What Makes the Ossa Act Different? The Law, the Precedent, and the Gap

What Makes the Ossa Act Different?

This Is Not About Regulating Belief. It Is About Regulating Commercial Conduct.

The United States already regulates charitable fundraising, deceptive business practices, health claims, professional services, and—in some jurisdictions—paid psychic and fortune-telling activities. What does not appear to exist at the federal level is one comprehensive framework bringing these protections together for the commercial spiritual and New Age marketplace.

Based on the federal, state, and local authorities reviewed to date, we have not identified an existing federal statute that creates the same combination of practitioner accountability, consumer disclosures, commercial-service standards, donation-versus-payment rules, and safeguards proposed by the Ossa Act.

The Ossa Act is therefore not based on the proposition that government has never regulated donations, spiritual businesses, or deceptive claims. It has. The issue is that the existing protections are fragmented.

1. Federal Law Already Recognizes That Calling Money a “Donation” Does Not Automatically Make It a Donation

Federal tax law expressly recognizes a category called a “quid pro quo contribution”—a payment made partly as a contribution and partly in exchange for goods or services.

Under 26 U.S.C. § 6115, when a qualifying charitable organization receives a quid pro quo contribution exceeding $75, it generally must provide the donor with a written disclosure explaining that the tax-deductible portion is limited to the amount exceeding the value of the goods or services received and provide a good-faith estimate of their value.

Federal law contains an important exception for certain intangible religious benefits supplied by organizations organized exclusively for religious purposes. That distinction matters: genuine religious giving and commercial transactions are not automatically treated as the same thing.

The United States Supreme Court confronted this issue directly in Hernandez v. Commissioner, 490 U.S. 680 (1989). Scientology organizations charged what were described as “fixed donations” for auditing and training sessions. The Court held that the payments were not deductible charitable contributions because the participants received identifiable services in return. The Court characterized the transactions as quid pro quo exchanges.

That precedent establishes an important principle for the Ossa Act: the legal character of a transaction can depend on what is actually happening, not merely on what the payment is called. A practitioner should not automatically be able to convert a commercial transaction into an unrestricted “donation” simply by changing the terminology.

2. Arizona Already Regulates Misrepresentation Surrounding Donations

Arizona law also recognizes that the word “donation” can be misused. Under A.R.S. § 44-6561, it is unlawful in connection with charitable solicitation to knowingly misrepresent that a donation is tax deductible, is going to a nonprofit corporation, or qualifies the donor for a tax credit.

Arizona's broader Consumer Fraud Act, A.R.S. § 44-1522, also prohibits deception, fraud, false promises, misrepresentations, and concealment of material facts in connection with the sale or advertising of merchandise. This demonstrates that Arizona already recognizes a legitimate government interest in protecting consumers from deceptive financial representations.

3. Arizona Once Required Broad Charity Registration—but That Requirement Was Repealed

Arizona previously required charitable organizations to register with the Arizona Secretary of State before soliciting contributions. In 2013, House Bill 2457 repealed the broader charitable-organization registration system.

The Arizona Secretary of State currently states that the office requires only veterans’ charitable organizations to file under the specific veterans-charity statute and that the previous filing requirement applying generally to charities ended on September 13, 2013. Arizona therefore has consumer-fraud and solicitation laws without the former broad registration system for ordinary charitable organizations.

4. Some American Cities Already Regulate Paid Psychic Activity—and Some Explicitly Include “Donations”

Palm Springs, California, Municipal Code Chapter 5.56 regulates psychic activities. Its definition of activity performed “for pay” expressly includes receiving a fee, reward, donation, loan, or anything of value.

The Palm Springs ordinance requires a permit for covered fortune-telling activities, provides for an application and investigation process, and contains an exception addressing bona fide religious practice. Its covered activities include forms of clairvoyance, mediumship, prophecy, astrology, palmistry, crystal gazing, telepathy, and similar practices.

Palm Desert, California, likewise regulates specified fortune-telling, spiritist, psychic, mediumistic, prophetic, occult, and clairvoyant activities when performed for consideration and refers to compensation that may take the form of a fee, donation, gratuity, reward, or other compensation.

These ordinances provide concrete precedent for one of the principles behind the Ossa Act: governments have previously recognized that describing compensation as a “donation” does not necessarily remove an otherwise commercial transaction from regulation.

5. Virginia Has Also Authorized Regulation of Compensated Fortune-Telling

Under Virginia Code § 58.1-3726, local governments may impose license taxation on compensated fortune-tellers, clairvoyants, and practitioners of palmistry. A locality may also make engaging in such business without the required license a Class 3 misdemeanor. This is another example of the existing patchwork rather than a comprehensive federal system.

6. Federal Consumer-Protection Law Already Reaches Deceptive Commercial Claims

Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, prohibits unfair or deceptive acts or practices affecting commerce. The Federal Trade Commission explains that a deceptive practice can involve a material representation, omission, or practice likely to mislead a reasonable consumer.

Health-related commercial claims receive particular scrutiny. FTC guidance states that objective health claims generally require appropriate scientific substantiation and that advertising must be truthful and not misleading. A seller therefore does not automatically escape ordinary advertising law merely because a product or service is described using spiritual, energetic, holistic, or metaphysical terminology.

The Ossa Act would build on the same consumer-protection principle while addressing areas that ordinary advertising law does not organize into a practitioner-specific accountability system.

7. The First Amendment Creates an Important Boundary

Any serious proposal must also acknowledge what government cannot constitutionally do. The Supreme Court has repeatedly held that charitable and religious solicitation can involve protected First Amendment activity.

Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620 (1980), struck down an overly broad fundraising restriction. Riley v. National Federation of the Blind, 487 U.S. 781 (1988), struck down restrictions tied to the percentage professional fundraisers retained. Watchtower Bible & Tract Society v. Village of Stratton, 536 U.S. 150 (2002), struck down a sweeping permit requirement for door-to-door advocacy that reached religious proselytizing and other protected speech.

Cantwell v. Connecticut, 310 U.S. 296 (1940), drew a critical distinction: government may protect the public against fraudulent solicitation, but it cannot give officials unconstitutional authority to decide which religious causes are legitimate before allowing their exercise.

Those cases establish an important boundary for the Ossa Act: the government should not decide whether someone’s spiritual beliefs are true. The focus must instead be on objectively regulable conduct—money, representations, commercial transactions, safety, disclosure, fraud, recordkeeping, and consumer protection.

8. Fraud Does Not Become Constitutionally Protected Because It Is Connected to a Cause

In Illinois ex rel. Madigan v. Telemarketing Associates, Inc., 538 U.S. 600 (2003), the Supreme Court reaffirmed that charitable solicitation receives constitutional protection while also making clear that fraudulent charitable solicitation is not protected simply because fundraising involves speech.

This distinction is fundamental to the Ossa Act. The proposal should protect spiritual freedom while giving consumers meaningful remedies when commercial conduct crosses into deception, exploitation, undisclosed financial arrangements, or objectively false commercial representations.

9. Courts Have Also Warned Government Against Simply Banning Spiritual Speech

In Spiritual Psychic Science Church of Truth, Inc. v. City of Azusa, 39 Cal. 3d 501 (1985), the California Supreme Court invalidated an ordinance broadly prohibiting compensated astrology, clairvoyance, fortune-telling, prophecy, spiritual readings, and similar activities.

That decision demonstrates why effective legislation should not merely declare certain spiritual practices illegal. A consumer-protection law is substantially stronger when it regulates demonstrable conduct—fraud, undisclosed transactions, false commercial claims, exploitation, dangerous practices, and other objective behavior—rather than attempting to regulate whether a spiritual teaching itself is “true.”

10. Sedona Already Licenses Businesses—but That Is Not the Same as Practitioner Accountability

Sedona requires businesses operating within city limits, including qualifying home-based businesses, to maintain a city business license. Sedona also has a substantial spiritual and metaphysical economy that includes readings, wellness services, healing and therapy offerings, retreats, ceremonies, classes, and metaphysical retail.

A general business license, however, is fundamentally different from a regulatory framework establishing practitioner-specific consumer disclosures, transaction standards, complaint mechanisms, financial transparency, or standards governing paid spiritual services.

So What Is Actually New About the Ossa Act?

The legal landscape is a patchwork. Federal tax law addresses charitable deductions and quid pro quo payments. Federal consumer-protection law addresses unfair and deceptive commercial practices. Arizona law prohibits certain deceptive donation representations. Some cities regulate compensated psychic practices. Some jurisdictions license or tax fortune-telling businesses. Health regulators police certain medical and product claims. Constitutional law protects religious belief, spiritual expression, advocacy, and legitimate charitable solicitation.

What our research has not identified is an existing federal law that combines those separate concepts into one national consumer-protection framework specifically designed for the commercial spiritual and New Age marketplace.

The proposed Ossa Act seeks to address that gap through a framework centered on:

• Clear accountability for commercial spiritual practitioners.

• Transparent disclosure of practitioner status, services, fees, and material representations.

• Clear standards distinguishing genuine voluntary gifts from payments connected to commercial services.

• Consumer protections against fraud, deceptive claims, financial exploitation, and materially misleading representations.

• Appropriate safeguards when commercial spiritual claims cross into health or safety claims.

• Recordkeeping and complaint procedures sufficient to investigate legitimate allegations.

• Enforcement based on conduct—not on whether government agrees with a person's theology, spirituality, philosophy, or metaphysical beliefs.

• Explicit protection for legitimate religious exercise, private spirituality, free speech, and truly voluntary giving.

The Principle

The Ossa Act is not an attempt to tell Americans what they may believe.

Believe whatever you want. Pray however you want. Meditate however you want. Practice your spirituality. Teach your philosophy. Give freely to the people and organizations you believe in.

But when spirituality becomes a commercial transaction—when money changes hands in exchange for services, promises, healing claims, retreats, readings, counseling, energetic work, certifications, or other benefits—the consumer deserves transparency and basic protection.

Freedom of belief should remain protected. Fraud should not. And the word “donation” should not become a magic word that automatically removes a commercial transaction from accountability.

Selected Authorities and Source Links

Federal quid pro quo contribution rule: 26 U.S.C. § 6115

Supreme Court fixed-donation precedent: Hernandez v. Commissioner, 490 U.S. 680 (1989)

First Amendment charitable-solicitation precedent: Village of Schaumburg v. Citizens for a Better Environment

Professional fundraising precedent: Riley v. National Federation of the Blind

FTC guidance on health-product claims: Health Products Compliance Guidance

Example of local psychic-activity regulation: Palm Springs Municipal Code Chapter 5.56

Authorities reviewed also include 26 U.S.C. § 170; Federal Trade Commission Act § 5, 15 U.S.C. § 45; A.R.S. §§ 44-1522, 44-6551, and 44-6561; Arizona H.B. 2457 (2013); Palm Desert Municipal Code Chapter 9.48; Virginia Code § 58.1-3726; Cantwell v. Connecticut, 310 U.S. 296 (1940); Watchtower Bible & Tract Society v. Village of Stratton, 536 U.S. 150 (2002); Illinois ex rel. Madigan v. Telemarketing Associates, Inc., 538 U.S. 600 (2003); and Spiritual Psychic Science Church of Truth, Inc. v. City of Azusa, 39 Cal. 3d 501 (1985).

Research note: This summary describes authorities located during our research and is intended for public-policy and advocacy purposes. The statement that we have not identified a matching federal framework is deliberately narrower than claiming that no similar proposal has ever been introduced anywhere in American history.