Tennessee Charity Sues Government for Right to Participate in Federal Drive

A Tennessee charity that raises money through the Combined Federal Campaign — the annual drive for federal workers — is suing in federal court for the right to continue soliciting donations through the campaign after the government denied its admission.

The organization, the Stuttering Foundation of America, in Memphis, was rejected for the fall 2007 drive because federal officials said it did not qualify under a new rule, adopted by the government last year, that participating groups must be “public charities,” which the federal tax code defines as organizations with broad financial support from the public.

The Stuttering Foundation of America is classified under tax law not as a public charity but 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 make grants to other organizations.

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

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

Last November, the U.S. Office of Personnel Management, which oversees the Combined Federal Campaign, 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.”

At the time, the Office of Personnel Managment said that, during a months-long comment period that had just expired, no one had objected to the idea of clarifiying that rule.

In a legal filing last week, the Stuttering Foundation of America said that the Office of Personnel Management in March turned down its application for participation in the fall 2007 campaign because the foundation is not a public charity. The foundation said the government in March also declined to grant a “one-year waiver” of the requirement to the Stuttering Foundation of America and other operating foundations.

In its lawsuit, the Stuttering Foundation of America charged that the government’s change in rules violates a 1987 federal law that says the critieria 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, according to the Tennessee group.

The Stuttering Foundation of America asked the federal court to force the Office of Personnel Management to allow the organization to participate in the 2007 Combined Federal Campaign.

“If the foundation is denied inclusion in the 2007 CFC, it will be a severe blow financially,” said Noland MacKenzie Canter III, a lawyer for the organization, in a March letter to the Office of Personnel Management that appealed the government’s ruling. “More importantly, it will deny federal employees the opportunity to learn that help is available.”

He added that the foundation thinks the government’s view not only violates the law but “deviates from sound public policy.” Operating foundations “provide charitable services in the same manner as do publicly supported charities to which they are substantially similar in material respects.”

The Office of Personnel Management rejected the foundation’s appeal last month and the government had no comment on the lawsuit last week.