The Donor Disclosure Debate: Some think tax-exempt charities need to be policed while others believe some donors should remain anonymous. Here’s what both sides are saying. To have stories like this and more delivered directly to your inbox, be sure to sign up for our newsletter.
Top Story: The Donor Disclosure Debate
This week, the Supreme Court closes out its April argument session with two major First Amendment cases. Yesterday it heard, “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,” Amy Howe writes for ScotusBlog. Currently, California non-profit organizations are required to disclose their top contributors to state regulators. Some think tax-exempt charities need to be policed while others believe some donors should remain anonymous. Here are the arguments from both sides:
On The Right
Quoting Congressman Ken Buck, the right believes “California is threatening First Amendment rights by trying to force advocacy groups to reveal who funds them.” One of the right’s main arguments relies heavily on a watershed legal victory for the NAACP. They also think this could cripple the charity sector in the US. Members of the left actually agree, but below we’ll be highlighting right-leaning commentators and outlets.
In The Hill, John Bursch, the lawyer representing the plaintiffs, describes an “astoundingly diverse coalition of public-interest groups across the ideological spectrum” on his side of this case. To Bursch, California’s sole intent is to gain access to donor rolls to enable doxxing and political rival harassment. He points to the experience of the NAACP in Alabama during the civil rights era in the late 1950s as an example. At the time, “Alabama demanded the civil rights organization provide the state with its membership lists,” resulting in a “detrimental effect on the NAACP’s membership” given the hostile environment. In a unanimous decision, the Supreme Court eventually found Alabama’s actions violated the Free Association Clause of the First Amendment. While the California AG “claims this policy is necessary to thwart fraud,” in reality, Bursch believes the state has “never had a problem obtaining necessary information from the federal government.”
Similarly, Federal Election Commissioner Allen Dickerson also mentions the NAACP case in The Wall Street Journal. He accuses California of “amassing a comprehensive database of donors to American charities” solely for the purpose of harassment. Interestingly enough, “when several nonprofit groups challenged this practice in 2014, then-Attorney General Kamala Harris argued that she needed the information to streamline investigations. She promised that individuals’ confidentiality was carefully protected.” Dickerson says, “Neither assertion was true,” adding “One can imagine how such databases could be weaponized as social mores change.” He asks readers to “Consider how a similar policy might have been abused during, say, the national debate over same-sex marriage.” Dickerson asks the court to be “vigilant” because “since the republic’s founding, [individuals] have pooled their resources to advocate for change without fear of retribution.” He concludes by saying, “We should honor, not undermine, that tradition.”
Finally, Howard Husock echoes the aforementioned commentators, in National Review. Simply put, he believes California’s current requirements “could have significant implications that would reduce charitable giving overall; infringe upon Americans’ freedoms of speech, religion, and association; threaten the ability of individual donors and nonprofits to carry out their work; and potentially put private citizens at risk of harassment or worse.” Husock doesn’t buy California’s excuse for donor disclosure because “states can already call on the IRS for help.” Instead, “it appears that the real motivation behind California’s demands is the larger liberal crusade against so-called ‘dark money’ — a phrase the Left likes to use to describe private donations going to conservative causes.” Not only does this case involve the First Amendment, it could “cause collateral damage for charitable giving.” Using back of the napkin math, Husock thinks there could be “a $12 billion reduction in overall giving,” across the US if California’s current transparency process stands.
The right believes California’s law is more about harassing political opponents than preventing fraud. They urge the Supreme Court to overturn the 9th Circuit’s ruling through this appeal.
On The Left
While there are liberal groups (like the ACLU and NAACP Legal Defense and Education Fund) that agree with the right-leaning commentators above, there are also loud voices on the left that deem the California law a necessary tool for transparency and fraud protection. They do not view donor disclosure as a violation of First Amendment rights, especially since it only applies to select donors.
Ciara Torres-Spelliscy, writing for the Brennan Center, points out that while “The Supreme Court has repeatedly ruled that disclosing donors behind political campaigns and political ads is constitutional,” this case is “slightly different… because it doesn’t arise in the campaign finance context.” She acknowledges the case involving the NAACP but argues current matters are much different since the plaintiff, Americans for Prosperity Foundation, has billionaire donors while the NAACP was “a scrappy nonprofit with many poor individuals as members.” Torres-Spelliscy says, “Comparing the two is like comparing apples and diamond-encrusted Rolexes,” warning that “if the Americans for Prosperity Foundation wins at the Supreme Court, every nonprofit that launders dark money for corporations or the wealthy will rely on this new case to keep the dark money sources under wraps.” To Torres-Spelliscy, this spells “bad news for our democracy.”
Meanwhile, in what was a fairly balanced piece for NPR, Nina Totenberg shuns the notion that this case “has any resemblance whatsoever to cases like NAACP v. Alabama.” The differences, she writes, are that “the list of donors is not made public” but are instead “reported to the state,” and that only “big donors” are reported at all. For the case in question, “Only donors who gave more than $340,000 were reported.” She contends that “California and other states need information from charities to ferret out fraud and self-dealing,” as opposed to in the past when regulators required “some kind of a red flag before they [knew] which charities to pick out for…investigation.” Furthermore, Totenberg thinks concerns regarding California’s lax information security are unwarranted, as problems with “the state’s data system was short-lived and have been fixed.”
Lastly, Madeleine Carlisle describes in TIME how this case could have “campaign finance implications.” For context, she notes that “the Supreme Court [is considering] this case more than a decade after its last major donor disclosure decision, which opened the floodgates to enormous sums of anonymous money influencing elections.” This was of course Citizens United v. FEC, 2010’s landmark campaign finance case in which “the Supreme Court struck down limitations on corporate spending in political communications.” Although “Citizens United also affirmed financial disclosure requirements in certain instances, it’s unclear how the newest conservative justices might feel about such requirements,” Carlisle writes, quoting Richard Briffault, a professor at Columbia Law School. Ultimately, “How the justices rule—and the precedent they set for reviewing financial disclosure requirements in the future—could further affirm or erode some organizations’ ability to keep their donors private.” This would impact the upcoming 2022 midterm elections and beyond.
Although not everyone on the left agrees, there are those that believe donor disclosure will stamp out “dark money” that is a danger to democracy.
Flag This: The Donor Disclosure Debate
According to Open Secrets, a nonpartisan research group that tracks the effects of money and lobbying on elections and public policy, “only a tiny fraction of Americans actually give campaign contributions to political candidates, parties, or PACs. The ones who give contributions large enough to be itemized (over $200) is even smaller.” In the 2020 election cycle for example, the percentage of the US population that gave over $200 was less than three percent. With that said, historically speaking “more Americans are making political donations,” according to The Pew Research Center. In 1992 just 6% of Americans said they had donated to an individual running for public office within the past year. By 2016 that number doubled to 12%. One month before the 2020 election, President Joe Biden raised about $25.06 million via small-dollar donations, whereas former President Donald Trump raised $13.41 million. In a separate article, Open Secrets noted that “the total cost of the 2020 election nearly reached an unprecedented $14 billion, making it the most expensive election in history and twice as expensive as the previous presidential election cycle.”
Flag Poll: The Donor Disclosure Debate
Do you think tax-exempt charities need to be policed? Comment below and share your thoughts.