Ninth Circuit Decision Ensures Proper Oversight of State Charities and Prevents Broader Assault on Political Transparency Laws

Man writing words "You have a right to know"

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 public transparency in the electoral context. Plaintiff Americans for Prosperity Foundation, a 501(c)(3) nonprofit political group connected to billionaire megadonors Charles and David Koch, wanted to be relieved of its obligation to disclose the same large-donor information it files every year with the IRS to the California Attorney General.

After a bench trial, the trial court had held that the disclosure requirement could not be applied to AFPF because it would unconstitutionally burden the group’s First Amendment associational rights and subject its donors to “threats, harassment, or reprisals.” The appellate court reversed, finding that California has a strong interest in collecting Schedule B’s to further its law enforcement needs, and that the Foundation’s evidence was not sufficient to show that nonpublic Schedule B disclosure would actually chill contributions to the group or lead to the probable harassment of its donors.

In a brief filed in December 2016, CLC argued that the district court improperly exempted the Foundation from the California reporting law based on inadequate and legally insufficient evidence, which largely amounted to testimony that a handful of well-known individuals associated with the group had been subjected to criticism for their public political stances. As the late Justice Antonin Scalia wrote in a 2010 Supreme Court decision, “harsh criticism, short of unlawful action, is a price our people have traditionally been willing to pay for self-governance.” Accepting the district court’s permissive view of what a group needs to show to obtain an as-applied “harassment” exemption from disclosure—a remedy historically reserved for groups facing severe harassment from official and private actors, like the 1950s Alabama NAACP—would have had disastrous consequences for the efficacy of political disclosure laws, by allowing groups to use the “robust debate” that political disclosure laws are meant to foster as an excuse to avoid disclosure entirely.

Thankfully, the Ninth Circuit refused to open that loophole. The court of appeals was ultimately not persuaded that the Foundation should be entitled to sidestep a general law regulating tax-exempt groups based on the minute possibility that a confidential regulatory disclosure requirement would expose its donors to a “substantial probability” of threats, harassment, or reprisals.

Visit our case page to learn about the background of the case.

*Note: As the officeholder of the California Attorney General changed, the name of this case also changed: from Americans for Prosperity Foundation v. Harris to Americans for Prosperity Foundation v. Becerra.