Once again, the super-rich will have an outsized voice in the 2016 election. And once more, nonprofit groups will use state and federal law to shield donors from being publicly identified.
They’ll claim that public disclosure would infringe on donors’ First Amendment right of free association; they fear harassment from people who disagree with them. Specious though their argument is, the law is on their side.
Now, lawyers representing conservative nonprofit organizations are stretching their privacy claims further, contending that they can withhold donors’ identities from regulators in California and New York.
They are wrong, as the U.S. 9th Circuit Court of Appeals in San Francisco concluded earlier this month.
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The Internal Revenue Service and states require that nonprofit corporations provide identities of donors when they file their tax returns. That’s part of the price they and their donors pay for receiving federal and state tax breaks. The tax returns are public documents, but donor lists are not.
In California, Attorney General Kamala Harris and the Department of Justice Division of Charitable Trust regulate nonprofits. Noticing that some groups had failed to provide donor lists, Harris sent letters last year insisting that they abide by long-standing law, or risk losing their tax-exempt status. To conduct that oversight, she has a reasonable claim to donor records.
Among the recipients of her letter was the Center for Competitive Politics, a Virginia-based nonprofit that regularly sues to unravel campaign finance law. True to form, the center’s lawyers sued to block Harris’ request. Joining the Center for Competitive Politics in court is the National Organization for Marriage, which opposes same-sex marriage and has tried in court to block disclosure of its campaign donors.
Americans for Prosperity, a politically active organization funded by billionaires David and Charles Koch, also sued Harris over her request for donor lists. That case is pending.
In New York, Citizens United sued to block Attorney General Eric Schneiderman from getting its donor list. Citizens United is the conservative organization that brought the suit that led to the U.S. Supreme Court decision in 2010 opening the way for unlimited corporate and labor spending on independent campaigns.
Lawyers for the nonprofit groups say they provide donor lists to the IRS, knowing that confidentiality will be maintained. They have less confidence that states will honor the confidentiality requirements.
Harris and Schneiderman are Democrats on the rise. Perhaps the conservative groups believe they will use the information for partisan ends. However, long-standing state law says nonprofit donor lists are not public.
David Keating, president of the Center for Competitive Politics, likens the request by Harris to the National Security Agency accumulating data about phone calls. He also said in an interview that donor lists could be subject to state open public records laws, and argues that federal law preempts state laws governing charities.
A three-judge panel of the 9th Circuit called the center’s arguments novel but not supported by the law. U.S. Supreme Court Justice Anthony Kennedy, who has written about the benefits of campaign finance disclosure, refused to intervene earlier this month, leaving the lower court decision in place. The center will ask the full Supreme Court to review the case. We hope justices agree with Kennedy. This issue goes to the core of states’ power to enforce their laws.
Nonprofits that don’t want to disclose have an alternative. The California Department of Finance estimates that taxpayers used charitable deductions to lower their state taxes by $2.2 billion in fiscal year 2014-15. Nonprofits and their donors could forgo tax breaks granted by California. Then, Harris would have no claim to their donor lists. It would be a simple solution, but not a likely one.