Supreme Court Hears Oral Argument on California’s Attempt To Collect Names of Donors to Nonprofits

On April 26, the Supreme Court held a lively oral argument in the much-anticipated first amendment case of Americans for Prosperity Foundation v. Rodriguez: a challenge to the State of California’s requirement that charities who solicit contributions in that state provide the names and addresses of their largest donors to the California attorney general. This case has drawn considerable attention from nonprofits across the ideological spectrum and from the United States Solicitor General who was invited to submit an amicus brief (and who essentially wrote in favor of donor disclosure).

Every year nonprofits file an annual federal tax return called the 990. Included in that filing is a “Schedule B” which requires 501 (c)(3) charities to disclose their major donors to the Internal Revenue Service. The IRS cannot, however, share that information with other agencies or make those names public.

The State of California now wants a copy of those confidential lists for its own use. This caused two conservative-leaning charities to sue the state saying that the compelled disclosure of their donors’ names unconstitutionally violates their first amendment guarantee of private freedom of association. This is similar to the protections accorded by the Supreme Court to the NAACP in its 1958 landmark case against the State of Alabama. In that case, a unanimous Supreme Court found that Alabama’s thinly veiled attempt to run the NAACP out of the state by disclosing its donors violated their first amendment protections (the NAACP has filed an amicus brief here in support of the petitioners).

Further, the petitioners argued that California actually has no use for the donor information on Schedule B because it can adequately supervise charities without having to know who their donors are, and second, the state also has a history of letting these confidential lists leak into the public domain subjecting donors to harassment for supporting unpopular organizations.

Over 60 charitable groups – both liberal and conservative – wrote friend of the court briefs in favor of the petitioners, while a group of 15 U.S. Senators led by Sheldon Whitehouse urged the court to uphold the disclosure requirement largely in response to the Court’s Citizen United decision. Whitehouse has also led an effort to get Justice Barrett to recuse herself from the case because an affiliate of one of the plaintiffs spent money in support of her confirmation.

Here are some of the key questions that came up in the 90-minute oral argument:

1. Which standard of review should the court use in evaluating a government’s regulation of a charitable organization’s donors? Must the law be narrowly tailored and survive heightened scrutiny (advocated by the petitioners) or can a law be sustained with a more relaxed rational basis review (urged by California and the United States)? These legal standards have become a tangle of words and phrases, with each Justice invoking a test that is likely to produce his or her desired result.
2. Is there a difference between mandated public or private disclosure? Although California says it will keep these records confidential, it has a poor track record of doing so, and there have been leaks and allegedly deliberative placement of some donors names on the internet. 
3. Does California even use this data anyway? Much was said about how having access to the names of major donors could help the state government confront charitable fraud, but the arguments revealed the state didn’t really access this data once they received it, and had other more narrowly-tailored ways of examining charities. The arguments did make clear there is a difference between the IRS collecting this data for its federal, tax oversight purposes and a state wanting it for its own law enforcement reasons.
4. Did the petitioners bring enough legal weight to present a facial challenge to the statute as a whole, or only enough evidence to strike the statute as it applied to them? How much donor harassment needs to be put forward in order to protect your donors? The Justices opined that a vast majority of charities are non-controversial and not involved in fraud. But conversely, if California thinks this disclosure is important, why do 46 other states not ask for this information?

The petitioners appeared to have a more sympathetic bench and went so far as to say the Attorney General of the State of California was “not genuine” in his position, and has devised a lot of post hoc rationalizations to try and get these donor records.

This case could go one of two ways: it could answer some clear first amendment questions about the right of donors to assemble in private, or it could get entangled with dense standard of review analyses and a remand to the Ninth Circuit for more findings on the difference between facial and as-applied challenges. A decision is expected before the end of June.