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Justices to consider constitutionality of donor disclosure rule

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The Supreme Court will close out its April argument session next week with two major First Amendment cases. On Wednesday, it will hear the case of a Pennsylvania student who was removed from her high school cheerleading team after posting offensive messages on social media. But on Monday, it will first hear a very different First Amendment case: a challenge to California’s requirement that charities and nonprofits operating in the state provide the state attorney general’s office with the names and addresses of their largest donors. The case, Americans for Prosperity Foundation v. Bonta (consolidated with Thomas More Law Center v. Bonta), has drawn considerable attention, not only because of what it could mean for nonprofits but also because three Democratic members of Congress have asked the court’s newest justice, Amy Coney Barrett, to recuse herself from the case.


The California attorney general’s office, which regulates charities in the state, requires all charities that want to operate or fundraise in California – including nonprofits – to submit a copy of their federal tax return. This includes a copy of Schedule B, a form used to report the names and addresses of their major donors nationwide. According to a “friend of the court” brief filed in the Supreme Court, based on the criteria that the IRS uses to determine which donors must be listed, a donor would have had to have given at least $31,000 to appear on the Schedule B for the Thomas More Law Center, a Michigan-based conservative Christian public-interest law firm whose founders include Thomas Monaghan, also the founder of Domino’s Pizza. To appear on the Schedule B for the Americans for Prosperity Foundation, a nonprofit group that is linked to the influential conservative billionaire Charles Koch and describes its mission as educating citizens “to be advocates for freedom,” a donor would have had to have given more than $341,000 in 2018.

Thomas More and Americans for Prosperity went to federal court in 2014 to challenge the disclosure requirement, arguing that it violates their First Amendment right to free association by discouraging their donors from making donations. A federal district court agreed and blocked the California attorney general from requiring the two groups to submit their Schedule Bs, but a three-judge panel of the U.S. Court of Appeals for the 9th Circuit reversed. The panel ruled that the policy, which requires charities to provide the state with the same information that they already give to the IRS, was related to an important state interest in policing charitable fraud. Even if the challengers are correct that their donors would face “substantial harassment” if the information about their contributions became public, the court of appeals added, the state collects the information only for its own uses, and there is only a small risk that the information will accidentally be disclosed to the public. Over a dissent from five judges, the full 9th Circuit declined to reconsider the panel’s ruling. Thomas More and Americans for Prosperity then went to the Supreme Court, which agreed earlier this year to weigh in.

The challengers’ arguments

In its brief on the merits, Thomas More argued that the disclosure requirement must be reviewed under the most rigorous constitutional test, known as strict scrutiny. Doing so, the group argued, is consistent with the court’s 1958 decision in NAACP v. Alabama, which involved a challenge to an Alabama rule requiring the disclosure of the names of the NAACP’s supporters. The Supreme Court in that case, Thomas More explained, stressed that if Alabama’s purpose was to determine whether the NAACP was conducting business in the state, it had other, less intrusive ways to do so. Two years later, Thomas More added, the court made clear that the names of donors are also protected by its decision in the NAACP case. 

In this case, Thomas More contended, there is no good reason for the California attorney general to seek the information in the Schedule B forms: The attorney general’s office rarely uses it for anything at all, much less to initiate fraud investigations, and it could obtain the information in less intrusive ways if it did need it. “Indeed,” Thomas More pointed out, “47 states regulate charities without a blanket-disclosure scheme.” Although California officials testified at trial that it was more efficient or convenient to require disclosures, Thomas More wrote, that’s not “the prime objective of the First Amendment.” And the disclosure requirement doesn’t actually do anything to prevent fraud, Thomas More suggested, because the section of the attorney general’s office responsible for investigating charities uses the information on the Schedule B forms only after a complaint is filed.  

The disclosure requirement is also broader than it needs to be to protect against any interest in combatting fraud, Thomas More continued. Not only does California essentially never use the information to investigate fraud, but “there is no reason to suspect tens of thousands of nonprofits of wrongdoing,” and “the IRS and often charities’ home states already police their activities.”

Even if the court were to conclude that a less stringent test than strict scrutiny applied to the disclosure requirement, Thomas More told the justices, California’s rule would fail that test as well. The attorney general’s interests in regulating charities are not, Thomas More insisted, sufficiently important to justify the extent to which the requirement infringes on Thomas More’s First Amendment rights.

And at the very least, Thomas More asserted, even if the justices determine that the disclosure requirement is generally valid, the Supreme Court should rule that it is unconstitutional as applied to Thomas More, because of the likelihood that its donors will face “retaliation or intimidation because of their deeply held religious beliefs.” Because the attorney general has failed to take measures to adequately protect the Schedule B forms, Thomas More suggested, some donors “will consider the Attorney General’s scheme and reasonably conclude that the risks of disclosure are too great.”

Americans for Prosperity makes similar arguments, although it told the justices that the disclosure requirement should be subject to a test known as exacting scrutiny, which is less stringent than strict scrutiny. But whatever level of heightened scrutiny is applied to the disclosure requirement, Americans for Prosperity emphasized, the rule is unconstitutional across the board.

The group cited examples of previous breaches of confidentiality, telling the court that “California employees posted over 1,800 confidential Schedule B forms listing the names and addresses of charitable donors on a public website.” The prospect of such disclosures, the group wrote, will deter donors from making contributions. And although donors listed on a Schedule B form may be “limited in number,” Americans for Prosperity explained, they are “critical” to the organization’s operations.

The federal government’s arguments

In a “friend of the court” brief signed by Acting U.S. Solicitor General Elizabeth Prelogar, the federal government told the justices that the disclosure requirement should be judged by the less stringent “exacting scrutiny” test, because it has only an indirect effect on the right to associate. And in this case, the federal government argued, the court of appeals applied the right standard and correctly concluded that the disclosure requirement is not unconstitutional in all cases.

But, the government continued, the court of appeals didn’t consider the scope of the potential harm to these groups’ donors if their identities were revealed. As a result, the government contended, the case should go back to the lower court for it to reconsider the impact that the disclosure requirement could have on the groups’ freedom of association. And if the court of appeals ultimately concludes that the disclosure requirement is unconstitutional, the government added, it should consider whether to impose a remedy that focuses on reducing the risk that donor information will accidentally be disclosed, rather than barring the collection of the groups’ Schedule B forms at all.

California’s arguments

Like the United States, California urged the court to subject the disclosure requirement to “exacting scrutiny” rather than “strict scrutiny.” The requirement applies to all charities in California, the state stressed, regardless of what they do or say, and it doesn’t require them to say anything or associate with anyone, nor does it bar them from doing so.

Thomas More and Americans for Prosperity cannot show that the disclosure requirement must be invalidated under this test, California contended, on the ground that is unconstitutional on its face – that is, across the board. The requirement is closely related to California’s interest in regulating charities and the billions of dollars that its residents contribute to charities each year, the state emphasized. Investigators can use information on the Schedule B disclosure as part of their oversight of charities – for example, to find purchases from or grants to large donors. And it is not true, the state told the justices, that regulators never use donor records as part of their work – indeed, regulators “routinely review” the records when they investigate complaints against charities.

Moreover, the state argued, Thomas More and Americans for Prosperity have not shown that the disclosure requirement has generally deterred donors for charities as a whole, many of which focus on activities or causes that do not garner controversy. There is therefore no reason (and the groups have not shown) that requiring those charities to provide the state with their Schedule B would discourage contributions, particularly when the charities already have to comply with the same requirement at the federal level.

California acknowledged that there have been “shortcomings” in how the state has implemented its confidentiality policies for the Schedule Bs. But those shortcomings do not, the state emphasized, transform the requirement that charities submit their Schedule Bs into a public-disclosure requirement: There was no evidence, the state observed, that the general public either “saw the confidential documents or that any harm resulted.” Indeed, the state noted, it has now put in place extra procedures to ensure that confidential documents are not made accessible to the public.

And although the state is not required to show that the disclosure requirement is the only way for the state to effectively oversee charities that do business in California, the state concluded, the reality is that the narrower alternatives that Thomas More and Americans for Prosperity suggest wouldn’t work for the state, which can get as many as 100 complaints about charities each month. Issuing a subpoena or an audit letter whenever it wants to investigate a charity further would take up not only the state’s time and resources, but also the charity’s.

Thomas More and Americans for Prosperity also cannot prevail, California continued, on their claims that, at a minimum, the disclosure requirement is unconstitutional as it applies to them. Although the Supreme Court has allowed such claims when “disclosure would lead to threats, reprisals, or harassment,” the state reasoned, there has been no indication that the disclosure requirement would actually have that effect for donors whose names would be on the groups’ Schedule B forms.

Other groups weigh in

A wide range of groups filed briefs supporting Thomas More and Americans for Prosperity. One such brief, by the Council on American-Islamic Relations, warned that if the 9th Circuit’s decision is allowed to stand, it could have repercussions well beyond donor disclosures. Among other things, CAIR explained, it litigates challenges to the constitutionality of the federal terrorist watchlist system – which, CAIR contended, “relies heavily on associations and affiliations in its operations” and therefore “imposes a severe burden on protected First Amendment activity.” By applying a less rigorous standard in this case, CAIR suggested, the lower court’s ruling “threatens not only donor disclosure cases but also assessment of other associational claims.”

On California’s side, a group of 15 U.S. senators, led by Sen. Sheldon Whitehouse, D-R.I., urged the court to uphold the disclosure requirement, with dire predictions about what might happen if the lower court’s ruling is struck down. The senators argued that since the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission, holding that corporations and unions have a right to engage in independent spending to influence elections, “powerful influencers” have been spending money anonymously – funds that are sometimes referred to as “dark money.” This case, the senators suggested, is part of a broader strategy by the groups and other influencers to ensure that their donors’ ability to remain anonymous is protected by the Constitution “so they can attack any and all disclosure requirements in other contexts – a ‘moon shot’ to lock in dark money’s hold on our politics and policy making, possibly forever.”

Whitehouse’s friend-of-the-court brief was not his only involvement in the case. On April 16, Whitehouse and two other Democrats – Sen. Richard Blumenthal of Connecticut and Rep. Hank Johnson of Georgia – sent a letter to Justice Amy Coney Barrett, asking her to recuse herself from the case. The Americans for Prosperity Foundation, the members of Congress wrote, is the non-profit arm of Americans for Prosperity, a political advocacy group that announced in September, after Barrett was nominated, that it would spend “in the seven figures” – at least a million dollars – on a campaign to ensure Barrett’s confirmation. Because the advocacy group “played a significant and disproportionate role campaigning for” Barrett’s confirmation “while its corporate sibling’s case was pending and imminent,” there is the kind of “serious risk of actual bias” that, under the Supreme Court’s cases, would require her to recuse herself. At the very least, the letter added, if Barrett opts not to recuse, she should publicly explain why she is not doing so.

Barrett did not recuse herself from the decision to grant review in the foundation’s case, and there has been no indication so far that she will not participate in Monday’s argument.

This article was originally published at Howe on the Court.

Recommended Citation: Amy Howe, Justices to consider constitutionality of donor disclosure rule, SCOTUSblog (Apr. 25, 2021, 2:37 PM),