Does the American Red Cross have to file disaster-relief financial reports with Tennessee, or is its federal status enough to exempt it?

Subject

Obligation of the American National Red Cross to File Disaster-Relief Financial Reports Under Tenn. Code Ann. § 48-101-521

Plain-English summary

Secretary of State Tre Hargett asked whether the American Red Cross is required to file the quarterly disaster-relief financial reports that Tennessee requires from charitable organizations under Tenn. Code Ann. § 48-101-521. The statute applies to any charitable organization (other than a religious institution) that solicits and receives more than $25,000 "for a charitable purpose related to a disaster in this state."

The Red Cross checks both boxes literally: it raises far more than $25,000 in Tennessee for disaster relief, and it is a "charitable organization" by the statute's broad definition. The General Assembly already exempted the Red Cross from the Act's general registration requirement in § 48-101-502(a)(7), but § 48-101-502(e) makes clear that registration exemption does not exempt an organization from "other provisions" of the Act, including the disaster-relief reporting requirement.

Even so, the AG concluded the Red Cross does not have to file the quarterly state report. The reason is federal: the Red Cross is a "federally chartered instrumentality of the United States" under 36 U.S.C. § 300101(a), confirmed by the American National Red Cross Governance Modernization Act of 2007 and previously recognized by the Supreme Court in Department of Employment v. United States, 385 U.S. 355 (1966). As a federal instrumentality, the Red Cross is subject to federal financial reporting obligations to the Secretary of Defense and Congress under 36 U.S.C. § 300110, and those reports are publicly available.

Under the intergovernmental-immunity principle articulated in McCulloch v. Maryland, Mayo v. United States, and Hancock v. Train, federal instrumentalities are generally not subject to state regulation unless Congress has authorized it. Requiring the Red Cross to also file Tennessee's quarterly report would impose an additional, parallel state regulation on a federal entity, which the Supremacy Clause does not permit. Leslie Miller, Inc. v. Arkansas, 352 U.S. 187, 190 (1956), is cited for the rule that federal-instrumentality immunity reaches state-imposed "qualifications in addition to those that the [federal] Government has pronounced sufficient."

The AG also notes a practical observation in a footnote: the underlying purpose of the state reporting requirement (transparency about disaster relief activities in Tennessee) is already accomplished by the Red Cross's federal disclosures, which are public.

What this means for you

If you work in the Tennessee Secretary of State's charitable solicitation office

You should not pursue the Red Cross for non-filing of § 48-101-521 quarterly disaster-relief reports. The federal instrumentality status overrides the state filing requirement, and enforcement would conflict with the Supremacy Clause. The Red Cross's federal annual report to the Secretary of Defense, audited and submitted to Congress, supplies functionally similar information.

If you are a Red Cross compliance officer in Tennessee

The AG opinion confirms that § 48-101-521 does not require quarterly filings from the Red Cross. The statutory exemption from registration in § 48-101-502(a)(7) is independent and predates this opinion; the new piece is that the same federal-instrumentality status protects against the disaster-reporting requirement too. Continue compliance with federal annual reporting under 36 U.S.C. § 300110, and consider voluntarily sharing information with Tennessee state regulators, as Pub. L. No. 110-26 § 2(b)(4) (2007) encourages.

If you administer another federal-instrumentality charity

The same Supremacy Clause / intergovernmental-immunity principle applies to other federally chartered instrumentalities subject to federal financial-reporting requirements. The Red Cross's situation is not unique on the constitutional principle, but the answer for any specific organization depends on whether Congress has chartered it, designated it as a federal instrumentality, and imposed federal reporting requirements.

If you are a private charity required to file under § 48-101-521

The opinion does not change anything for you. The Red Cross's exemption rests on its federal-instrumentality status. Private (non-federally-chartered) charities still must file the quarterly disaster-relief reports if they solicit and receive more than $25,000 for Tennessee disaster relief.

Common questions

Q: Why is the Red Cross treated differently from other charities?
A: Because Congress chartered the Red Cross as a "federally chartered instrumentality of the United States" (36 U.S.C. § 300101) and made it subject to federal supervision and reporting. The Supremacy Clause limits state authority to impose additional regulation on federal entities.

Q: Is the Red Cross exempt from Tennessee tax law?
A: That is not directly addressed in this opinion, but the Supreme Court in Department of Employment held the Red Cross is immune from state taxation as a federal instrumentality. The same principle would apply.

Q: What if the Red Cross voluntarily wanted to file the Tennessee quarterly report?
A: It can. The AG's analysis is about whether Tennessee can compel the filing, not about voluntary disclosure. The 2007 federal Modernization Act in fact encourages the Red Cross to "maintain appropriate communications with State regulators of charitable organizations."

Q: Does this exempt the Red Cross from the state's general charitable-solicitation registration?
A: That exemption was already in place under Tenn. Code Ann. § 48-101-502(a)(7) before this opinion. This opinion addresses only the additional disaster-relief reporting requirement in § 48-101-521.

Q: How does the public access information about Red Cross disaster-relief activities in Tennessee?
A: Through the Red Cross's federal annual report to the Secretary of Defense, which is audited and submitted to Congress. Those filings are publicly available, see 36 U.S.C. § 300110(b).

Background and statutory framework

The American National Red Cross is a charitable corporation chartered by Congress in 1900, with its current charter at 36 U.S.C. §§ 300101 to 300113. The 2007 American National Red Cross Governance Modernization Act, Pub. L. No. 110-26, formally declared the Red Cross to be a federal instrumentality. The Supreme Court had already reached that conclusion in Department of Employment v. United States, 385 U.S. 355, 358-60 (1966), holding that the Red Cross was immune from state taxation as a federal instrumentality.

Under 36 U.S.C. § 300110(a), the Red Cross must submit an annual report to the Secretary of Defense, "including a complete, itemized report of all receipts and expenditures." The Secretary audits the report and forwards it to Congress under § 300110(b). Those reports are publicly available.

Tennessee's Solicitation of Charitable Funds Act, Tenn. Code Ann. §§ 48-101-501 to -521, requires registration of charitable organizations soliciting in the State. § 48-101-502(a)(7) exempts "[a]ny corporation established by an act of congress of the United States that is required by federal law to submit annual reports of its activities to congress containing itemized accounts of all receipts and expenditures after being fully audited by the department of defense." The Red Cross is such an organization.

But § 48-101-502(e) provides that registration exemption "shall not limit the applicability of other provisions [of the Act] to a charitable organization." § 48-101-521 is one of those "other provisions": it requires any charitable organization (other than a religious institution) that solicits and receives more than $25,000 "for a charitable purpose related to a disaster in this state" to file quarterly financial reports with the Secretary of State, "detailing the money raised and expended by the organization as a result of the solicitation."

The Supremacy Clause analysis: federal instrumentalities are generally immune from state regulation absent congressional authorization. McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 426 (1819), is the foundational case. Hancock v. Train, 426 U.S. 167, 178 (1976), restated the rule. Mayo v. United States, 319 U.S. 441, 445, 447 (1943), held that "the activities of the Federal Government are free from regulation by any state." Leslie Miller, Inc. v. Arkansas, 352 U.S. 187, 190 (1956), held that federal-instrumentality immunity reaches state attempts to impose "qualifications in addition to those that the [federal] Government has pronounced sufficient."

Applied here: requiring the Red Cross to file Tennessee's quarterly disaster-relief reports would subject it to state regulation parallel to its federal reporting duties, with no congressional authorization. Under the Supremacy Clause, that requirement cannot be enforced against the Red Cross.

A 1977 prior AG opinion, Tenn. Att'y Gen. Op. 77-369 (Oct. 26, 1977), reached the same conclusion under an earlier version of the Act. The 2022 opinion confirms that result holds for § 48-101-521.

Citations

Statutes:
- Tenn. Code Ann. §§ 48-101-501 to -521 (Solicitation of Charitable Funds Act)
- Tenn. Code Ann. § 48-101-501(1) (definition of charitable organization)
- Tenn. Code Ann. § 48-101-502 (registration)
- Tenn. Code Ann. § 48-101-502(a)(7) (Red Cross registration exemption)
- Tenn. Code Ann. § 48-101-502(e) (other provisions still apply)
- Tenn. Code Ann. § 48-101-521 (disaster-relief reports)
- 36 U.S.C. §§ 300101 to 300113 (Red Cross charter)
- 36 U.S.C. § 300101(a) (federal instrumentality)
- 36 U.S.C. § 300102 (Red Cross duties)
- 36 U.S.C. § 300110 (annual federal reporting)
- Pub. L. No. 110-26, 121 Stat. 103, § 2(b)(4) (2007) (Modernization Act)

Cases:
- Department of Employment v. United States, 385 U.S. 355, 358-60 (1966) (Red Cross is federal instrumentality)
- Hancock v. Train, 426 U.S. 167, 178 (1976) (federal supremacy)
- McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 426 (1819) (foundational federal supremacy)
- Mayo v. United States, 319 U.S. 441, 445, 447 (1943) (federal activities free from state regulation)
- Leslie Miller, Inc. v. Arkansas, 352 U.S. 187, 190 (1956) (federal-instrumentality immunity)

Prior AG opinion:
- Tenn. Att'y Gen. Op. 77-369 (Oct. 26, 1977)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2022/op22-06.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
March 29, 2022
Opinion No. 22-06
Obligation of the American National Red Cross to File Disaster-Relief Financial Reports
Under Tenn. Code Ann. § 48-101-521

Question
Must the American National Red Cross, which is "an instrumentality of the United States,"
comply with the disaster-relief financial report filing requirements under Tenn. Code Ann. § 48-
101-521?

Opinion
No. Because it is an instrumentality of the United States subject to federal reporting
requirements, the American National Red Cross is not required to file disaster-relief financial
reports under Tenn. Code Ann. § 48-101-521.

ANALYSIS

The American National Red Cross ("Red Cross") is a congressionally chartered charitable
corporation. See 36 U.S.C. §§ 300101 to -113. By statute, the Red Cross has "the right and the
obligation," among others, "to assist the Federal Government in providing disaster assistance to
the States in time of need." Department of Employment v. United States, 385 U.S. 355, 359 (1966);
see 36 U.S.C. § 300102.

As a "[f]ederally chartered instrumentality of the United States," 36 U.S.C. § 300101(a),
the Red Cross is subject to governmental supervision by the United States Department of Defense.
It must submit a report to the Secretary of Defense on its activities during each fiscal year,
"including a complete, itemized report of all receipts and expenditures." 36 U.S.C. § 300110(a).
The Secretary of Defense, in turn, must audit the report and then submit the audited report to
Congress. Id. § 300110(b). The Red Cross has represented for purposes of this opinion that it
does submit the required financial reports to the Department of Defense each year.

Tennessee's Solicitation of Charitable Funds Act regulates charitable organizations that
raise money in this State. See Tenn. Code Ann. §§ 48-101-501 to -521. Every "charitable
organization" that intends to solicit charitable contributions in Tennessee must register with the
Tennessee Secretary of State unless it is specifically exempted from registration. Id. §§ 48-101-
502, -504.

As of 2007, the General Assembly did exempt the Red Cross from registration under the
Act when it specifically exempted "[a]ny corporation established by an act of congress of the
United States that is required by federal law to submit annual reports of its activities to congress
containing itemized accounts of all receipts and expenditures after being fully audited by the
department of defense." Id. § 48-101-502(a)(7). The Red Cross is such an organization; there is
no question that it is exempt from the registration requirements of the Act.

However, exemption from the registration requirements of the Act does not exempt a
charitable organization from other provisions of the Act. See id. § 48-101-502(e) ("[e]xemption
from the registration requirements of [the Act] shall not limit the applicability of other provisions
[of the Act] to a charitable organization"). And one of those "other" provisions, namely Tenn.
Code Ann. § 48-101-521, requires any "charitable organization" (other than a religious
institution) that solicits and receives more than $25,000 "for a charitable purpose related to a
disaster in this state" to "file quarterly financial reports with the [Tennessee] secretary of state, . . .
detailing the money raised and expended by the organization as a result of the solicitation."

There is no question that the Red Cross is a "charitable organization" and that it raises
more than $25,000 for disaster relief in Tennessee. Thus, even though it is exempt from having to
register under the Act, the plain language of the Act appears to require it to file the quarterly
disaster-relief financial reports called for in § 48-101-521. The question is, therefore, whether
some other legal principle exempts the Red Cross from having to comply with § 48-101-521.

"It is a seminal principle of our law 'that the constitution and the laws made in pursuance
thereof are supreme; that they control the constitution and laws of the respective States, and cannot
be controlled by them.'" Hancock v. Train, 426 U.S. 167, 178 (1976) (quoting McCulloch v.
Maryland, 4 Wheat. 316, 426 (1819)). The general corollary to this principle is that "'the activities
of the Federal Government are free from regulation by any state.'" Id. (quoting Mayo v. United
States, 319 U.S. 441, 445 (1943)). In short, unless Congress has authorized state regulation, federal
instrumentalities, while operating within the limits of federal power, are generally not subject to
control or regulation by the States.

Under this supremacy principle, the Red Cross is not required to comply with Tenn. Code
Ann. § 48-101-521 because it is a federal instrumentality subject to oversight by the federal
government, Congress has not authorized state regulation, and requiring the Red Cross to file
quarterly disaster-relief financial reports would amount to impermissible state regulation of its
operations.

Under federal law, the Red Cross is required to make annual financial reports about its
operations to the Secretary of Defense, "including a complete, itemized report of all receipts and
expenditures." 36 U.S.C. § 300110(a). Those reports are then audited by the Secretary of Defense
and submitted to Congress; they are publicly available. Id. § 300110(b).

Requiring the Red Cross under state law to submit quarterly disaster-relief financial reports
under § 48-101-521 would subject the Red Cross to a different, additional regulation. Having to
comply with that additional state regulation would mean that the Red Cross could not conduct its
"federal function" free from state regulation and control. See Mayo, 319 U.S. at 447; see also
Leslie Miller, Inc. v. Arkansas, 352 U.S. 187, 190 (1956) (immunity of federal instrumentalities
includes immunity from state requirements of "qualifications in addition to those that the [federal]
Government has pronounced sufficient").

In sum, because it is an instrumentality of the United States subject to federal reporting
requirements, the American Red Cross is not required to file disaster-relief financial reports under
Tenn. Code Ann. § 48-101-521.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

LAURA T. KIDWELL
Assistant Solicitor General

Requested by:
The Honorable Tre Hargett
Tennessee Secretary of State
1st Floor State Capitol
Nashville, Tennessee 37243