District of Columbia Mayor Anthony Williams has vetoed a bill extending the deadline to register for DC's Master Business License. The veto adds to the considerable confusion already surrounding the MBL process and requirements.

The D.C. Council recently voted to repeal the law requiring businesses – including nonprofit organizations – to register for the Master Business License. At that time, the Council also approved emergency legislation that would have extended the deadline for obtaining a MBL until the effective date of the repeal. The Mayor's veto of the emergency legislation means that the deadline for obtaining a MBL remains June 30, 2003.

The Council will vote a second time on the repeal legislation on July 8, 2003. If the repeal is approved at the Council's second vote, it will need to go to Congress for a 30-day review period before becoming effective.

The future of the Master Business License program and the need to register is uncertain. However, the DC Department of Consumer and Regulatory Affairs (DCRA) has stated that it will not issue fines to most organizations that fail to obtain an MBL until after the Council takes up the legislation a second time.

The MBL is the city's attempt to streamline licensing procedures, to toughen up on businesses that had not been paying city taxes, and to create a master list of businesses in the District. Some critics of the MBL complained that it is too complicated, and that the law requires too many small businesses to register. D.C.'s charitable solicitation registration is incorporated in the MBL; it is yet to be determined how the repeal of the MBL law would affect the way organizations that solicit in the District are required to register.

For more information, call the Master Business License hotline, (202) 442-4311 or e-mail mbl.infocenter@dc.gov.

By Miguel de Baca and Amy Licht

Supreme Court Rules Ban on Corporate Campaign Contributions Applies to MCFL Organizations

Early last year, a panel of the U.S. Court of Appeals for the Fourth Circuit ruled that Qualified Nonprofit Corporations, also known as MCFL organizations, were constitutionally allowed to make direct contributions to federal candidates, parties or PACs. [see NN, 03/02] In a recent 7-2 decision, the Supreme Court struck down the lower court's ruling. In doing so, the Court concluded that Congress may constitutionally ban corporate contributions for use in federal elections (as they have been for nearly 100 years), regardless of whether a corporation is in business to make a profit or is merely a non-profit advocacy organization that has no shareholders, does not engage in business activities, and refuses donations from business corporations and unions–in other words, an MCFL organization. The case is Federal Election Commission v. Beaumont.

In upholding the direct contribution ban as applied to MCFL organizations, the Court cited prior decisions in which it had already determined that contributions are subject to less First Amendment protection than are expenditures. It reasoned that while MCFL organizations are constitutionally permitted to make independent expenditures for communications that expressly call for the election or defeat of a candidate (speech that deserves the greatest protection under the First Amendment), there remain sufficiently good reasons to continue to prohibit these corporations from making direct contributions. The Court also observed that the ban is not complete, further weakening the argument that it is unconstitutional. An incorporated MCFL organization, just like any corporation, can always establish and operate a connected federal PAC from which it can make non-corporate contributions as it chooses.

One issue the Court did not decide because it was not appealed by the FEC is whether an MCFL organization may accept a small amount of corporate money, so long as most of the organization's receipts come from individual donations. The Fourth Circuit had ruled in the affirmative despite the FEC's regulations prohibiting an MCFL organization from taking any donations from business corporations or unions. Until this matter is settled, it would be prudent for MCFL organizations to continue their practice of rejecting corporation and union dollars.

While the result in Beaumont is not very surprising to most practitioners of federal election law, it is notable for its status as the last campaign finance case to be decided by the Supreme Court prior to its taking up the appeal in the litigation over the Bipartisan Campaign Reform Act (BCRA), [see NN, 05/03]. For this reason, it is being read for clues over how the Court might ultimately rule on BCRA. There has been speculation that the Court's recognition of the role connected PACs play in allowing corporations to participate in federal elections bodes well for BCRA's corporate ban on electioneering communications [see NN, 11/02], since, as with contributions, corporations may make such communications through their PACs. On the other hand, the Court's decision in Beaumont breaks no new legal ground, and many experts are warning of the folly of trying to read the future of BCRA between its lines.

By Paul J. Murphy

New York State Revamps its Charitable Solicitation Regulations

In a recent rule-making, the New York State Attorney General (AG) finalized revised reporting and disclosure requirements for charities and professional fundraisers that are based in or solicit in New York. The regulations, which clarify recent changes to two separate New York laws requiring charitable registration and reporting, are primarily designed to cut down on abusive telemarketing. They take effect on July 1, 2003.

The revised regulations require charities to disclose on regular financial reports details about their use of professional fundraisers, including whether a fundraising contract was reviewed and approved by the organization's Board and how many bids were reviewed before the fundraiser was hired. Failure to file the regular financial reports on time will result in cancellation of an organization's registration to solicit. In addition, charities must now obtain written confirmation from a professional fundraiser that it is registered and complies with New York State charitable solicitation laws before engaging the fundraiser's services.

Significantly, the AG's office dropped several provisions contained in a proposed version of the regulations in response to criticism by charitable organizations and fundraisers. The rules no longer include a "comparison shopping" requirement found in the first draft of the regulations, which mandated that each director of an organization's board review at least three bids from different fundraisers before the organization hired one. Also stricken from the final version of the rules is a requirement that the Board approve certain fundraising contracts by a 3/4 majority vote.

For a copy of the new regulations, please visit the New York State Attorney General's office website at http://www.oag.state.ny.us/charities/charities.html.

By Amy Licht





Follow Your Bylaws Or Else!

A Missouri Court of Appeals has ruled that a local post of the Veterans of Foreign Wars of the United States, Inc. (VFW) lost its right to repurchase a building it had sold because it failed to adhere to procedures in its bylaws. Higginsville Memorial Post 6270 v. Benton. The bylaws required ten day's notice of any membership meeting at which the sale or purchase of real estate would be discussed, and a two-thirds vote to approve the transaction. The court found the VFW's attempt to repurchase the building was invalid because it could not prove that it followed the required procedure.

The VFW sold its building to Benton, a VFW member, because it could not meet its mortgage obligations. The contract contained a repurchase option that allowed the VFW to buy back the building if it could do so before Benton paid off the mortgage. Nearly two years later the VFW attempted to exercise its repurchase option. Benton refused the offer and made the final mortgage payments, at which point the VFW sued to enforce the option.

The VFW introduced no evidence that it gave the required notice to its members. The court noted that meeting minutes are the most important evidence of what occurs at a meeting; however, the minutes of the VFW meeting where the repurchase was supposedly discussed did not record the number of members present, nor reflect any discussion or vote on the repurchase. Since the VFW's meeting minutes did not support its contentions, the court disregarded the VFW's assertions that its members properly voted in favor of the repurchase.

This case is a bracing reminder of two important points:

1. Your directors and officers must be familiar with the decision-making procedures set forth in your bylaws. Bylaws can often be changed, but while they are in effect, they are legally binding rules that govern the decision-making of a corporation. Decisions that are made in a manner inconsistent with valid bylaws are voidable. An organization may get away with nonconforming procedures for years, suddenly to find its actions challenged at a most sensitive or important time.
   
   
2. Maintaining careful books and records is nearly as important as following proper procedures. Meeting minutes must contain enough information to demonstrate that proper procedures were followed.