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State May Require Donor List For Charitable Registration

State May Require Donor List For Charitable Registration

Ninth Circuit says requirement does not violate First Amendment rights

California’s requirement to submit an unredacted list of major donors as part of its charitable solicitation registration materials does not violate the First Amendment, the Ninth Circuit Court of Appeals has ruled.  The Court has affirmed the denial of a preliminary injunction sought by a charity that wanted to remove the names of donors shown on Schedule B to the Form 990 that is a required part of the registration package.  (Center for Competitive Politics v. Harris, 9th Cir., No. 14-15978, 5/1/15. )

The Center for Competitive Politics, a 501(c)(3) organization whose purpose includes defending First Amendment rights of free political speech, claimed that the requirement infringes on its and its supporters’ First Amendment right of freedom of association.  A federal District Court denied a request for a preliminary injunction and the Court of Appeals has affirmed.

California is one of the 39 states and the District of Columbia that require most charities to register prior to soliciting charitable contributions within their jurisdictions.  Schedule B to the Form 990 includes the names, addresses, and amount of gifts from major donors, basically those giving more than $5000.  Under the federal law, although the Form 990 is a public document, the names and addresses of donors on Schedule B are confidential and may be redacted before showing the Schedule to the public.  (Since the amount of the contribution is not confidential, the identity of the donor can often be inferred, however.)  California asks for the names, but does not make them available to the public.  They are available only to in-house staff and are handled separately from non-confidential documents.

The Attorney General argued that there is a compelling law enforcement interest in having the information.  She claimed that the information is necessary to determine whether a charity is actually engaged in a charitable purpose or is violating state law by engaging in self-dealing, improper loans or other unfair business practices.  She also argued that having significant donor information allows the office to determine when an organization has inflated its revenue by overstating the value of “in kind” donations, allows her to identify suspicious behavior, and obviates the need for expensive and burdensome audits.

The Center has been registered since 2008, but the state did not require the unredacted Schedule B until 2014.  The Center argued that the requirement amounted to a compelled disclosure of its supporters’ identities that infringed on its and their freedom of association.  It also argued that the federal requirement of confidentiality preempted the Attorney General’s requirement.

The Court of Appeals said the First Amendment argument presented “a novel theory” that is not supported by its case law or Supreme Court precedent.  The Court agreed that the risk of chilling association triggered exacting scrutiny, but said the Supreme Court has made clear that it must balance the risk of harm with the “actual harm” to the organization’s rights.  The Center “has not shown any actual burden on its freedom of association,” the Court held.

The Center, it said, did not argue that it feared reprisals from a government agency, but only that the AG’s systems for preserving confidentiality are not secure and that the donors’ names might be inadvertently released.  “Such arguments are speculative, and do not constitute evidence that would support [the Center’s] claim that disclosing its donors to the Attorney General for her confidential use would chill its donors’ participation.”

“On the other side of the scale,” the Court said, “the Attorney General has the power to require disclosure of significant donor information as a part of her general subpoena power” and the disclosure requirement has a “plainly legitimate sweep.”

The Court left open the possibility that the Center could show a reasonable probability that the compelled disclosure of its contributors’ names will subject them to threats, harassment, or reprisals from either government officials or private parties that would warrant relief to a challenge to the rules as applied.  But it held that the Center could not prevail on a facial challenge to the rules.

On the federal preemption argument, the Court said that Congress had to show its “clear and manifest purpose” for preemption.  The Center argued that preemption was shown in Section 6104 of the Tax Code that allows the IRS to share such information upon the written request of an appropriate state officer.  The Court rejected the Center’s argument that the language showed a ban on such information, saying it “is better construed as a limited grant of authority than as a prohibition.”  But even if the statute were a prohibition, the Court said, it did not expressly preempt the state’s rights to require such disclosure directly from the organizations they are regulating.


California, New York and a few other states say that they require an unredacted Schedule B, but California and New York are the apparently only ones that currently refuse to register an organization that fails to provide it.  The Attorney General’s defense of the demand in this case seems something of a stretch, but there haven’t, to our knowledge, been significant examples of improper disclosure of the names to the public.

9th Circuit Court of Appeals

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