ACLU, Others Balk at CFC Terrorism Policy

Department of Labor Redefines "Overtime"

Stay in Control, Stay Tax-Exempt

"Life Cycle of a Public Charity" Added to IRS Web Site

FEC Rulemaking Over, Major Purpose Untouched

On Thursday, August 19, the Federal Election Commission completed its rulemaking on political committee status, approving a new set of regulations regarding the treatment of certain fundraising solicitations and new rules governing the allocation of funds used for communications related to both federal and state elections. However, the FEC failed to adopt any of the proposals that would have more broadly regulated many nonprofit organizations - 527s as well as 501(c)s - as political committees.

As reported earlier (See Non-Profit Navigator June 2004), in May, 2004 the FEC delayed action for 90 days on a set of controversial proposed regulations that had generated nearly 200,000 comments from the public. On Thursday, the FEC considered a substantially revised proposal prepared by the FEC's General Counsel as well as two alternative proposals from different groups of commissioners. One of these alternatives, a proposal brought forward by Commission Chair Brad Smith, Vice-Chair Ellen Weintraub, and Commissioner David Mason, was the only proposal to muster sufficient votes to pass.

In rejecting the General Counsel's Draft Final Rules, the FEC chose not to write into regulation a centerpiece of both that draft and the controversial spring proposal - a sweeping "major purpose" test that would have expanded the definition of "political committee" and forced many more organizations to comply with the severe limits on political committee fundraising and stringent reporting requirements. The FEC also rejected the vague standard for determining "major purpose" based on whether statements made by independent groups were found to "promote, support, attack, or oppose" a federal candidate. (Just prior to the meeting at which the FEC rejected the General Counsel proposal, Harmon Curran had filed comments criticizing the proposal.

The regulations approved by the FEC will take effect some time after the November elections. Under the approved regulations, as under current law, an organization will only be designated a political committee if it receives "contributions" or makes "expenditures" in excess of $1,000 in a calendar year. The new rules, however, expand the definition of "contribution" to include funds an organization receives in response to a solicitation that indicates that donations will be used to support or oppose the election of a clearly identified federal candidate. In light of this, groups that plan fundraising solicitations mentioning any federal candidate should consult with knowledgeable legal counsel before proceeding. In addition, the new rules will change previous FEC regulations about how political committees with separate accounts for state level and federal election work allocate the costs of certain activities related to both state and federal elections, including fundraising, public communications featuring political parties or candidates, and voter activation (including voter identification, voter registration, and get-out-the-vote). Organizations subject to this new regulation will now be required, in most cases, to use funds raised under federal rules for at least half of all the costs of such activities.

Some campaign reform groups and their allies in Congress have criticized the FEC for failing to adopt more aggressive rules regulating independent 527s and other organizations. Some of these critics promise to seek further regulation through the congress or the courts. Harmon Curran will continue to monitor the issue and report any new developments.

By Damon King





ACLU, Others Balk at CFC Terrorism Policy

Recently the ACLU has decided to withdraw from the Combined Federal Campaign (CFC) over concerns about certifying that its employees did not engage in terrorist activities. OMB Watch released a position paper declaring the "CFC Must Change its Misguided Policy on Terrorism", and a coalition of charities has sued the CFC over this requirement. Charities participating in the Combined Federal Campaign should be aware of this certification requirement and their actual responsibilities.

The 2004 CFC application requires participating charities to certify that they do not "knowingly employ individuals or contribute funds to organizations" found on certain terrorist lists promulgated by the United States, United Nations, and European Union. This requirement means not only that organizations cannot have actual knowledge of an employee's or grantee's terrorist activities, but also places an affirmative obligation on participants to conduct certain simple checks of terrorist lists. An organization could be found in violation of the certification if there are reasonable grounds for the charity to suspect an employee or grantee is involved in terrorism. Deliberate failure to investigate or check the relevant government lists could therefore subject a member organization to liability just the same as actual knowledge.

This places the responsibility on participating organizations to make a good faith review of these lists. If an organization certifies that is does not employ terrorists or contribute funds to listed organizations without consulting the lists and a terrorist is later found to be employed or an improper grant made, it may suggest that the charity and its managers have knowingly evaded the requirement. However, if participating charities make a good faith effort to check the lists, there should be no violation.

Currently, the certification requires review of three lists: (1) the Department of the Treasury's Specially Designated Nationals List, (2) the Department of Justice's Terrorist Exclusion List, and (3) the Annex to Executive Order 13224. All three of these lists are available on the CFC website (www.opm.gov/cfc/opmmemos/2003/list.asp)

By Scott Macbeth





Department of Labor Redefines "Overtime"

On August 23, 2004 the Department of Labor's new regulations regarding employees went into effect. Originally proposed in March of 2003 [see NN 4/03], the final regulations mark the first major revision of the overtime regulations under the federal Fair Labor Standards Act. The regulations are the final step in a process of updating and re-defining exemptions from overtime for professional, administrative, and executive employees. While the new regulations appear to expand the number of workers who are considered exempt from FLSA, they should have little effect on nonprofit organizations, as the core of the regulations remains intact.

Under the previous regulations, employees earning more than $155 per week ($8,060 annually) could be considered exempt. The final new regulations increase the minimum salary for exempt employees to $455 per week. This means that employees earning less than $23,660 annually are automatically considered non-exempt and are guaranteed minimum wage and overtime pay.

Earning the minimum salary alone does not make an employee exempt from minimum wage and overtime rules. In addition to earning more than $23,660, exempt employees must perform certain types of duties which qualify them as exempt from the Fair Labor Standards Act. The categories for exemption are executive, administrative, professional, outside sales, and computer-related occupations. In addition to the salary change, the new regulations have altered the nature of the duties for exempt professional, administrative, and executive employees. Previously, there were two tests for exempt employees, one which applied to employees earning between $155 and $250 per week (the "long" test) and one for those earning more than $250 (the "short" test). These tests have been combined so that an exempt employee is anyone earning more than $455 per week, whose duties are executive, administrative, professional, etc., in nature.

Executive employees are those whose main duty is running a department, subdivision, or an entire business. In order to qualify for exemption, all of the following requirements must be met:

• The employee's primary duty is management of a department, subdivision, or the entire enterprise in which she is employed;
• The employee customarily and regularly directs the work of two or more other employees; and
• The employee has the authority to hire or fire other employees or whose suggestions as to the hiring, firing, advancement, promotion, or any other change in the status of other employees are given particular weight.

• The employee's primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer; and
• The employee's primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

• The employee's primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or
• The employee's primary duty requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

• The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
• The design, development, documentation, analysis, creation, testing, or modification of computer systems, programs, or operating systems; or
• A combination of the aforementioned duties, the performance of which requires the same level of skills.

• The employee's primary duty is making sales or obtaining orders or contracts for services or the use of facilities; and
• The employee is customarily and regularly engaged in this duty away from the employer's place of business.