Nonprofit Asks Supreme Court to Protect Donors from California Regulator

The Center for Competitive Politics is petitioning the court to hear what could be a landmark donor disclosure case

November 4, 2015

The U.S. Supreme Court will consider this week whether to hear a potentially landmark First Amendment case on donations to nonprofit groups, marking a flashpoint in a battle over money and free speech increasingly taking place in courts instead of legislatures.

At issue is a California regulation requiring all nonprofit groups that solicit donors in the state to disclose extensive amounts of information about their internal operations, including lists of all of their major donors.

The Center for Competitive Politics, a libertarian campaign finance legal group appealing a federal court ruling upholding those regulations, says the regulation is a blatant violation of its First Amendment right to associate with other private citizens free from the intrusion of government regulators.

"This Court has consistently recognized that the freedom to associate, and to speak in concert with others, would inevitably be chilled by unjustified governmental intrusion," CCP told the Supreme Court in its petition asking justices to hear its appeal.

The Supreme Court will consider on Friday whether to take up the case, potentially marking an inflection point in rules governing politically charged speech, which are increasingly being written by unelected administrators rather than legislators and then adjudicated in the court system.

An eighth of all U.S. charitable groups solicit donors in California, according to the Philanthropy Roundtable, making its regulations of particular importance to that community.

CCP is a libertarian-leaning nonprofit group, but the regulations at issue have also impacted left-leaning nonprofits in the state. California’s attorney general warned left-wing opposition research group Media Matters for America in May of this year that it was at risk of suspension if it did not turn over a donor list.

The Center for American Progress complied with the request in November and provided its own donor list. In a handwritten note accompanying the list, it stressed that the information was confidential. "It should not be made available to the public," the group said (emphasis in original).

Like CAP and Media Matters, CCP is a 501(c)(3) nonprofit, meaning it engages in charitable or educational activities and cannot conduct the type of issue advocacy campaigns that generally trigger public disclosure of a nonprofit group’s donors.

The office of California attorney general Kamala Harris (D.) in February informed CCP that it would be barred from soliciting contributions from California residents unless it submitted a list, including names and addresses, of all donors that have given at least $5,000 to the group.

All such donors are listed on nonprofits’ annual filings with the IRS. However, pursuant to federal laws protecting donor anonymity, the IRS redacts contributors’ names and addresses in the versions of those filings that it makes available for public inspection.

Harris has said she will not make that information public and that it will only be used for the attorney general’s internal compliance and enforcement activities. But CCP says there is no California statute that bars officials from publicly disclosing that information if Harris or some future attorney general decides to do so.

CCP issued a legal challenge to the regulation, which the Ninth Circuit Court of Appeals upheld last year as constitutional. "No case has ever held or implied that a disclosure requirement in and of itself constitutes First Amendment injury," that court stated in its decision.

CCP responded by citing the Supreme Court’s landmark 1976 ruling in Buckley v. Valeo. "We have repeatedly found that compelled disclosure, in itself, can seriously infringe on privacy of association and belief guaranteed by the First Amendment," the court stated in that case.

The Ninth Circuit focused on the word "can" in that passage, saying it demonstrated the court does not consider disclosure harmful in itself. CCP focused on the "serious"—disclosure inherently harms charity groups, it claims, even if not always "seriously" so.

A number of philanthropic organizations agree.

The Philanthropy Roundtable, which represents 650 "individual philanthropists, family foundations, and other private grantmaking institutions," wrote in a brief filed in support of CCP’s petition that California’s regulation and the Ninth Circuit decision upholding it would chill First Amendment rights by discouraging donations to charitable groups.

"While many donors are happy to see their contributions publicized … it cannot seriously be questioned that many donors simply will not give unless they can keep their donations confidential," the group wrote.

"Forced disclosure of donor names to state governments—which lack the needed privacy protections available at the federal level—threatens serious unintended consequences for individual donors and charitable organizations across the nation," according to their brief.

Compulsory donor disclosure threatens more than freedom of association, the Philanthropy Roundtable argued. It could even infringe on religious freedom.

"For example, Jewish donors may request anonymity according to Maimonides’ teaching that the second highest form of tzedakah (‘charity’ or ‘righteousness’) is to give anonymously to an unknown recipient, and the third highest is to give anonymously to a known recipient," the group wrote.

It also noted the possibility of threats and reprisals against donors who give to politically unfashionable but nonetheless constitutionally protected causes.

That is the basis of another challenge to the California regulations by the Americans for Prosperity Foundation, which says that forced donor disclosure would subject its donors to political intimidation and harassment campaigns such as those already undertaken against libertarian philanthropist David Koch, the group’s chairman.

A federal court in February issued an injunction against the enforcement of California donor disclosure regulations against AFPF while that case is adjudicated.

In the mean time, federal courts are also hearing a challenge to Federal Election Commission rules brought by Rep. Chris Van Hollen. The Maryland Democrat is seeking to impose additional disclosure requirements on 501(c)(4) advocacy groups that engage in "electioneering communications," or issue ads that mention a federal candidate by name within two months of an election involving that candidate.

According to Dan Epstein, executive director of the legal watchdog group Cause of Action, Van Hollen’s and Harris’ efforts are part of the same campaign to chill speech by conservative and libertarian political and charitable donors.

"If the court forces nonprofits to disclose the identity of their supporters, it will lead to the ‘threats, harassment, or reprisal’ that chill free speech and limit free association, just as the Supreme Court has warned," Epstein wrote in a Wall Street Journal column last month.

"That is what Rep. Van Hollen, President Obama and their allies on the left want—and it’s precisely why the federal judiciary should stop them."