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Supreme Court Strikes Down California Donor Disclosure Requirement - Confirms Broad Protection for Anonymity and First Amendment Associational Rights

In Americans for Prosperity Foundation vs. Bonta, two tax-exempt charities recently prevailed in their decade long fight to protect the identities of their major donors from state disclosure requirements. At issue was the requirement for nonprofits who want to engage in fundraising to provide California with their confidential taxpayer versions of IRS Form 990, Schedule B, which include donor names that are not subject to public disclosure.  Even though the state pledged confidentiality – a promise not always kept in the past – the United States Supreme Court concluded that this California requirement was unconstitutional.

The Supreme Court ruled that this broad disclosure requirement was not narrowly tailored to the claimed governmental interest in investigating charitable wrongdoing or the state’s administrative convenience. The Court concluded that the “disclosure requirement imposes a widespread burden on donors’ associational rights” and held that it was “facially” invalid for all nonprofits – not just as “applied” to the specific nonprofits that filed this case based on the threats or burdens they were able to establish (which in this case took years of litigation). 

The Americans for Prosperity Foundation decision is of particular interest given the broader societal and political debate as to whether the public should be able to know who provides financial support to cause related and other nonprofit groups. One side claims a need or right to know the source of so-called “dark money” while the other side cites personal threats to donors and boycotts of their businesses that may result from having their support revealed.  In this case, the majority opinion concluded that the “chilling effect on association is enough” to strike down the disclosure requirement.

The majority opinion in Americans for Prosperity Foundation harkened back to the Supreme Court’s 1958 seminal decision in NAACP vs. Alabama. In that case, the Supreme Court struck down an effort by the Alabama Attorney General to obtain the group’s membership lists in light of threatened economic reprisals and violence if members’ affiliation with the organization were disclosed. The concurring opinion in Americans for Prosperity Foundation case emphasized that the Assembly Clause in the United States Constitution includes the right to associate anonymously and implicates other First Amendment rights, such as freedom of the press.

A strongly worded dissent argued that the NAACP rationale should not apply broadly in the current context without a particular organization having to “plead and prove that disclosure will likely expose them to objective harms, such as threats, harassment, or reprisals.”  The dissent opposed a broad holding that the statute is “facially” invalid for all nonprofits and suggested that each nonprofit instead should have to establish why disclosure would be unconstitutional as “applied” to its particular circumstances.

The broader debate will continue, but for now, California can no longer enforce its donor disclosure requirement. Moreover, both New York and New Jersey, the two other states with similar donor disclosure fundraising requirements, indicated that they also would no longer enforce a similar requirement.

It remains to be seen how the Americans for Prosperity Foundation decision will be applied in other contexts. 

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