Foes say Prop. 22 backers misusing nonprofit status

Despite having a gargantuan $ 185 million to spend, the Yes on 22 campaign knows how to pinch pennies — via a tactic its opponents claim is unlawful, but Yes on 22 defends as proper.

Proposition 22, the ballot measure to exempt Uber and Lyft drivers and other gig workers from being employees, got a nonprofit postal permit for its deluge of glossy mailers, allowing it to save millions on postage. U. S. Postal Service regulations specifically say that political organizations other than political parties are not eligible. Yes on 22’ s lawyers said the campaign is legitimately entitled to its nonprofit mailing status and is not a “political organization” as that regulation defines it.

“I have never heard of a campaign using nonprofit status for campaign mailers.” Rick Hasen, professor of law and political science at UC Irvine

“This misuse of the nonprofit permit coming from a corporate backed $ 200 million campaign is unprecedented and should be remedied by the Postal Service immediately,” attorneys for the No on 22 campaign, which is backed by organized labor, wrote to Postmaster General Louis DeJoy on Wednesday.

The Yes on 22 campaign, which is financed by Uber, Lyft, DoorDash, Instacart and Postmates, said its applications for nonprofit status were approved by the Internal Revenue Service and the Postal Service.

Geoff Vetter, campaign spokesman, cited a Postal Service ruling that he characterized as “allowing the ballot measure committee of a duly authorized nonprofit to mail under the nonprofit’s authorization,” and provided examples of some ballot measure mailers from past years that used nonprofit mailing permits.

The California Fair Political Practices Committee, which oversees campaigns’ legal compliance, said it could not comment on specific situations, nor say whether such use of the nonprofit postal permit is common or uncommon.

The U. S. Postal Service did not reply to requests for comment.

Lawyers for the Yes and No sides of the Prop. 22 campaign agreed that it is common for ballot campaigns to set themselves up as 501( c)( 4) nonprofits, but then presented differing views of when their use of nonprofit mailing status is legitimate.

Lance Olson, who wrote the letter to the postmaster general on behalf of No on 22, said that not all nonprofit campaigns are entitled to the nonprofit mailing status, and that the sponsoring organization behind the campaign is key.

“There have been plenty of campaigns in the past that were entitled to the permit because they were the right type of nonprofit ( backed by) a 501( c)( 3) organization, such as an environmental group or other existing nonprofit,” he said. “That has nothing to do with forprofit corporations ( such as the gig companies) creating a nonprofit, funding a nonprofit and then saying, ipso facto, we get a permit because we are a nonprofit.”

But Steve Lucas, a lawyer for Yes on 22, said that was incorrect.

“The status of a nonprofit is not contingent on the makeup of the donors to the nonprofit,” he said. “The status of a nonprofit is determined solely by the nonprofit’s activities and expenditures.”

Moreover, he said, the post office regulations barring “political organizations other than political parties” from nonprofit mailing status use a different definition of “political organization” than what the average person would recognize. It is “limited to organizations that involve themselves in candidate and political party activities, none of which we do,” he said.

“We’re not a political organization” as the regulations define them.

However, some experts said the nonprofit mailing permit was unusual.

“I have never heard of a campaign using nonprofit status for campaign mailers and cannot think of any circumstances where that would be appropriate,” said Rick Hasen, professor of law and political science at UC Irvine, in an email.

David McCuan, a professor of political science at Sonoma State University, said Yes on 22 is “pushing the boundaries.” Issue campaigns seeking to generate attention around a public policy or to educate the voting public about an issue, can sometimes manipulate postal rules to get the nonprofit rates, he said, so Prop. 22 may be trying to blur the lines and claim it is an “issue advocacy” campaign.

“It’s outrageous but not surprising,” said Mike Roth, a spokesman for the laborbacked No on 22 campaign.