[Federal Register Volume 62, Number 173 (Monday, September 8, 1997)]
[Proposed Rules]
[Pages 47178-47179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23682]
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POSTAL SERVICE
39 CFR Part 111
Eligibility Requirements for Certain Nonprofit Standard Mail
Matter
AGENCY: Postal Service.
ACTION: Proposed rule.
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SUMMARY: This proposed rule will amend the standards for mail matter
eligible to be sent at the Nonprofit Standard Mail rates. Specifically,
mail matter that seeks or solicits contributions or membership dues
payments and offers a premium item such as a tote bag or umbrella will
be considered eligible for the Nonprofit Standard Mail rates provided
that certain criteria are met. The Postal Service has determined that a
revision to the standards in this manner is consistent with the
treatment of similar solicitations by other agencies, most notably the
Internal Revenue Service and the Federal Trade Commission.
DATES: Comments must be received on or before October 8, 1997.
ADDRESSES: Written comments should be mailed or delivered to Manager,
Business Mail Acceptance, USPS Headquarters, 475 L'Enfant Plaza SW.,
Washington, DC 20260-6808. Copies of all written comments will be
available for inspection and photocopying between 9 a.m. and 4 p.m.,
Monday through Friday, in Room 6801 at the above address.
FOR FURTHER INFORMATION CONTACT: Jerome M. Lease, 202-268-5188.
SUPPLEMENTARY INFORMATION: Nonprofit organizations authorized to mail
at the Nonprofit Standard Mail rates commonly offer premium items when
soliciting contributions or membership in their organizations. These
premiums, often referred to as ``backend premiums'' since they are
offered in return for a contribution, donation, or membership dues
payment, include such items as tote bags, umbrellas, t-shirts, and
coffee mugs.
By statute, material that advertises, promotes, offers, or, for a
fee or consideration, recommends, describes, or announces the
availability of any product or service, other than separately
restricted travel, insurance, and financial instruments such as credit
cards, is ineligible for the nonprofit rates of postage unless certain
prescribed exceptions are met. 39 U.S.C. 3626(j)(1)(D). In accordance
with its responsibility to administer the statute, the Postal Service
promulgated new standards effective October 1, 1995.
Domestic Mail Manual (DMM) E670.5.4d. provides that Nonprofit
Standard Mail rates may not be used for the entry of material that
advertises a product or service unless the sale of the product or the
provision of such service is substantially related to the exercise or
performance by the organization of one or more of the purposes used by
the organization to qualify for mailing at the Nonprofit Standard Mail
rates. In the implementation of these rules, the Postal Service has
concluded that ``utilitarian'' items such as tote bags, umbrellas,
coffee mugs, t-shirts, and similar items are not normally considered
substantially related to an organization's qualifying purposes.
Since the adoption of the regulations implementing the statute, the
Postal Service has consistently held that backend premiums are to be
considered advertising for the product offered as a premium. This
policy was discussed in Federal Register articles promulgating the new
rules. See 60 FR 22270, 22272 (May 5, 1995); 59 FR 23158, 23162 (May 5,
1994). It has also been followed in publications such as USPS
Publication 417 (Nonprofit Standard Mail Eligibility) and training in
this area. Backend premiums are similar to typical advertisements
because they invite a transaction which provides funds to the sender,
but are dissimilar from typical advertisements because the value of the
premium is usually much less than the required donation or other
payment. Although cognizant of the argument that the donor is motivated
by eleemosynary purposes, rather than a desire for the article, the
transaction can also be viewed as part donation and part sale, which,
in the view of the Postal Service, makes the offer an advertisement
under the statutory restrictions. This interpretation of the statute
is, at least in part, supported by IRS policy, which requires donors
declaring charitable deductions to subtract the value of premiums from
donations.
Recently, the Postal Service has become aware of new developments
which warrant review of the policy concerning backend premiums.
Notably, an advisory opinion by the Federal Trade Commission held that
telephone fundraising calls in which certain backend premiums are
offered are not ``telemarketing'' because they are not ``conducted to
induce the purchase of
[[Page 47179]]
goods or services.'' Similarly, the Internal Revenue Service does not
deem nonprofit organizations that provide backend premiums to be
involved in sales transactions.
The Postal Service believes it is reasonable to provide similar
treatment to backend premiums, particularly where the receipt of the
premiums does not appear to be the principal motivation of the donors
or members. In these instances, the offer of the premiums will not be
considered as ``advertisements'' for postal purposes; thus the
announcements are exempt from the substantially related rules affecting
advertisements in nonprofit mail. The Postal Service proposes two
tests. First, the requested contribution or other payment must be at
least five (5) times the total cost of the premiums to exempt the
announcements from being considered as advertisements for the premiums.
The cost of each premium is its actual cost to the nonprofit
organization. Second, the requested contribution or other payment must
be at least three (3) times the represented values in the mailpiece, if
any, of the premiums. Both tests must be met or the offer will be
considered an advertisement. Nonprofit organizations wishing to mail
solicitations for contributions which offer a premium may be asked to
substantiate the cost to the nonprofit organization for the premium,
consistent with their usual obligation to demonstrate eligibility for
nonprofit rates.
Although exempt from the notice and comment requirements of the
Administrative Procedure Act (5 U.S.C. 553(b), (c)) regarding proposed
rulemaking by 39 U.S.C. 410(a), the Postal Service invites comments on
the following proposed revisions of the Domestic Mail Manual,
incorporated by reference in the Code of Federal Regulations. See 39
CFR part 111.
List of Subjects in 39 CFR Part 111
Postal Service.
PART 111---[AMENDED]
The authority citation for 39 CFR part 111 continues to read as
follows:
Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 3001-
3011, 3201-3219, 3403-3406, 3621, 3626, 5001.
2. Amend Domestic Mail Manual E670.5.0, Eligible And Ineligible
Matter, by renumbering subsections 5.9 to 5.10, 5.10 to 5.11, 5.11 to
5.12, and 5.12 to 5.13, and adding a new subsection 5.9 to read as
follows:
5.0 ELIGIBLE AND INELIGIBLE MATTER
* * * * *
5.9 Contribution and Membership Premiums
Announcements for premiums received as a result of a contribution
or payment of membership dues are not considered advertisements if the
requested contribution or membership dues is at least 5 times the cost
to the nonprofit organization of the premium item(s) offered and at
least 3 times the represented value in the mailpiece, if any, of the
premium item(s) offered.
* * * * *
3. An appropriate amendment to 39 CFR 111.3 to reflect these
changes will be published if the proposal is adopted.
R. Andrew German,
Acting Chief Counsel, Legislative.
[FR Doc. 97-23682 Filed 9-5-97; 8:45 am]
BILLING CODE 7710-12-U
