FTC Staff Reconsidering Nonprofits' Exemption From 'Do Not Call' Rule
by Robert M. Fells, Esq., general counsel
Despite their assurances this past summer (see the August/ September "Washington Report") that nonprofit organizations are not covered under the new Do Not Call regulations for interstate telemarketing calls, Federal Trade Commission staff members recently contacted the ICFA to say they are reconsidering whether nonprofits are exempt from the regulations.
It is important to note that the FTC Do Not Call provisions affect telemarketing calls made interstate, that is, from one state to another. The FTC does not have jurisdiction over intrastate calls, that is, calls made and received from within the same state. Such intrastate calls are regulated by the Federal Communications Commission (FCC), which has its own Do Not Call regulations that specifically exclude "tax exempt, nonprofit organizations" as well as for-profit telemarketing firms employed by such entities.
Confusingly, both the FCC and the FTC have jurisdiction over interstate calls and it is unclear how they will divide enforcement responsibilities. Since new details are emerging from both federal agencies, ICFA members are urged to check these agencies' Web pages for updates at www.ftc.gov
Many nonprofit organizations have opted to use the FTC Do Not Call registry simply to maintain good public relations with consumers. However, this new development could require nonprofit groups, including religious organizations, that sell products and services to comply with the FTC regulations for interstate calls or risk fines of $11,000 per call.
The ICFA Government and Legal Affairs Committee met on October 28 to discuss this issue and is studying the several options it may pursue.
A Denver federal district court finding that the new FTC Do Not Call regulations are unconstitutional because they favor political and charitable calls had initially stopped the rules from going into effect October 1.
The effect of that ruling in Mainstream Marketing Services Inc. v. FTC was stayed pending an appeal by the FTC to the 10th Circuit, and the new regulations belatedly became effective on October 17. Oral arguments on the appeal took place in November. The ICFA believes this court decision may have caused FTC staff to reconsider its treatment of nonprofit organizations.
The commission's jurisdictional limits are contained in a 1914 federal statute known as the FTC Act. Under this law, the commission has jurisdiction over "persons, partnerships or corporations."
A nonprofit qualifier added in 1938 extends FTC jurisdiction to any "association, incorporated or unincorporated, which is organized to carry on business for its own profit or that of its members." The issue of what constitutes "profit" has been the subject of interpretation over the years on a case-by-case basis.
For example, a 1999 U.S. Supreme Court decision in California Dental Association v. FTC held that the commission had jurisdiction over a nonprofit professional association because the group existed "in substantial part for the pecuniary benefit of its for-profit members."
The tax-exempt status, the disbursement of funds, and whether revenue is insufficient to meet expenses are among the factors used by the FTC to determine the jurisdictional status of a nonprofit organization.
ICFA members will be informed of significant developments as they occur.
Senate Increases Its Funeral Benefit Allowance
Perhaps as an unintended endorsement of traditional funerals and burials, effective November 1, the U.S. Senate has increased the amount of payments for the funerals of its deceased members.
Added to the existing provisions is an increase from $2,000 to $5,000 for a burial vault and casket, and an increase from $1,000 to $2,000 for the cost of "one burial plot."
Reflecting the rising cremation rate, provisions include payment of "ordinary and necessary expenses" for "cremation fees, including urn."
Existing provisions continue to include payment for the transportation of remains to the mortuary; complete preparation and care of the remains; limousine service for the immediate family, pall bearers and the funeral coach; the receipt and care of floral tributes (though not the floral expenses themselves); interment fees for grave services; and miscellaneous expenses directly related to the funeral, such as fees for clergy and musicians, but not food, flowers or cards, in an amount not to exceed a total of $2,500.
However, permanent grave markers and headstones are excluded from covered expenses because these items are considered personal in nature.