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Supreme Court Strikes Down California Policy Forcing Disclosure Of Non-Profit Donors To State Regulators

Supreme Court Strikes Down California Policy Forcing Disclosure Of Non-Profit Donors To State Regulators

In an Opinion issued today, the Supreme Court has stricken a California policy requiring disclosure of large non-profit donor information to state regulators. The case establishes the important principle that if you want to make, ahem, large donations to organizations like the Legal Insurrection Foundation, your identify would not need to be disclosed on a routine basis to state regulators.

The Internal Revenue Service requires non-profits to disclose certain large donors when filing annual Form 990 returns. The information, on Schedule B, is supposed to be non-public, unlike the remainder of the Form 990.

This confidentiality of donor information is of great importance to Legal Insurrection Foundation and other right-of-center non-profits given the long and vicious history or supporters of conservative causes (whether non-profits or candidates) being harassed and targeted for cancelation. But some state charity regulators, including California, require that the entire Form 990, including Schedule B, be filed with the state when renewing state charitable registration.

That raises concerns that states will be more susceptible to leaks of this information for political purposes. The mere threat of disclosure can be enough to chill donors. This issue may not be important to the general public, but it is important to …. Legal Insurrection Foundation.

The California policy was challenged by Americans For Prosperity (AFP) as a 1st Amendment violation. AFP won at the District Court, but lost in the 9th Circuit.

In its Petition for Writ of Certiorari, AFP presented the case as follows:

QUESTION PRESENTED

Whether the exacting scrutiny this Court has long required of laws that abridge the freedoms of speech and association outside the election context—as called for by NAACP v. Alabama ex rel. Patterson, 357 U.S. 449 (1958), and its progeny—can be satisfied absent any showing that a blanket governmental demand for the individual identities and addresses of major donors to private nonprofit organizations is narrowly tailored to an asserted law-enforcement interest.

In its Brief, AFP summarized the case as follows:

“[P]rivacy in group association” has long been recognized as “indispensable to preservation of [the] freedom of association” protected by the First Amendment. NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 462 (1958). As such, a State may not compel a private group to disclose the identities of its members and donors unless such compelled disclosure is narrowly tailored to an overriding government interest.

Yet California seeks to shed these established First Amendment strictures. Its Attorney General claims license to demand (on pain of sanction) that all nonprofits, in order to operate in California, first produce the names of their top donors nationwide as listed on the confidential IRS Form 990 Schedule B.

So long as this Court’s precedents stand, California’s disclosure demand cannot. The record makes clear that California has no need to compel this sensitive donor information to serve any law-enforcement goal. California virtually never uses Schedule B for law-enforcement purposes. And State officials can readily obtain the same information when needed through the far narrower alternative of a targeted audit letter or subpoena. At the same time, the record amply demonstrates the chilling effect of California’s overbroad approach to compiling donor information. Violating purported assurances of confidentiality, California employees posted over 1,800 confidential Schedule B forms listing the names and addresses of charitable donors on a public website. Such misuse is the predictable result of such indiscriminate collection, and it subjects all charitable donors to potential intimidation, retaliation, and harassment. Indeed, the specter of harmful publicity chills charitable donors from contributing to private charities in the first place, potentially drying up charities’ most important sources of support and further inhibiting the freedom of association.

Caifornia, in its Brief, contended the policy was lawful:

Petitioners principally contend that California’s requirement is unconstitutional on its face. But they have not demonstrated that it has a broad chilling effect across the State’s large and diverse population of charities, as would be required to justify the drastic remedy of facial invalidation. Their contention that state charity regulators virtually never use major-donor information for oversight or enforcement purposes is contradicted by the record. And their arguments misunderstand the Attorney General’s longstanding role—grounded in the common law—in supervising charities and protecting charitable assets for their intended public purposes.

The consensus after oral argument was that the Court would rule in favor of AFP.

In the Opinion just issued, authored by Chief Justice Roberts, with a lot of concurring opinions and some parts joined, others not, but basically a 6-3 split, the Court threw out the California policy.

Here’s key parts of the Roberts Majority Opinion, first finding that California had no legitimate law enforcement interest in requiring every charity to disclose major donors:

To solicit contributions in California, charitable organizations must disclose to the state Attorney General’s Office the identities of their major donors. The State contends that having this information on hand makes it easier to police misconduct by charities. We must decide whether California’s disclosure requirement violates the First Amendment right to free association….

We do not doubt that California has an important interest in preventing wrongdoing by charitable organizations….

There is a dramatic mismatch, however, between the interest that the Attorney General seeks to promote and the disclosure regime that he has implemented in service of that end. Recall that 60,000 charities renew their registrations each year, and nearly all are required to file a Schedule B. Each Schedule B, in turn, contains information about a charity’s top donors—a small handful of individuals in some cases, but hundreds in others. See App. in No. 19–251, p. 319. This information includes donors’ names and the total contributions they have made to the charity, as well as their addresses.

Given the amount and sensitivity of this information harvested by the State, one would expect Schedule B collection to form an integral part of California’s fraud detection efforts. It does not. To the contrary, the record amply supports the District Court’s finding that there was not “a single, concrete instance in which pre-investigation collection of a Schedule B did anything to advance the Attorney General’s investigative, regulatory or enforcement efforts.” 182 F. Supp. 3d, at 1055….

The upshot is that California casts a dragnet for sensitive donor information from tens of thousands of charities each year, even though that information will become relevant in only a small number of cases involving filed complaints….

In reality, then, California’s interest is less in investigating fraud and more in ease of administration. This interest, however, cannot justify the disclosure requirement.

Next, Roberts found the policy invalid on its face:

The foregoing discussion also makes clear why a facial challenge is appropriate in these cases….

We have no trouble concluding here that the Attorney General’s disclosure requirement is overbroad. The lack of tailoring to the State’s investigative goals is categorical—present in every case—as is the weakness of the State’s interest in administrative convenience. Every demand that might chill association therefore fails exacting scrutiny.

Roberts found it significant that the amicus briefs filed against the policy were across the political spectrum — neither left nor right wants major donors disclosed:

The gravity of the privacy concerns in this context is further underscored by the filings of hundreds of organizations as amici curiae in support of the petitioners. Far from representing uniquely sensitive causes, these organizations span the ideological spectrum, and indeed the full range of human endeavors: from the American Civil Liberties Union to the Proposition 8 Legal Defense Fund; from the Council on American-Islamic Relations to the Zionist Organization of America; from Feeding America—Eastern Wisconsin to PBS Reno. The deterrent effect feared by these organizations is real and pervasive, even if their concerns are not shared by every single charity operating or raising funds in California.

Roberts rejected the idea that dislosure to the IRS justified dicslosure to California:

Finally, California’s demand for Schedule Bs cannot be saved by the fact that donor information is already disclosed to the IRS as a condition of federal tax-exempt status. For one thing, each governmental demand for disclosure brings with it an additional risk of chill. For another, revenue collection efforts and conferral of tax-exempt status may raise issues not presented by California’s disclosure requirement, which can prevent charities from operating in the State altogether…

We are left to conclude that the Attorney General’s disclosure requirement imposes a widespread burden on donors’ associational rights. And this burden cannot be justified on the ground that the regime is narrowly tailored to investigating charitable wrongdoing, or that the State’s in-terest in administrative convenience is sufficiently important. We therefore hold that the up-front collection ofSchedule Bs is facially unconstitutional…

Thomas and Alito wrote separate concurrences, fully joining the key findings, but raising other issues.

Sotomayor wrote the dissent, joined by Breyer and Kagan:

Although this Court is protective of First Amendmentrights, it typically requires that plaintiffs demonstrate an actual First Amendment burden before demanding that a law be narrowly tailored to the government’s interests, never mind striking the law down in its entirety. Not so today. Today, the Court holds that reporting and disclosure requirements must be narrowly tailored even if a plaintiff demonstrates no burden at all. The same scrutiny the Court applied when NAACP members in the Jim Crow South did not want to disclose their membership for fear of reprisals and violence now applies equally in the case of donors only too happy to publicize their names across the websites and walls of the organizations they support.

California oversees nearly a quarter of this Nation’s charitable assets. As part of that oversight, it investigates and prosecutes charitable fraud, relying in part on a registrywhere it collects and keeps charitable organizations’ tax forms. The majority holds that a California regulation requiring charitable organizations to disclose tax forms containing the names and contributions of their top donors unconstitutionally burdens the right to associate even if the forms are not publicly disclosed.

In so holding, the Court discards its decades-long requirement that, to establish a cognizable burden on their associational rights, plaintiffs must plead and prove that disclosure will likely expose them to objective harms, such as threats, harassment, or reprisals. It also departs from the traditional, nuanced approach to First Amendment challenges, whereby the degree of means-end tailoring required is commensurate to the actual burdens on associational rights. Finally, it recklessly holds a state regulation facially invalid despite petitioners’ failure to show that a substantial proportion of those affected would prefer anonymity, much less that they are objectively burdened by the loss of it.

Today’s analysis marks reporting and disclosure requirements with a bull’s-eye. Regulated entities who wish to avoid their obligations can do so by vaguely waving toward First Amendment “privacy concerns.” Ante, at 17. It does not matter if not a single individual risks experiencing a single reprisal from disclosure, or if the vast majority of those affected would happily comply. That is all irrelevant to the Court’s determination that California’s Schedule B requirement is facially unconstitutional. Neither precedent nor common sense supports such a result. I respectfully dissent.

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Comments

Overturning the 9th Circuit, some things never change.

California is the home of Cancel Culture, and they work to get people fired based on political affiliation.

Apolitical types are just beginning to notice.

This is the correct decision. Though I still have two reservations. Political contributions to a particular candidate or party along with transfer of funds to another organization which then provides funding to a candidate or party.

    Milhouse in reply to CommoChief. | July 1, 2021 at 1:17 pm

    Donations to a candidate’s campaign are still public. Is your reservation that you think they shouldn’t be, or that you thought this decision changed that?

    And what’s your reservation on the second point? What’s the compelling government interest in knowing who donates to entities not associated with candidates, just because those entities themselves make public donations to candidates? Do you also want to know who donates to those donors, and in turn who donates to them, and so ad infinitum?

      CommoChief in reply to Milhouse. | July 1, 2021 at 1:39 pm

      When we have a system of laws establishing limits on campaign contributions and require public disclosure of donors then those laws shouldn’t establish a legally permissible alternative.

      If I donate $1 million to a ‘non profit’ organization and that organization then donates directly to a political campaign or to an intermediary who then donates to a political campaign that seems to significantly undercut the rationale for the disclosure requirements and limits on campaign contributions.

      Where an organization does not directly or via an intermediary evade these campaign finance limits and disclosure requirements their donor list should remain private.

      Where an organization does make direct or indirect campaign contributions the diner information should be public.

      Having said that, I am perfectly happy to accept the removal of these campaign laws. However, if we are going to insist upon retaining them then we shouldn’t enable a process that works to evade them.

        Milhouse in reply to CommoChief. | July 1, 2021 at 3:48 pm

        You have things backwards. The first amendment protects people’s right to use whatever resources they have available to try to persuade people how to vote. The only reason the government is allowed to regulate direct contributions to campaigns is because it has a compelling interest in preventing the bribery of public officials, and limiting donations is narrowly tailored to protect that interest, while requiring disclosure is necessary to enforce the donation limits. When someone donates to a non-candidate entity there’s no potential for corruption, so the government can’t regulate it.

        And when that entity then makes a donation to a candidate, unrelated to the first donation that it received, there’s no great scope for corruption. The candidate doesn’t necessarily know who donated to the entity, but even if he did, that donor didn’t make the decision for the entity to give to the candidate.

        Sure, it’s possible to have the original donor tell the entity where it should direct his donation, and to inform the candidate about his donation; or to have an entity that makes it known that everything it receives is directed to a specific candidate, and that the donor lists will be passed on to the candidate, but that’s not the normal case.

          CommoChief in reply to Milhouse. | July 1, 2021 at 4:08 pm

          Milhouse ,

          I understand that others have a competing point of view. Currently that view is ascendant. Tomorrow who knows?

          I am a small l Libertarian. I disagree with almost every decision to restrict the liberty of individual Citizens. However, when those restrictions are imposed then they should be adhered to in spirit and letter, IMO.

          If we have collectively decided that individuals may only contribute x amount to a campaign and those donor names must be disclosed then ok.

          Let’s actually limit the donations and disclose the donors. All contributions and every donor without exception.

          Either these restrictions on liberty are necessary under the rationale that our Republic is in danger of compromise or they are not necessary.

          I would see them all removed. Those who argue for the necessity of their retention shouldn’t have a problem with ensuring they are adhered to in every respect without exception.

          Milhouse in reply to Milhouse. | July 1, 2021 at 7:50 pm

          You don’t seem to understand that the basis for the restrictions on direct donations from an individual to a candidate’s campaign is specifically the risk that it is a bribe. I’ve seen it suggested that this could be solved by forcing donations to be anonymous, but it would be impossible to enforce that. So the SCOTUS held that this restriction is narrowly tailored enough, to a compelling enough government interest, that it survives strict scrutiny.

          In any other situation there is no such risk, or at least not a big enough risk to justify a restriction on a core first amendment right.

          CommoChief in reply to Milhouse. | July 1, 2021 at 9:47 pm

          Milhouse,

          I understand that some, including the CT, find the logic of the danger of a ‘bribe’ compelling. I don’t. I think Buckley is convoluted and inconsistent in its reasoning. How is a limitation on the amount of $ prohibiting a Quid pro Quo (bribe)? It isn’t, all the cap does is limit the amount of the ‘bribe’; the $ still changes hands just in lesser amounts.

          There is an old story reflective of this.
          A billionaire asks his dinner date if she will spend the evening in bed at his hotel suite this evening and every evening. He promises to buy her the finest things in life. She says yes, looking forward to a life of ease.

          He then says what about just tonight and for $20, she says no I am not that kind of girl’. He responds ‘you have already revealed what you are, we are simply negotiating the price’.

          In any event requiring public disclosure of the donor and amounts provides more information to the electorate. Better sunlight than secrecy for political contributions.

          In 2016 the 3rd Circuit ruled in Delaware Strong Families v Denn that the state’s interest in “increasing information concerning those who support the candidates,” Buckley v. Valeo, permits it to condition a charity’s publication of a nonpartisan voter education guide, which lists all candidates equally and makes no endorsements, upon the immediate and public disclosures of the names and addresses of individuals making unrelated donations over the previous four years.

          SCOTUS denied cert, which isn’t a ruling but they did have a ripe case and choose not to hear it, so the 3rd Circuit decision stands. Even Buckley for all it’s flaws, acknowledges the legitimate state interest is served in transparency of campaign donations.

          I simply contend that if we require disclosure of direct contributions out of a concern for a possible quid pro quo, that we should apply that same concern when indirect contributions are made. Why would we provide a legal alternative to these contribution and disclosure requirements through intermediaries?

          Please note that I would not apply this to an organization that does not make political contributions or endorsements of candidates or lobbying for govt funds. As long as ‘save the squirrels org’ is confined to funding research, educational activities, publishing information about squirrels ect with the funds they raise then the donors and their contributions should be private.

          We are going to disagree on this in all likelihood.

          Milhouse in reply to Milhouse. | July 2, 2021 at 1:47 am

          I believe the reasoning behind the cap is that a candidate is unlikely to do improper favors for someone who gave him personally nothing, and merely gave his campaign a relatively small amount that many other people have also given. “Those people don’t expect favors, so who is this guy who thinks he owns me?”

          Giving to an entity that merely endorses candidates is extremely unlikely to be a bribe. What would the person tell the candidate when he comes asking for something? “You know, I gave $1M to Save the Squirrels”. “Oh yeah? What’s that to me?” “Well, they endorsed you, you know”. “Yeah, so did lots of organizations. And they endorsed lots of other people too. What have you done for me?”

          Even organizations that make donations, same story. The benefit the candidate receives personally from a donation to such an organization is too diffuse to induce him to do something improper for the donor.

          Whereas donations directly to the candidate’s campaign, well, in principle candidates aren’t supposed to get any personal benefit from their campaigns, but everyone knows ways around that. Campaign donations were the go-to bribe, before they were regulated.

        henrybowman in reply to CommoChief. | July 1, 2021 at 9:54 pm

        I think you are describing PACs and SuperPACs, and they already have specific disclosure laws enforced upon them, presumably to “fight dark money.” Any org that performs transfers like that has to register as a PAC. Do you have a particular one in mind that hasn’t?

          CommoChief in reply to henrybowman. | July 2, 2021 at 7:56 am

          Henry,

          In my original post I was simply stating my own policy preferences. I wasn’t looking to rehash 1st Amendment precedent.

          Let me try a restatement of that preference.

          Campaign disclosure is the preference of others. I don’t think they mitigate quid pro quo. However if we have these laws then
          all $ (or in kind) contributions and the names of all donors to partisan political activities should be public. No intermediary no exceptions.

Uncharacteristically brave of Roberts to go against precedent — especially for a principle more in keeping with American liberty.

I wonder who fortified his Wheaties?

    Milhouse in reply to McGehee. | July 1, 2021 at 1:12 pm

    What are you talking about? What precedent did he go against? On the contrary, this result is pretty much required by the NAACP precedent. The exact same considerations apply, notwithstanding the dissent’s closing its eyes tightly to reality.

      The dissenters seem convinced precedent was on their side, and Roberts has a history of going along with such assertions.

        Milhouse in reply to McGehee. | July 1, 2021 at 3:49 pm

        No, he doesn’t. He has a history of going along with actual precedent, and here the precedent was on our side.

          4rdm2 in reply to Milhouse. | July 2, 2021 at 8:13 am

          Milhouse, doesn’t it get embarrassing asserting that red is green and getting run over at the crosswalk? You know that isn’t true about Roberts so why assert that it is?

          Milhouse in reply to Milhouse. | July 4, 2021 at 4:28 am

          You tell me. What I wrote about Roberts is the plain truth. You are the one who is pulling nonsense out of your rear end.

      4rdm2 in reply to Milhouse. | July 2, 2021 at 8:12 am

      Being required by precedent doesn’t usually effect Roberts all that much in his quest to split the baby and avoid upsetting leftists where at all possible.

    Kevin in reply to McGehee. | July 1, 2021 at 6:36 pm

    Roberts had enough backup with the other 5 who concurred to make him want to be the one to write the decision. He still hasn’t got a hair on his ass, because of the way he created Obamacare’s reason to exist out of whole cloth. That was even worse than Roe, because the text of the law plainly stated its intent, but he twisted himself into a knot making his BS decision. There isn’t a penumbra anywhere that changes the fact that he caved to the media and Obamites. He uses at least one decision each session to try to atone for his egregious actions in 2012. This is one where he thinks that conservatives may say, “Roberts is a conservative after all”. Well, he is wrong. If there is ever an abortion case or a gun control case that he allows to be heard by the whole court that may actually put abortion law back in the hands of the states or would return the 2nd Amendment to its rightful place as the law of all America, he will fold up like a cheap suit. He’s worse than Warren ever was, because you at least knew Warren was a nutcase. With Roberts, you never know which way he’ll flip flop.

      Milhouse in reply to Kevin. | July 1, 2021 at 7:53 pm

      Congress’s intent is irrelevant, and its stated intent even more so. What matters is what it actually did, not what it says it did. Where would we be if we went around believing Congress all the time.

      What is your opinion of the 1930s precedent Roberts cited, where Congress purportedly enacted a “tax”, but the court found that it was not a tax at all but a penalty, and therefore the law was unconstitutional. Do you think the court was wrong, because Congress said it was a tax?! I don’t believe you think that. I think you agree with that decision, as all reasonable people would. So why is this one different?

        4rdm2 in reply to Milhouse. | July 2, 2021 at 10:40 am

        That Roberts was searching desperately for a way to validate Obamacare and not upset his cocktail party buddies?

        Milhouse in reply to Milhouse. | July 4, 2021 at 4:29 am

        Answer the damn question. Do you think the 1930s court should have allowed that so-called “tax”, just because Congress said that’s what it was?

This strikes me as a parallel to the Loki conversation with Agent Mobius, only with leaking confidential information to the press.

Loki : I’d never stab anyone in the back. That’s such a boring form of betrayal.

Mobius : Loki, I’ve studied almost every moment of your entire life. You’ve literally stabbed people in the back, like, 50 times.

Loki : …. Well I’ll never do it again.

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