Metropolitan News-Enterprise


Monday, May 4, 2015


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Court Rejects Group’s Challenge to Being Forced to Disclose Donors




The California attorney general can force a nonprofit advocacy group to disclose its major donors as a condition of its remaining a registered charitable trust, the Ninth U.S. Circuit Court of Appeals ruled Friday.

The panel affirmed U.S. District Judge Morrison B. England Jr.’s denial of a preliminary injunction that would bar Attorney General Kamala Harris from requiring the Center for Competitive Politics to disclose the names and contributions of its “significant donors” on Internal Revenue Form 990 Schedule B, which it must file with the state in order to maintain its registered status with the state’s Registry of Charitable Trusts.

Without that status, the center could not solicit funds from California residents. The center has been registered since 2008, but its filings have always included redacted versions of IRS Form 990 Schedule B.

State Statute

The attorney general insists that the filing of unredacted versions of the form is required by regulations enacted by the state under the Supervision of Trustees and Fundraisers for Charitable Purposes Act.

Those regulations, she argued, serve a compelling governmental interest because without being able to identify donors, the state cannot determine whether organizations are engaging in suspicious behavior, such as inflating the value of “in kind” donations. Without unredacted Form 990s, she said, her office would have to engage in costly and burdensome audits.

In seeking the injunction in U.S. District Court for the Eastern District of California, the center—which is based in Virginia and says its “mission is to promote and defend the First Amendment rights of free political speech, assembly, association, and petition through research, education, and strategic litigation”—contended that the disclosure requirement violates the First Amendment by infringing upon its supporters’ rights of free association.

England, however, ruled that that the center was unlikely to prevail on the merits and denied relief.

Paez Opinion

Judge Richard Paez, writing for the Ninth Circuit, agreed.

Paez rejected the “creative” argument that the disclosure requirement itself, and not its potential chilling effect on donors, constitutes injury for First Amendment purposes. That potential effect, however, does require that the regulation be subjected to “exacting” scrutiny, he acknowledged.

But the plaintiff, Paez wrote, “does not claim and produces no evidence to suggest that their significant donors would experience threats, harassment, or other potentially chilling conduct as a result of the Attorney General’s disclosure requirement.”

He rejected the plaintiff’s argument that a series of civil rights cases involving the NAACP supported the center’s position. Those rulings by the Supreme Court, handed down between 1958 and 1963, all involved strong showings that disclosure of members’ names would subject those members to threats and harassment, Paez said.

He also emphasized that there would be no public disclosure, because the attorney general’s office uses the Schedule B filings for internal purposes only.

No Preemption

Paez went on to reject the center’s claim that the filing requirement is preempted by 26 U.S.C. §6104, which generally permits the government to make return information for tax-exempt groups available to state enforcers of charitable trust law, but excepts 501 (c)(3) groups such as the center.

Nothing in the statutory language prohibits states from requiring 501 (c)(3) organizations to supply return information to state officials directly, nor did the plaintiffs carry their burden of showing that it was the “manifest intent” of Congress to preempt states from enforcing their own laws with respect to such organizations.

Senior Judge A. Wallace Tashima and visiting Senior Judge Gordon J. Quist of the U.S. District Court for the Western District of Michigan concurred in the opinion.

The case is Center for Competitive Politics v. Harris, 14-15978.


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