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Public Citizen Files Constitutional Challenge to a Jefferson County, Ken., Ordinance Requiring Charities to Obtain Local Permission

June 26, 2000

Public Citizen Files Constitutional Challenge to a Jefferson County, Ken., Ordinance Requiring Charities to Obtain Local Permission
to Solicit Funds

WASHINGTON, D.C. — The national consumer advocacy group Public Citizen filed suit today to challenge the constitutionality of a Jefferson County, Ken., ordinance requiring charities such as Public Citizen to obtain permission from the county before they may solicit supporters there, even if they only use the mail to do so.

Joining as plaintiffs are the environmental group Greenpeace and two umbrella organizations American Charities for Reasonable Fundraising Regulation and the National Federation of Nonprofits whose members and supporters are affected by the law being challenged and the laws of other jurisdictions that similarly impact on interstate charitable fundraising.

The complaint, filed in U.S. District Court in Louisville, argues that the ordinance violates the U.S. Constitution is two respects. First, the law requires approval by the county, which includes the city of Louisville, before any solicitation can be done there, and second, it requires every charity to file three extremely detailed, burdensome and invasive reports with the county every year.

“These requirements impose enormous costs on groups like ours, both to gather the information and to put it into the specific place on the individual form for each jurisdiction where we are supposed to register and report,” said Joseph A. Zillo, Public Citizen s chief operating officer. “We already fully report to the IRS in a very detailed Form 990, which is available on our Web site and will be sent to anyone who asks for one. The information on the 990 is more than any contributor could reasonably want to know, and we are baffled as to why states and localities would think they need any more.”

Several aspects of the Jefferson County ordinance are unusual and exceptionally burdensome and invasive of the privacy of the officers and employees of a charity. The county seeks plans about a charity s fundraising that go far beyond what other jurisdictions and the IRS require. For example, Public Citizen would have to disclose the name, home address, telephone number and Social Security number of employees who have control over funds raised and disbursed from solicitations. In addition, the law requires charities to submit detailed projections of revenue to be raised and the costs of doing so, seemingly tied to each separate fundraising campaign.

“To top it off, the county wants us to file our reports on a calendar year basis, when we keep our books and file with the IRS on an Oct. 1 fiscal year basis,” Zillo said. “Just think what it would cost us to redo our books for Jefferson County, not to mention what we might have to do for other states and localities if they decided they wanted information on a different basis.”

Moreover, changes in information on a registration form, even matters such as the home telephone number of a listed employee, or the addition of a new bank account where solicited funds are deposited, must be updated within five business days.

The complaint sets forth several legal bases for these challenges. Plaintiffs rely on the First Amendment — which the Supreme Court has held protects charitable solicitations — in asking the court to strike down both the registration and the reporting requirements (other than filing a copy of the IRS Form 990, which Public Citizen is willing to do). In addition, the suit alleges that, because the U.S. Postal Service already has laws and rules that decide what can and cannot be sent through the mail, no state or locality can require its prior permission before a charity can use the mail.

“Of course, if we were to violate some other law, we would not be immune simply because the Postal Service let our solicitations go ahead, but that is a very different situation from the kind of approval that Jefferson County and many states believe they can require,” said Alan Morrison of Public Citizen, lead counsel for the plaintiffs.

Jefferson County and the Commonwealth of Kentucky are not alone in seeking to regulate charitable solicitation; 38 states and the District of Columbia require charitable organizations to register if they intend to solicit. The nature of what must be reported varies widely, with many states imposing significantly more burdensome registration requirements than Kentucky.

“One of the reasons that we are filing this lawsuit is that, as cities and counties have also begun to impose more and disparate reporting requirements on charities, attempting to comply with the numerous sets of registration and reporting requirements has become increasingly burdensome, costly and difficult for charities,” Zillo said. “We felt it was time to slow down this tide before it truly overwhelms us.”

Morrison added, “The bottom line is that any state or locality that wants more information than the IRS requires should have to show a lot more justification than anyone has offered so far.”

For their objections to the reporting requirements, the plaintiffs rely on both the First Amendment and the Commerce Clause of the Constitution.