In September the National Association of State Charity Officials (NASCO) announced a pilot program in eight states that will ease some of the burden of the current multi-state registration system.
The program is called Singlepoint Website. It is “a unified electronic registration system that will allow nonprofit organizations and their professional fundraisers to comply with every state’s registration requirements at one online location.” You can read NASCO’s summary of the pilot program here.
NASCO’s pilot project is the first step towards what hopefully will be a nationwide single-point online disclosure system as an alternative to the expensive and cumbersome multi-state registration system.
As reported in the January 25, 2008 Chronicle of Philanthropy, I had proposed such an online program. NASCO first attacked the idea, claiming it could not be done, or at least effectively. State and charity budgetary problems finally made NASCO come around.
NASCO’s program is unlikely to be as efficient and inexpensive as the one that I had proposed in 2008, but the pilot program is at least a step in the right direction.
The eight states participating in the pilot program are Alaska, Colorado, Connecticut, Hawaii, Massachusetts, Mississippi, Missouri and New Hampshire.
As the summary says, “NASCO and its partners are reaching out to the nonprofit sector to join with us to implement these common sense efficiencies that will significantly benefit the sector and the public.”
(An excerpt from the paper, A Radical and Unlawful Power Grab over Private Charity and Religion)
Most of the published comments about POCAA so far have centered on Section 4, which creates yet another registration requirement for charities. The new, additional requirement to register under POCAA applies when charitable assets exceed $50,000. The Act also includes provisions for filing annual reports and notices of “reportable events,” and filing other notices that previously did not need to be filed.
Section 4(c) provides certain exemptions to registration. The first exemption is for any “government or government subdivision, agency, or instrumentality.” Given the scandals involving government fraud, waste and abuse, one can argue that the exemption for government is unconscionable. This is Big Brother exempting Big Brother.
Section 4(c) makes religious entities an optional exemption, and provides four “Alternatives” for these optional religious exemptions. In other words, the drafting committee saw fit to definitely exempt government agencies, but made churches and other religious entities merely an optional exemption for states that would consider adopting the Act.
Section 6 requires the personal representatives of probated estates to file with charity regulators a copy of Wills making charitable bequests and the inventory list of the estates.¹ In the states that do not exempt religious organizations, this forced disclosure of Wills would apply to religious bequests. The Act does not prohibit charity regulators from posting this information online.²
The Act’s comments reference that some states require reporting of conservation easements granted under Wills. POCAA’s requirement to report bequests of cash or other property, however, is a radical intrusion on privacy and the right to bequeath private assets to private institutions.
These new powers become more dangerous by virtue of the Act’s using what at first blush may appear to be a subtle term describing generally the power of charity regulators. Upon close inspection, the term is actually a radical one.
The Act authorizes charity regulators to act “in the public interest,” as in “to protect the public interest in charitable assets.” The committee debated that phrase versus “in the interest of the public,” and concluded there was no difference between the two.
Of course there’s a difference.
The term “in the public interest” is a subjective standard for potentially broad and varying interpretations of subject matter. The term is open to widely varying ideological interpretations depending on who is charged with enforcement.
The term “in the interest of” or “on behalf of” “the public” is an objective matter of standing. “Standing” is a term of jurisdiction to bring a cause of action under an objective and legally enforceable law. It is a doctrine used by the courts to ensure that only those with an interest in litigation may actually appear before the courts.
The Virginia case the committee cites in support of its expansion of authority, Virginia v. The JOCO Foundation, 558 S.E.2d 280 (Va 2002), was about whether the attorney general had standing to challenge the use of charitable assets inconsistent with a foundation’s governing documents, and whether the court had jurisdiction to hear the challenge. That decision used the phrase, “authority to act on behalf of the public with respect to [charitable] assets” with regard to the attorney general. The case does not support the notion that the attorney general has a subjective power to determine a “public interest” in private charitable assets.
This one twist of words employed under the Act expands the power of charity regulators, as opposed to clarifying the unique role of attorneys general relative to protecting charitable assets from misuse.
The phrase “public interest” in charitable assets is a corruption of the common law hoisted on the public by charity regulators. For some years, charity regulators have been pushing that corrupted twist of words in an effort to expand their authority over private assets.
POCAA itself is therefore little more than special interest legislation sought by and for charity regulators. It is not based in the common law or American law. The Uniform Law Commission has given us a model law that is inconsistent with the purposes of clarification, and instead is an unprecedented intrusion into private property and other rights. One can even argue that POCAA is based more in an ideology than sound law.
¹ Section 6(d) reads: “If a decedent‘s estate opened by a court in this state involves, or may involve, the distribution of property to a person holding charitable assets, unless the distribution is a nonresiduary devise with a value of less than $[50,000] to a named person, the [personal representative] shall deliver to the [Attorney General] not later than  days after the date the [personal representative] is appointed:
(1) a copy of the will;
(2) a copy of the [application] [petition] for probate; and
(3) a copy of the inventory or, if none is filed with the court, a statement of the value of the estate.”
From my piece today at The Examiner, “A power-grab against charity and religion”:
“The model Protection of Charitable Assets Act — which is being promoted by the National Association of State Charity Officials — represents a state power grab of poorly defined discretion over the property rights of private charities, churches, and even the estates of the deceased. It is special interest legislation for increasing bureaucratic power.
“POCAA gives state regulators unilateral authority to intrude by claiming a “public interest” in private charitable or religious assets. That phrase, which was specifically debated during POCAA’s drafting, is vitally important. “On behalf of the public” would have given state attorneys general legal standing to litigate when charitable assets might be misused. But with the words “in the public interest,” POCAA misconstrues this authority, giving the state a larger say in charities’ activities. It also extends this authority to other state officials who are not attorneys general or even attorneys. This makes POCAA even more ripe for unqualified and subjective interpretations.”
A Radical and Unlawful Power Grab over
Private Charity and Religion
The Model Protection of Charitable Assets Act
Oversight and Investigations
Mark J. Fitzgibbons¹
I. There Are Far Too Many Troubling General Provisions in the Act for It to Be Adopted by Any State
II. Show Us Your ‘Estate’ Papers
III. Investigations under POCAA – Good Reasons for States to Reject It, and How to Handle and Even Defeat Administrative Subpoenas Under It
IV. The Act Violates the Fourth Amendment by Reducing the Standard of ‘Cause’
V. Application of Search Powers to First Amendment Freedoms
The Protection of Charitable Assets Act (the “Act,” or “POCAA”), originally called the Oversight of Charitable Assets Act, was adopted at the July 2011 meeting of the Uniform Law Commission.²
POCAA was adopted under the claim for the need to clarify or make more uniform the authority of state attorneys general to correct certain abuses involving charitable assets.
Instead, however, POCAA expands the power of state officials, including those who are not attorneys general. The Act is actually a radical expansion of power of the state over private charity and even religion. Additionally, certain key provisions of the Act fly in the face of constitutional limits on government authority.
Through subtle and not-so-subtle defining provisions and reporting requirements, the Act actually would invite government abuse of private charity and/or religion. The investigation powers under the Act create what would be unlawful trespasses involving private property.
This paper focuses mostly on POCAA’s investigation provisions since, in my opinion, those are the most susceptible to being misused and actually constitute violations of law restricting government authority for searches. However, this paper will touch briefly on a few other provisions of the Act that demonstrate POCAA is actually an expansion, not clarification, of state authority with regard to charitable and religious entities, assets and rights.
To read the entire paper, click here.
¹ President of Corporate and Legal Affairs, American Target Advertising, Inc. This paper is a modified and expanded version of a presentation at the 48th Annual Washington Non-profit Legal & Tax Conference, March 22, 2012, Arlington, Virginia.
Writing at The Chronicle of Philanthropy, Pablo Eisenberg laments the loss of full-time newspaper writers covering nonprofits.
I share his concern. But as with most of what Mr. Eisenberg writes, I find fault in his premises.
I’d rather see more thoughtful private critics of nonprofits and less poorly targeted and burdensome government regulation. Mr. Eisenberg has tended to prefer more government regulation.
The increase in government regulation of private philanthropy has not brought about better philanthropy, and has reduced the incentive of newspapers to be thoughtful critics. Instead, we often find what newspaper coverage there is to be ideologically driven instead of factually based. The state of journalism is far worse than the state of private philanthropy.
The problems fall squarely on the shoulders of people who, like Mr. Eisenberg, have misconstrued the nature of private philanthropy.
His piece, for example, references “tax-subsidized dollars [charities] received.” Referring to tax exemption as a “subsidy” is a misuse of the word. Justice William Rehnquist misused that term to describe tax exemption as means to justify limits on policy advocacy by 501(c)(3)s in Regan v. Taxation with Representation of Washington.
That view opens the door to much government control of private philanthropy and abuse of the free exercise of rights.
The Chronicle of Philanthropy dutifully reported the same day on yet another example of a federally funded charitable entity being bilked.
It’s time to recognize that blurring the lines between private philanthropy and government, making charities dependent on taxpayer handouts, and pushing out thoughtful private critics through incompetent government bureaucracy has been a net negative for charities.
Here’s a December 1, 2011 article in the ABA Journal on the Protection of Charitable Assets Act (POCAA) that I missed until just now. It quotes Free Speech Coalition legal co-counsel (and world-class lawyer) Mark Weinberg and yours truly criticizing POCAA.
I think the premise of the piece, which first represents the side of the charity regulators and their proponents, is terribly flawed. Charity regulators already have laws and registration requirements in place, and failed to show why those requirements weren’t sufficient to stop the Bobby Thompson situation (the U.S. Navy Veterans Association scam).
That wasn’t a scam caused by a lack of laws. If anything, charity regulators spend too much time processing needless paperwork to actually do people any good.
Using Bobby Thompson as a poster child for POCAA is about as disingenuous as using Jerry Sandusky as a reason to have people who start charities for kids go on some pre-registry for sex offenders.
That’s the title of my piece up at American Thinker. Here’s a clip:
“One of the ways charity regulators violate laws, private property rights, and the Constitution is through their investigations of charities and other nonprofit organizations. Using investigations, charity regulators are able to intimidate charities and silence critics of government. In the 1950s and 60s, states bullied the civil rights movement, and the Supreme Court helped stem that tide in NAACP v. Alabama, blocking an investigation on First Amendment grounds.”
As readers know, charity regulators are the biggest violators of laws governing charitable solicitation.
What happens when charity regulators ask or demand charities or others to violate the law? That is also known as solicitation, and the offense of solicitation is a serious one.
Here’s a real life example of how charity regulators might be caught soliciting crimes or misdemeanors.
A charity is being investigated by its state’s charity regulator, in this instance, the attorney general. The charity believes it has done nothing wrong, and is cooperating with the investigation even though the attorney general hasn’t stated the probable cause for the investigation.
An employee of the charity works out of state in an office owned and operated by a business. The business owns the computers, papers, forms, reports and other property used by the charity’s employee in the course of her work.
The charity’s employee is a “guest” of the business (in the legal sense), and is given access to certain information, the kind of which is treated as confidential to protect it from competitors of the business and its clients’ competitors.
A deputy attorney general issued a subpoena to the charity’s custodian of records. The deputy attorney general was provided notice that the subpoena fails to state probable cause as required by the Fourth Amendment, and other defects. The deputy AG ignored that notice, and did not cure or fix the subpoena to bring it into compliance with the Fourth Amendment.
The deputy attorney general then asked the charity’s lawyer to depose or interview the charity’s out-of-state employee by phone, and the lawyer consented. There was no subpoena issued for this interview/deposition, but the charity’s lawyer and employee understood that the interview/deposition was requested under color of state law and as part of the investigation of the charity.
In the deposition of the charity’s out-of-state employee, the deputy AG asked the employee to provide information found on the computers that the employee uses, documents, forms, and other information from the business’s office.
In other words, without seeking the consent of the business, the deputy AG asked (actually, demanded) the charity’s employee to take property from the business and transmit that property to the deputy AG.
To remove property without consent of the owner is a form of theft known as larceny.
Just as any charity’s employees may not remove data or property of the charity without consent of the charity, a charity’s employee certainly may not remove property from any business without consent of the business.
Here’s where the violation of law called “solicitation” comes in. When someone asks or demands another person to commit larceny, that is known as solicitation of larceny, and it is every bit as much a violation of law as larceny.
In this example, the solicitation was done under the duress and intimidation of an interview/deposition of the employee, an investigation of the employee’s employer, and the color of state law.
This deputy attorney general seems to have several very serious problems on her hand.
First of all, it seems that what she has done fits the black letter definition of solicitation of larceny. She certainly could be sued by the business. And, if prosecuted and convicted by the state in which the charity’s employee works, that could put her license to practice law in her home state at jeopardy.
Secondly, since the deputy AG was acting in the name of the state Attorney General, that imputes the conduct to the AG.
Thirdly, information gathered in violation of law (in this case, in violation of the Fourth Amendment and the state law of larceny) may not be used against the charity. So the solicitation of larceny, if not violations of the Fourth Amendment, jeopardizes the investigation of the charity. That adds incompetence onto the unlawful conduct in the investigation.
Unless the deputy AG believes that the charity has violated some serious law being investigated, she may want to reach a quick and confidential agreement with the charity, issue just a warning rather than seeking a penalty (if she even has cause to seek a penalty), and slink away into obscurity.
It has been my experience with charity regulators that they frequently use duress and intimidation under color or state law to force registrants to violate laws.
It is important for lawyers representing charities to make sure that investigations of their clients comply with probable cause and other Fourth Amendment requirements.
When charity regulators issue faulty subpoenas or seek to go beyond the scope of the subpoenas, lawyers should make sure that they object and restrict the subpoenas to the persons, time, places and things that are identified in the subpoena. Otherwise, the lawyer could be sued by a third party for aiding the solicitation of larceny, such as a business, where, as in this example, the charity’s employee is a guest.
Just because charity regulators hold their breath, cover their ears and stomp their feet when their own lawbreaking is brought up won’t get lawyers representing charities off the hook.
Another politician, another charity scam.
As reported in The Washington Post: “Harry Thomas Jr. resigned Thursday night, hours after he became the first sitting D.C. Council member to be charged with a felony, when federal prosecutors accused him of embezzling more than $350,000 in government funds and filing false tax returns.”
With all the charity scams involving government officials, you’d think that no responsible legislation would exempt government from the strictures of reporting and compliance.
Well, charity regulators who pushed the Uniform Law Commission to pass the model Protection of Charitable Assets Act (POCAA), managed to include an exemption for government from POCAA’s registration and reporting.
Section 4(c)(1) of POCCA exempts “a government or government subdivision, agency, or instrumentality” from POCAA’s requirement to register charitable assets of more than $50,000.
If POCAA is a legitimate law with legitimate purposes, what possible purpose is there for this exemption other than to give government lawbreakers an advantage?
Charity regulators once again prove their bias and incompetence, and the Uniform Law Commission should be ashamed of itself.
As a rule, it’s safe to say the overwhelming majority of people in the charitable sector have good intentions, right?
What about charity regulators? Well, even if we presume their good intentions (and I’ll defer to your judgment for today’s purposes), too many of them act as if the rule of law doesn’t fully apply to them, they act above the law, or they are ignorant of how the law applies to them especially when the rights of charities are involved.
Charities are sensitive about their good standing in the public, and for good reason. When charity regulators investigate charities, just the notion that an investigation is taking place can harm the reputation of a charity. Charities therefore don’t want to make waves.
Quite often, therefore, charities are willing to cooperate with informal requests for information or formal investigations initiated by charity regulators rather than challenging them. A recent decision out of the U.S. District Court for the District of Columbia shows why that is quite often the wrong approach.
A December 13, 2011 opinion in Bank of America v. Solis recognized that informal government inquiries and requests for documents under what are called “administrative searches” are subject to the Fourth Amendment requirements such as probable cause. In this case the government failed to abide by Fourth Amendment requirements placed on government requests for information, i.e., searches.
Bank of America, as a government contractor, must report to and comply with a special division within the Department of Labor. The government agency is authorized to conduct systematic but “neutral” compliance evaluations of all federal contractors. These evaluations use a pre-set selection procedure required by law.
Unknown to Bank of America at the time of the inquiry, the government had violated the procedure required by law.
Bank of America, however, voluntarily consented to the administrative search and provided documents in response to the government’s request. When BoA later found out that the government had violated the law, it was too late. BoA waived its Fourth Amendment protections by voluntarily complying with the government’s request for documents.
1. Always, always require that charity regulators provide their specific statutory authority for any special requests or demands for information, or the actions they are telling you they want you to take; and
2. If a charity regulator is unilaterally (without a court order) issuing a formal or even an informal request for information or documents, investigating you, or issuing a subpoena, demand that they state their probable cause.
Charity regulators frequently violate the Fourth Amendment and other laws. They have as much of an obligation to follow the law as charities do.