SCOTUS case on disclosure of nonprofit donor names raises First Amendment questions
More than 60 years ago, the U.S. Supreme Court ruled that the state of Alabama could not require the NAACP to disclose its membership list.
In NAACP v. Alabama ex rel. Patterson, the court unanimously held that the civil rights organization had shown that disclosure of its members in the state would expose them to retaliation in the Jim Crow South.
“This court has recognized the vital relationship between freedom to associate and privacy in one’s associations,” Justice John Marshall Harlan II wrote for the court. “Inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association, particularly where a group espouses dissident beliefs.”
Next week, the high court will hear arguments in a case that is a next-generation variation of that 1958 decision. The case, Americans for Prosperity Foundation v. Rodriquez, is about the state of California’s requirement that nonprofit organizations submit a list of their top donors each year. It represents a battle between state oversight of charitable organizations and the First Amendment’s right of freedom of association.
To some observers, the case may affect campaign-disclosure laws and the court’s 2010 decision in Citizens United v. Federal Election Commission, which authorized unlimited independent political expenditures by corporations (including nonprofit ones) and unions.
“You’re seeing very different types of narratives in this case,” says Cindy M. Lott, an associate professor at Columbia University and an expert on the regulation of nonprofits. “You have amicus groups concerned about transparency versus those who want to make sure First Amendment associational rights are protected.”
Fears of a chill
The case, which will be argued April 26, stems from legal challenges by two nonprofit groups of California’s rule requiring all federal 501(c)(3) organizations to submit a list of their major donors—those who contributed at least $5,000 or who gave more than 2% of the organization’s total donations during the tax year.
The challengers say the requirement violates their rights to free speech and freedom of association and that the state has previously failed to keep the information private.
“Donors are going to be chilled if they know their information is going to be given to the government and they know their information won’t be kept confidential,” says John J. Bursch, a lawyer representing the Thomas More Law Center, a public interest law firm based in Ann Arbor, Michigan, and one of the nonprofits challenging the rule.
The other challenger is Americans for Prosperity Foundation, an Arlington, Virginia-based group that promotes free market principles and limited government. It argues that “perceived ideological opponents are hunted, vilified and targeted in ways that were unthinkable before the dawn of the internet.”
“Historic strides have often been achieved by private groups espousing ideas that others may (at a particular time and place) violently oppose,” the foundation argues in a brief. “Our country would be far less just—and the public square less diverse—if Americans could not support causes anonymously.”
To California, the case is about its oversight of more than 100,000 charities that operate in the state and a simple requirement that they file—confidentially—the same federal tax form listing their largest donors that they provide to the Internal Revenue Service each year on Schedule B of their Form 990s.
“That nonpublic reporting requirement applies evenhandedly without regard to a charity’s mission or viewpoint, and it does not compel or restrict any speech or association,” California Acting Attorney General Matthew Rodriquez argues in a brief.
The challengers contend the state has a poor track record of keeping the Schedule B information confidential. It was only in 2016, after Americans for Prosperity Foundation had sued, that the state codified a regulation to keep donor information confidential, the foundation says.
The foundation says that discovery during its litigation revealed that the Registry of Charitable Trusts maintained by the California Attorney General’s Office had posted nearly 2,000 Schedule Bs for public viewing. The group also says that a website vulnerability made some 350,000 confidential documents available to anyone who knew to tweak a URL.
The Thomas More Law Center was more blunt in its assessment of the state’s privacy record.
“California leaks confidential information like a sieve,” the group says in its brief, citing evidence from its own litigation as well as that of Americans for Prosperity Foundation.
“That makes this an easy case,” says Bursch, who is representing the Thomas More Law Center. Bursch is senior counsel and vice president of appellate advocacy with Alliance Defending Freedom, a Scottsdale, Arizona-based public interest law firm.
The groups won in separate trials but lost in the San Francisco-based 9th Circuit U.S. Court of Appeals, which applied Supreme Court decisions analyzing public-disclosure requirements in the election context and held that the First Amendment permits the government to compel the disclosure of a private organization’s donors so long as there is “a substantial relation between the disclosure requirement and a sufficiently important government interest.”
Keeping out the ‘bad apples’
Advocates suggest there are numerous reasons donors wish to remain anonymous. One is to avoid being inundated with requests from other charities. Another is a fear of harassment. Several groups filed amicus briefs citing such concerns.
The ChinaAid Association, a Midland, Texas-based nonprofit that promotes religious freedom and the rule of law in China, warns in a brief that its U.S. donors or their family members in China would be exposed to reprisals from the Chinese government, which the group contends would have little difficulty hacking into California’s charity registry.
California says it its brief that “there have at times been shortcomings” with confidentiality of the documents but that it has made fixes.
The challengers argue that even if the information is being protected, the state doesn’t need nonprofit groups to submit the donor lists because it rarely uses them for routine oversight and can quickly acquire the information from any charity suspected of abuses.
“They can get this on a need-to-know basis,” Bursch says.
California responds that its requirement “mandates reporting to state charity regulators only the same information that tax-exempt entities already provide to the federal government” and “state charity regulators routinely review Schedule Bs as part of their evaluation of complaints.”
Ellen Aprill, a professor of tax law at Loyola Marymount University’s Loyola Law School in Los Angeles, says the donor disclosure requirement provides a deterrent effect against wrongdoing in the nonprofit sector.
“We don’t want bad apples in the sector because that hurts the good apples,” says Aprill, who joined an amicus brief in support of the state by scholars of the law of nonprofit organizations.
Lott, the Columbia professor, also joined the scholars’ brief. She says there is much focus among the challengers and their supporters on public disclosure of donors when the listing California requires is intended to remain confidential.
“Here, it is disclosure to the state only,” she says. “It means you are reporting to the government.”
A political lens on the case
The California case has taken on more political overtones as it gets closer to argument.
One of the state’s own allies says it is not a case about the regulation of nonprofits at all.
“This is a campaign finance case cloaked in charity law clothing,” says an amicus brief from the National Council of Nonprofits. The group laments that the California case has been drawn into “a long-running war over campaign-finance disclosure issues with fierce battles between those pushing for anonymity of contributions and campaign finance expenditures versus those pushing for full disclosure to ban ‘dark money.’”
A group of 15 Democratic U.S. senators said the nonprofits’ case “is just the latest move in the steady and methodical campaign pursued by powerful interests to both cement and obscure their influence over the public sphere since this court’s decision in Citizens United.”
Two of the signers of that brief—Sen. Sheldon Whitehouse, D-R.I., and and Sen. Richard Blumenthal, D-Conn.—along with U.S. Rep. Hank Johnson, D-Ga., sent a letter to Justice Amy Coney Barrett asking that she recuse herself from the case because Americans for Prosperity, a sister organization to Americans for Prosperity Foundation, financed an advertising campaign to support Barrett’s confirmation last fall.
Americans for Prosperity and its foundation were founded by Charles G. Koch and the late David H. Koch, the wealthy brothers known for their support of libertarian and conservative causes.
In an earlier Supreme Court brief, Americans for Prosperity Foundation had a simple response to the suggestions about the potential influence of a decision in the case on campaign finance or politics.
“This case has nothing to do with elections,” the brief said.