August 28, 2019 / 7:29 PM / 18 days ago

Koch-founded charity asks for Supreme Court help to keep donor list secret

(Reuters) - The Americans for Prosperity Foundation, a libertarian nonprofit founded by Charles and David Koch, filed a petition this week at the U.S. Supreme Court, asking the justices to review a 2018 ruling by the 9th U.S. Circuit Court of Appeals that would require Americans for Prosperity and other California-registered charitable foundations to disclose their major donors to the California Attorney General.

AFPF’s lawyers at Quinn Emanuel Urquhart & Sullivan are positioning the case as an opportunity for the Supreme Court to reaffirm a principle it clearly articulated in 1958’s NAACP v. Alabama: If a state attempts to interfere with the First Amendment right, it has to show that it has narrowly tailored its action to serve a compelling state interest. In the NAACP case, the Supreme Court struck down a demand from the Alabama AG for the names of NAACP members. AFPF contends that its major donors, like NAACP members in 1950s Alabama, would face harassment and threats of physical violence if they were exposed. The 9th Circuit decision, according to AFPF, unjustifiably compromises the First Amendment rights of donors to advocacy groups.

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“The 9th Circuit has opened the door for the major donors of thousands of charities to be exposed and chilled through California’s dragnet,” the petition said. “If this court declines review, the resulting chill will be profound and lasting.”

As the petition explains, California requires nonprofits that solicit donations in the state to file their federal tax returns with California’s Registry of Charitable Trusts. Those federal tax returns include a schedule that discloses the charity’s major donors – contributors who have either given at least $5,000 or whose donations constitute 2% of the charity’s annual contributions. Before 2010, according to the AFPF, thousands of California charities did not include the major donor form in their registrations with the state. But beginning in 2010, the state AG, who is charged with enforcing the registry, notified charities that they must include the donor form in their state filings.

It’s worth noting that AFPF’s amici in its unsuccessful bid for en banc review included the NAACP Legal Defense and Education Fund, in addition to a bevy of right-leaning groups.

AFPF’s petition asserted that the 9th Circuit failed to apply strict scrutiny to California’s disclosure requirement, despite the court’s claim that the requirement meets “exacting scrutiny” standards. The appeals court found that California has a compelling interest in policing fraud in charitable organizations – an interest that is advanced by disclosure to the state of major donors. The 9th Circuit discounted the prospect that AFPF donors would face harassment because, the court said, there’s little risk that information disclosed to the state as part of the charity registration process would become public. (AFPF said that conclusion is belied by ample evidence that donor information is hackable and has, in fact, leaked in the past.)

But the 9th Circuit said it was not required to test whether California’s disclosure requirement was narrowly tailored, as the Supreme Court’s NAACP precedent directed. It looked instead at political disclosure cases, such as Doe v. Reed, in which the Supreme Court ruled that the disclosure of the names of people who signed a referendum petition was substantially related to the state’s interest in protecting the election process. California, the court said, has a strong interest in collecting donor information to assure charities are not engaged in fraud. That interest, the court said, far outweighed AFPF’s speculative fear about chilling its donors’ First Amendment rights.

AFPF’s petition argued that the 9th Circuit erroneously ditched the narrow tailoring requirement, which is supposed to be “part and parcel of the heightened scrutiny that always attends laws abridging interests protected under the First Amendment.” The appeals court, AFPF argued, justified its analysis with cases involving political disclosures – but AFPF, the petition said, is a 501(c)(3) charity prohibited from political advocacy. “There is a categorical distinction between the election context, where compelled public disclosure can be an affirmative good, and the non-election context, where compelled disclosure (even to government itself) is at best a necessary evil,” the petition said. “This case has nothing to do with elections or any claimed interest in public transparency.”

State AG Xavier Becerra’s office didn’t immediately respond to my email requesting comment on AFPF’s Supreme Court petition but the foundation’s bid faces two obvious obstacles. For one, the Supreme Court has already turned down a previous petition, by the Center for Competitive Politics, challenging a 2015 9th Circuit ruling that upheld the charitable donor disclosure requirement. For another, despite AFPF’s assertions of a circuit split on applying the narrow tailoring test, the 2nd Circuit in 2018 upheld a New York disclosure requirement that precisely mirrors the California regulation.

AFPF tried to distinguish the 9th Circuit’s ruling in its case from the 2nd Circuit’s decision in Citizens United v. Schneiderman by arguing that the New York appeals court didn’t reach the issue of narrow tailoring. (The 2nd Circuit also criticized California in its ruling, contrasting New York’s record of keeping donor information confidential with California’s “systematic incompetence.”) But in the end, the 2nd Circuit, like the 9th Circuit, found that the First Amendment did not bar states from requiring 501(c)(3) groups to file disclosures of their major donors.

I expect we’ll see a lot of amici backing AFPF, considering that conservative groups and some state AGs turned out in force both at the 9th Circuit for AFPF and in the Supreme Court when the Center for Competitive Politics challenged California’s disclosure requirement.

The views expressed in this article are not those of Reuters News.

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