassroots but would be covered within total lobbying spending limits. However, if an organization asked its members to influence nonmembers that would be grassroots activity.
Mr. President, these amendments will mean a great deal to several thousands of organizations around the country such as the American Cancer Society, the American Heart Association, the Arthritis Foundation, the American Public Health Association, among others.
In addition, however, I would like to note that this legislation has had the support of several public charitable organizations from my State of Maine including the Diocesan Human Relations Services, and the United Low Income and Abilities and Good Will oganizations.