A federal appeals court upheld California’s non-public Schedule B disclosure requirement in a ruling handed down Tuesday that will protect the state’s ability to police fraud and self-dealing by charities operating in California. Tuesday’s decision also deals a blow to the larger litigation effort to weaken political disclosure laws, which secure p...
At a Glance
Americans for Prosperity Foundation has failed to comply with California state law by providing its list of donors with the AG's office. They are challenging the law. CLC filed a brief in favor of the law, which seeks to protect taxpayers against fraud.Back to top
About this Case
About the Case
The state of California requires 501(c)(3) nonprofits like the Americans for Prosperity Foundation to submit on a confidential basis a report of their large donors to the Attorney General (AG) as part of the state’s administration of its laws and regulations governing tax-exempt groups. The law applies to all charities that solicit donations or have an office in California.
Americans for Prosperity Foundation has repeatedly failed to provide its “Schedule B” donor report to the AG’s office. And when the organization was put on notice that it had not been complying with the law, it responded by suing the state.
Americans for Prosperity argues that the law violates the donors’ right to privacy under the First Amendment. It claims that submission of the Schedule B would result in harassment and threats to its donors, alleging that the billionaire Koch Brothers helming the foundation had suffered from harassment due to their political activity. U.S. District Court Judge Manuel Real agreed with the Foundation and temporarily blocked the law, barring the AG from collecting the Foundation’s Schedule B’s—even on a non-public basis—but the Ninth Circuit reversed this ruling, ordering the AG only to keep the Schedule B’s confidential. After trial on the merits, the district court again ruled in favor of the Foundation, holding that it was constitutionally entitled to an as-applied exemption from the reporting requirement on ground that compliance with the law would likely subject the Foundation’s donors to harassment and reprisals.
What’s at Stake
The law requires reporting of donors to help the Attorney General administer the tax laws and protect taxpayers against fraud. This is not even a case about public disclosure—although the Foundation alleges that the AG had inadvertently made a small number of confidential reports available on its website in the past. But even if this case did concern a public reporting requirement, the Foundation is not entitled to an exemption from disclosure because it failed to show that reporting would subject its donors to harassment and reprisals and instead focused merely alleged that publicizing its donors’ association with the Foundation may draw criticism and protest.
Expanding the “harassment exemption” from political disclosure laws as the district court did here would create an exception that swallows the rule. This narrow exemption was designed to protect politically and socially marginalized groups—like the NAACP in the civil rights era or the Socialist Workers’ Party—whose members were subject not only to private threats and violence, but also state surveillance and harassment. By contrast, Americans for Prosperity Foundation is attempting to escape general laws regulating tax-exempt groups simply because its donors would prefer to remain anonymous and avoid public criticism for their political stances. Permitting the wealthy and powerful to exempt themselves from disclosure to avoid a critical public response would eviscerate political disclosure laws and undercut the free-flow of information and robust debate the First Amendment is meant to protect.
CLC filed a friend-of-the-court brief with the 9th U.S. Circuit Court of Appeals on Dec. 2, 2016 in support of California Attorney General Kamala Harris. In its brief, CLC argues the Foundation should not receive an exemption from the California reporting law because it is its reporting will be confidential and that even in the unlikely event that its Schedule B is made public, it has failed to demonstrate a reasonable fear of donor harassment as a result.