Supreme Court Rules Blanket Donor Disclosure Mandates Are Unconstitutional

Supreme Court Rules Blanket Donor Disclosure Mandates Are Unconstitutional

Jul 07, 2021 Elizabeth McGuigan

American philanthropy won a major victory last week. In a 6-3 decision, the U.S. Supreme Court upheld the long-standing right to private association under the First Amendment in the case Americans for Prosperity Foundation v. Bonta. As we’ve covered here before, the Philanthropy Roundtable supported the petitioners by filing two amicus briefs. We are happy to report the court found that California’s blanket demand for all charities’ Schedule Bs was unconstitutional – not only as applied to the petitioners, but in general.

While we continue to process the opinion and its implications for donors nationwide, here are three key takeaways from this landmark decision. 

1) Civil society is vital for American society and supported by the freedom of association.

At the Roundtable, we value and promote a vibrant, diverse civil society for the benefit of all Americans. The U.S. Supreme Court echoed the importance of the right to associate:

“This Court has ‘long understood as implicit in the right to engage in activities protected by the First Amendment a corresponding right to associate with others.’ Roberts v. United States Jaycees, 468 U. S. 609, 622 (1984). Protected association furthers ‘a wide variety of political, social, economic, educational, religious and cultural ends,’ and ‘is especially important in preserving political and cultural diversity and in shielding dissident expression from suppression by the majority.’ Ibid” 

2) The First Amendment protects the right to private association.

The decision further represents a crucial confirmation by the court that the right to associate must include the right to associate privately. As the Roundtable pointed out in our March 2021 amicus brief, California’s bulk collection of donor information, “transgresses this crucial boundary between government and civil society and infringes on the rights of donors who wish to keep their charitable giving and association with nonprofit organizations anonymous, rather than disclosed to government officials and/or the public at large.” We know as a network of charitable givers that efforts to compel donor disclosure chill charitable giving and impede philanthropic freedom.

The Roundtable has long held that there are many reasons a donor may wish to remain private including for religious reasons, out of modesty or in fear of retaliation or reprisal for his or her association. The majority upheld this fact, and made clear that this is true, even though not all donors wish to remain anonymous. The opinion states:

“It is irrelevant, moreover, that some donors might not mind—or might even prefer—the disclosure of their identities to the state. The disclosure requirement ‘creates an unnecessary risk of chilling’ in violation of the First Amendment, Secretary of State of Md. v. Joseph H. Munson Co., 467 U. S. 947, 968 (1984), indiscriminately sweeping up the information of every major donor with reason to remain anonymous.”

The justices highlighted the threats that the petitioners, their donors and their families faced due to their association and noted that, “Such risks are heightened in the 21st century and seem to grow with each passing year, as “anyone with access to a computer [can] compile a wealth of information about” anyone else, including such sensitive details as a person’s home address or the school attended by his children. Reed, 561 U. S., at 208 (ALITO, J., concurring).”

However, a key part of California’s argument was that the requirement was not problematic because it was not a public disclosure. The majority opinion disagreed and found, “that disclosure requirements can chill association ‘[e]ven if there [is] no disclosure to the general public.’ Shelton, 364 U. S., at 486.”

3) Blanket disclosure mandates are unconstitutional.

While we all share the goal of preventing fraud in the charitable sector and enforcing laws aimed at bad apples, the majority opinion characterized California’s interest as “less in investigating fraud and more in ease of administration.” And found that:

“[t]his interest, however, cannot justify the disclosure requirement. The Attorney General may well prefer to have every charity’s information close at hand, just in case. But ‘the prime objective of the First Amendment is not efficiency.’ McCullen, 573 U. S., at 495. Mere administrative convenience does not remotely ‘reflect the seriousness of the actual burden’ that the demand for Schedule Bs imposes on donors’ association rights. Reed, 561 U. S., at 196.”

The bulk collection of personal data was found to be unconstitutional with the lack of a compelling reason for the mandate. The court stated, “The upshot is that California casts a dragnet for sensitive donor information from tens of thousands of charities each year, even though that information will become relevant in only a small number of cases involving filed complaints.” Further:

“We are left to conclude that the Attorney General’s disclosure requirement imposes a widespread burden on donors’ associational rights. And this burden cannot be justified on the ground that the regime is narrowly tailored to investigating charitable wrongdoing, or that the state’s interest in administrative convenience is sufficiently important. We therefore hold that the up-front collection of Schedule Bs is facially unconstitutional, because it fails exacting scrutiny in ‘a substantial number of its applications ... judged in relation to [its] plainly legitimate sweep.’ Stevens, 559 U. S., at 473.”

Implications for Other States and Federal Efforts

This ruling will have implications for other efforts aimed at requiring donor disclosure for charitable organizations. As stated by the court, “Each governmental demand for disclosure brings with it an additional risk of chill.” In 2021 alone, 16 states considered measures requiring donor disclosure for 501(c)(3) organizations, and 10 states have passed donor privacy protections in recent years. Moving forward, this decision will help to protect donors from new burdens on their right to private association and bolster the efforts to explicitly protect donor privacy. 

Implications are expected on the federal level as well. New legislation in Congress, S.1981, threatens donor privacy on several fronts by 1) forcing private foundations to disclose donor-advised fund (DAF) gifts in detail; 2) treating all anonymous DAF gifts as coming from one person and making it more difficult for charities to meet public charity status under the tax code; as well as 3) disallowing anonymous contributions of non-cash assets to DAFs. Such forced disclosure of some donations and the intent behind them may threaten the safety and well-being of donors as well as chill charitable giving overall.

With the Supreme Court’s ruling for freedom of association and the corollary right to donor privacy, S. 1981 and state efforts to mandate donor disclosure face a clear constitutional obstacle.