New Jersey Considering Mandatory Disclosure Requirement

July 15, 2011       Samuel Fanburg      

The New Jersey Division of Consumer Affairs (NJDCA) is accepting public comment on a proposed mandatory donor designation disclosure. Nonprofits would be required to provide a mechanism for donors to designate funds to specific programs.

According to the “pre-proposal” under N.J.A.C. 13:48-11.2, the NJDCA believes that “if particular programs are the inducement for a donor to make a contribution to the charity, the donor should be advised that he or she has the option to direct the charity to use his or her contribution to fund that program.” Any nonprofit that receives more than $250,000 in its previous fiscal year would have to include a designation allowing donors to choose what specific program their contribution would fund.

In a seven-page letter addressed to the acting director of the NJDCA, Errol Copilevitz, a partner in the Kansas City, Mo., firm of Copilevitz & Canter, LLC, tackled his own misgivings about the proposal finding a misunderstanding of fundraising by the state. “The rule fails to recognize a basic axiom of charitable fundraising, to-wit: it costs money to make money,” he wrote.

The proposed rule makes no allowance for cost and would mislead donors into believing their designation will require “100 percent of their donation to go to program services (when such a request is impossible),” according to Copilevitz. Especially in a nonprofit’s infancy, many times it costs more than a dollar to raise a dollar, but securing that initial relationship with donors allows an organization to cultivate future contributions.

Copilevitz, who has represented nonprofits in some of the nation’s landmark solicitation and free speech cases, contends that the proposed rule would mandate a form of “compelled speech.” Citing precedent in Miami Herald Publishing Company v. Tornillo, 417 U.S. 241 (1979) and Wooly v. Maynard, 430 U.S. 705, 714 (1977), he said compelled speech can only be used to “promote a compelling state interest,” which is not the case in this situation.

The Center for Non-Profits in New Brunswick, N.J. has raised concerns about the proposal. “Although donors always have the option of restricting their gifts, the regulations would go further by effectively encouraging donors to do so, thereby reducing available funds for general operations, overhead or organizational flexibility to respond to unanticipated community needs,” according to Director Linda Czipo. The measure also could mean additional administrative costs such as printing, fund allocation and bookkeeping, she said, adding that the division is expected to decided on the measure after weighing public comments that are received.

Comments on the proposal are being accepted until Aug. 5 and can be sent to:

Thomas Calcagni, Acting Director
New Jersey Division of Consumer Affairs
P.O. Box 45037
Newark, NJ 07101