Every year, the Internal Revenue Service publishes its “Dirty Dozen,” which represents “the worst of the worst tax scams.” The Dirty Dozen always includes “fake charities.” These scam organizations weaponize human compassion for their gain and defraud the generous public of millions of dollars every year. One of the ways this fraud occurs is through calls from telemarketers – specifically, robocalls. For example, a group of five political nonprofits nominally supporting police officers, veterans, and firefighters raised over $89 million through robocalls but less than $1 million was actually spent on political contributions – the rest benefited insiders or fed the organization’s fundraising machine to continue raising money.
In 2019, Congress enacted the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence (“TRACE”) Act, in part, to “reduce illegal and unwanted robocalls.” S. Rept. 116-41. In December 2022, the Federal Communications Commission published final regulations implementing the TRACE Act that became effective July 20, 2023 (see 47 C.F.R. § 64.1200). Those regulations impose three new requirements on tax-exempt nonprofits, including political organizations.
- First, the final regulations limit the number of robocalls “made by or on behalf of” a tax-exempt nonprofit to residential landlines to three robocalls per 30 days. To exceed that limit, the organization must obtain the written or oral consent of the call recipient. However, the final regulations do not change the existing rule that written or oral consent must be obtained before making any robocalls or autodialed text messages to wireless phone lines. Additionally, no limits are imposed on the number of calls made by live callers.
- Second, at the beginning of each call, the name of the person or entity responsible for the robocall must be stated clearly and followed by the ability to opt-out of receiving future robocalls. The final regulations include detailed instructions for when and how the opt-out mechanism must be provided. All tax-exempt nonprofits making calls must maintain a do-not-call list for recipients who make opt out requests. The do-not-call request must be honored for five years.
- Third, all tax-exempt nonprofits that make non-commercial robocalls to landlines must have a written policy for maintaining the do-not-call list that is made available to the public upon request. All personnel involved in making robocalls must be informed of the existence of the policy and trained on the use of the do-not-call list. Additionally, all tax-exempt nonprofits must maintain records to ensure that the call limits are not exceeded.
The types of robocall subject to the three-call-per-month limit is not restricted to fundraising calls. Rather, non-commercial calls such as calls conducting research, market surveys, political polling, or similar noncommercial activities are also subject to the three-call-per-month limit. Any tax-exempt nonprofit or political organization should consider reviewing their robocall activities involving landline numbers to ensure compliance with the new requirements.