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Supreme Court rules collection of charity donor information unconstitutional

Supreme Court rules collection of charity donor information unconstitutional

July 4, 2021
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Supreme Court rules collection of charity donor information unconstitutional

With a resounding “No!”, the Supreme Court struck a blow for freedom of speech and freedom of association.

Cato by Cato
July 4, 2021
in Breaking News, Foreground, Politics
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Supreme Court rules collection of charity donor information unconstitutional
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Last updated on July 6th, 2021 at 09:25 am

“We therefore hold that the up-front collection of Schedule Bs is facially unconstitutional…,” declared the United States Supreme Court on July 1 in the case of Americans for Prosperity Foundation v. Attorney General of California (594 U.S. ___ (2021)). At issue in this case was whether a state government could force a charitable organization to disclose the names and addresses of its larger donors as part of the state’s mandatory registration process. With a resounding “No!”, the Supreme Court struck a blow for freedom of speech and freedom of association by holding that such a requirement could have a chilling effect on the willingness of people to donate to controversial causes.

Each year the United States Internal Revenue Service requires charitable organizations to file an IRS Form 990. On this form charities list information about organizational leadership, mission, and financial matters. The Schedule B on the 990 forms, charities are also required to list the names and addresses of all individuals and organizations that donated more than $5,000 during the year to said charity. While the IRS is required to keep information on Schedule B confidential so as to protect donor identity, left-wing bureaucrats all too often “inadvertently” disclose such information to the public as a way to frighten potential conservative donors from contributing to (what they deem “controversial”) organizations. Over the last decade, left-wing groups–especially LGBT ones–have become notorious for harassing and intimidating people and organizations that donate to conservative causes and organizations. Such was the case in 2011 when an IRS bureaucrat “inadvertently” disclosed to the public the Schedule B donor list of the National Organization for Marriage (NOM) during the height of the state referenda on defining marriage as between a man and a woman. As a result of such disclosure—and the subsequent rabid attacks by radical LGBT supporters—some large donors stopped giving to NOM and some potential and large donors decided to forego giving to NOM. The chilling effect of such disclosure was clearly palpable and the outcome of certain referenda may have been affected as a result. (nota bene; NOM won damages against the IRS for wrongful disclosure in this matter.)

Over forty states require charitable organizations to first register with the state before they can solicit donations within their borders and then to file annual renewal reports if they wish to continue soliciting. Financial reports are almost always required to be submitted with such registrations/renewals, and many states require a charity to file its IRS Form 990 annual return as part of such reports. Failure to file any required reports would prevent a charity from legally operating in a state and soliciting funds there.

While most states requiring the filing of a Form 990 either do not require the Schedule B or allow charities to redact donor information on it, a few states like California require an unredacted Schedule B to be filed. Many charities, including the Americans for Prosperity Foundation, the Thomas More Law Center, and the National Organization for Marriage (NOM), protested California’s requirement to file an unredacted Schedule B because of fears that donor information could be wrongfully disclosed to the public despite California law supposedly protecting the confidentiality of such information. Indeed, the NOM example above showed how even the IRS’s iron-clad non-disclosure regime was not enough to protect confidential donor information. And each time an unredacted Schedule B is filed with a government agency, the chances of an “inadvertent” wrongful disclosure increases.

When California threatened to suspend the charitable registrations of Americans for Prosperity Foundation and the Thomas More Law Center for failure to file unredacted Schedule Bs, these two organizations brought suit against the state. The charities claimed that the disclosure requirement was unconstitutional as it violated their First Amendment rights and the rights of their donors, in particular by infringing upon the freedom of association of donors and potential donors, who may be less likely to contribute money to certain charities for fear of reprisals and harassment should their donation information become public. While the district court agreed with the charities, the liberal 9th Circuit Court of Appeals reversed the lower court decision. The Supreme Court then accepted the case on appeal and ruled in favor of the charities by holding that the California requirement was unconstitutional on its face.

The Supreme Court specifically held that the Schedule B requirement:

“’creates an unnecessary risk of chilling’ in violation of the First Amendment,…indiscriminately sweeping up the information of every major donor with reason to remain anonymous. The [charities] here, for example, introduced evidence that they and their supporters have been subject to bomb threats, protests, stalking, and physical violence…Such risks are heightened in the 21st century and seem to grow with each passing year, as ‘anyone with access to a computer [can] compile a wealth of information about’ anyone else, including such sensitive details as a person’s home address or the school attended by his children.”

The Court also held that the promises of California to keep donor information confidential did not hold water: “Here the State’s assurances of confidentiality are not worth much…After two full bench trials, the [district] court found that the Attorney General’s promise of confidentiality ‘rings hollow,’ and that ‘[d]onors and potential donors would be reasonably justified in a fear of disclosure.”

The fact that hundreds of organizations submitted briefs in support of the two charities also carried weight with the court:

“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 [charities]. Far from representing uniquely sensitive causes, these organizations span the ideological spectrum, and indeed the full range of human endeavors…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.”

The Court then declared that the fact that the charities were required to disclose the information on Schedule B to the IRS did not alter the outcome of the case: “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.”

After weighing all the arguments, the Court concluded:

“We are left to conclude that the Attorney General’s disclosure requirement imposes a widespread burden on donor’s 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 interest in administrative convenience is sufficiently important. We therefore hold the up-front collection of Schedule Bs is facially unconstitutional….”

So charitable organizations like the Americans for Prosperity Foundation, the Thomas More Law Center, and the National Organization for Marriage that protested the California donor disclosure requirement were right all along. California and other states that wrongfully required donor information for no valid purpose did create a chilling effect risk among donors and potential donors in violation of the U.S. Constitution. It is still tragic that it took years of litigation and a Supreme Court decision to defeat the designs of the largest state in America to stifle the voices of mainly conservative organizations and their donors.  But at least justice was done.

Tags: Americans for ProsperitycharitiesdonorslgbtNational Organization for MarriageState of CaliforniaThomas More Law CenterUS Supreme Court
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Cato

Cato is a staunch defender of Western Civilization and the Judeo-Christian worldview. He will end all of his articles: "And the radical LGBT agenda must be defeated" as this is the pre-eminent battle of our day.

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