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 PRESENTEDWhether 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.

Tags: 1st Amendment, California, NAACP, US Supreme Court