Government Reverses Its Decision on Organization’s Right to Solicit Federal Workers

Pressured by a court ruling on Monday, the government agency that oversees the annual charity drive for federal workers has reversed itself and now will allow a Tennessee organization — the Stuttering Foundation of America — to again solicit.

What’s more, the U.S. Office of Personnel Management said that, in light of the judge’s opinion, it will allow other private foundations to participate in the Combined Federal Campaign as long as the organizations meet the drive’s overall eligibility requirements.

The government’s decision affects the Stuttering Foundation of America and three private foundations that recently had been denied permission to solicit federal workers nationwide, according to a spokesman for the Office of Personnel Management.

The spokesman said the three organizations are the Impact Movement; the National Black United Front Educational Fund; and the Roger L. Von Amelunxen Foundation.

The government’s decision also affects private foundations that had been denied permission to solicit federal workers locally. They must now be allowed to participate in the federal drive as long as they meet overall eligibility requirements, according to the spokesman for the personnel office.

The Office of Personnel Management told the Stuttering Foundation of America that it would admit the organization in a letter it sent today to the organization and its lawyer, Noland MacKenzie Canter III.

“I have reconsidered my decision” in light of the court ruling, wrote Tricia Hollis, chief of staff in the director’s office. “I am pleased to inform you that your organization is admitted for participation this year.”

The Stuttering Foundation of America, which was established in 1947, provides information and assistance to prevent stuttering in young children, and treatment for youths and adults who stutter.

The organization was admitted to the Combined Federal Campaign from 1992 to 2006, receiving more than $30,000 in pledges in each of the past two years.

On Monday, U.S. District Judge John D. Bates ruled that the Office of Personnel Management improperly denied the Stuttering Foundation of America the opportunity to solicit. Mr. Bates said that a new rule the government used to decide whether the organization was eligible violates federal law, and he ordered the personnel office to re-evaluate the application of the Tennessee group using its old rule.

The Stuttering Foundation of America’s application for the fall 2007 drive had been rejected by the government because the agency said the group did not qualify under the new rule, adopted by the personnel office last year, that participating groups must be “public charities” as defined in the federal tax code.

The Stuttering Foundation of America is classified under tax law as a private operating foundation.

Such entities are endowed groups that use most of their resources to directly operate their own charitable programs, don’t make any (or many) grants to other organizations, and usually don’t raise much (if any) money from the public. By contrast, private foundations do not provide direct services themselves and they make grants to other organizations.

Last November, the Office of Personnel Management made several changes in how the campaign operates, including revising a rule to say that participating national charities must be public charities, “not private foundations or exclusively government units or instrumentalities thereof.”

In March the personnel office turned down the Tennessee organization’s application for participation in the fall 2007 campaign because it said the foundation is not a public charity.

After the Office of Personnel Management rejected the Tennessee organization’s appeal in June, the Stuttering Foundation of America filed a lawsuit charging the government’s change in rules violated a 20-year-old federal law that says the criteria for the eligibility of organizations to participate in the Combined Federal Campaign cannot be different from the eligibility criteria that existed in the 1984 regulations for the charity drive. The 1984 rules allowed private operating foundations to participate in the drive, the Tennessee group said.

The Office of Personnel Management told the U.S. District Court for the District of Columbia that its new rule clarified and reasonably interpreted eligibility requirements set forth in its 1984 regulations but did not change them. The agency contended that its “public charity” criterion was consistent with a requirement in its 1984 rules that participating groups be financed primarily through gifts from the public.

But in his ruling, Judge Bates said, “Even at first glance, it is obvious that the eligibility criteria in the 2006 CFC regulations are inconsistent with the 1984 criteria.”

He said that, under the 1984 regulations, an organization was required to show that it received at least 50 percent of its revenue from sources other than the federal government or at least 20 percent from “direct and/or indirect contributions.”

The judge said that, in place of this criterion, the 2006 regulations require that an organization be a public charity under federal tax law, which he said is “a substantively different four-category test which, to the extent it uses a percentage test, uses a 33-percent standard” for the amount of support an organization must receive from the public in the form of gifts, grants, contributions, or membership fees, and receipts from other activities.

“In short,” said Mr. Bates, “the 2006 CFC eligibility criteria are not the same as the 1984 criteria.”

The judge added that the 1984 criteria “in practice actually enabled private foundations to participate in the Combined Federal Campaign over the years until the 2006 regulations came into effect.”