The U.S. Supreme Court is hearing argument on the critical nonprofit donor disclosure case AFPF v. Rodriquez (formerly AFPF v. Becerra) April 26.
As a reminder, this case pertains to the state of California requiring that all nonprofits operating in the state turn over unredacted versions of their IRS 990 Form Schedule B. This attachment lists the names, addresses, and the amount that substantial donors contributed to an organization within a tax year – highly sensitive information.
The Americans for Prosperity Foundation (AFPF) sued the state of California arguing that this donor disclosure requirement violated First Amendment rights to privately associate. The Roundtable submitted two amicus briefs in support of AFPF, which you can read here and here.
Disclosure advocates may claim to seek increased transparency in the nonprofit world. Instead, they are stripping donors of their right to privacy and creating an environment that will drive donors away from supporting the causes they believe in.
Here are four arguments California gets WRONG about donor privacy in this case:
1. Disclosure is necessary for the state to investigate.
In 2015, Americans for Prosperity Foundation filed a lawsuit against the state of California after refusing to comply with regulations that it file its Form 990 Schedule B with the state as part of periodic reporting. On appeal, California’s attorney general argued that the Schedule B Form was needed for investigatory purposes. They sought the information to determine whether an organization violated the law, including laws against self-dealing, improper loans, interested persons or illegal or unfair business practices.
A lower court was unpersuaded. An attorney for the state testified that he had successfully audited and found wrongdoing by charities without the full Schedule B and that he was able to obtain the same information through other means. Furthermore, as AFPF noted in their case brief, the attorney general’s office searched 10 years of records and identified that 0.93% of investigations (five out of 540 investigations) used Schedule B. Even in each of those instances, staff could not testify whether the Schedule B was obtained through the mandate or other means.
Judge Manuel Real of the U.S. District Court concluded in 2016 (AFPF v. Harris): “It is clear that the attorney general’s purported Schedule B submission requirement demonstrably played no role in advancing the attorney general’s law enforcement goals for the past ten years. The record before the Court lacks even 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.”
2. The state will keep confidential donor information private.
California has argued that a Schedule B is not for public use. Yet, the state’s Registry of Charitable Trusts electronically stores the Schedule Bs.
We don’t live in a perfect world. Data breaches happen to websites of the biggest companies and best-funded organizations. Why should we expect that even a fully-funded state office website wouldn’t be hacked? Or worse, that a staffer might accidentally or willfully post sensitive material online?
The attorney general admitted to the Court that the Registry is underfunded, understaffed and underequipped and the Registrar admitted that separating out Schedule Bs and other confidential materials from public filings is work where “there is room for errors to be made.” Unauthorized disclosures or data breaches is a very real problem.
This nightmare scenario played out during the litigation of AFPF’s case. The organization discovered that over 1,400 Schedule Bs were publicly available on the Registry’s website. The Schedule B for Planned Parenthood Affiliates of California was available online, for example. It’s not hard to imagine that anti-abortion activists could turn a bunch of Schedule Bs into hit lists.
All of those confidential documents were removed within a day, but the state could not undo the damage done. Once, citizens (charities) have lost trust in their government, it can’t be regained. The U.S. District Court agreed, writing, “Once a confidential Schedule B has been publicly disseminated via the internet, there is no way to meaningfully restore confidentiality.”
3. Public disclosure has no impact on giving to organizations.
Disclosure advocates might claim that committed donors will continue to give even if they’ve been unmasked. After all, many donors are willing to put their names on buildings, scholarships and in the printed materials of fund-raising galas. Many donors give anonymously for sundry reasons. They have that right.
State employees have been careless with the sensitive information the state demands of nonprofits despite the state’s confidentiality policy. If donors knew this, they might be unwilling to give to charitable causes out of justifiable fear that they would be exposed. AFPF explained that the donors listed on their Schedule B are limited, but their financial contributions are outsized and so critical to their organization’s funding that losing even one could shut down parts of its operation.
The District Court held that “Among other things, plaintiffs have demonstrated that the Schedule B disclosure requirement places donors in fear of exercising their First Amendment right to support AFPF’s expressive activity; the effect then is to diminish the amount of expressive and associational activity by AFPF.”
Nonprofits like AFPF that go against the state and withhold their full Schedule B risk losing their tax-exempt status, the ability to operate in California, and penalties. It’s an unfortunate Catch-22 for organizations that should be focused on the people they serve.
4. Donor privacy is not a constitutional right.
Donor privacy and freedom of association work together. As the Philanthropy Roundtable explains in our amicus brief:
“Anonymous giving is central to all of those core First Amendment rights. For many donors, the right to donate to charity is meaningless without the corresponding ability to give anonymously, as Americans have done for centuries. Likewise, the right to choose which organizations to support and associate with is a nullity without the related freedom to keep one’s associations private. And without the promise of anonymity, the right to freely live in accordance with religious precepts is no right at all for the many individuals faithful to religious traditions that embrace anonymous giving.”
The political environment is far more politically toxic today than in 2010 when California first began asking for nonprofit donor lists. Doxxing, economic retribution and politically motivated physical attacks are on the rise. AFPF employees and donors and their families have faced harassment, intimidation and even death threats. In this context, the Supreme Court must decide whether the privacy of donors outweighs the state’s rationale.
The stakes of this case are high and the implications wide-reaching. As other states mull increasing disclosure requirements on charities, they are looking to the Supreme Court for a final say on whether increased regulations will pass or fail constitutional scrutiny. If the Court sides with the state, charities face the prospect of a loss in revenue and significant challenges in fundraising. Ultimately, if California wins, it will be the people and causes that charities serve will lose.
