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Arguments in favor of disclosing nonprofit donor information to governments

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Donor privacy and disclosure policy
Taxonomy of arguments
• Disclosure of nonprofit donor information to governments
• Disclosure of nonprofit donor information to the public
• Disclosure and political polarization
Donor privacy and disclosure policy by state

This article is one of 10 that described arguments about donor privacy and disclosure policy between 2019 and 2023. This article may not reflect subsequent developments in arguments about donor privacy and disclosure policy. For more on Ballotpedia's past donor privacy and disclosure policy coverage, click here.

Advocates of donor disclosure policies argue that increased disclosure minimizes the potential for fraud, establishes public accountability, prevents foreign influence in politics and elections, and limits the political influence of major donors who might seek to advance their private interests.

Click on the arguments below to see statements from advocates of disclosing nonprofit donor information to governments:

Argument: Disclosure ensures accountability and prevents fraud and corruption

  • Jan Masaoka, CEO of the California Association of Nonprofits, which describes itself as "a statewide membership organization that brings nonprofits together to advocate for the communities we serve," supported the California Secretary of State’s disclosure regulations. She said in an interview with NPR, "All of us--nonprofits and donors--we want to have that confidence that the rules are being enforced, and we need the [state] attorney general to do that."[1]
  • The Ninth Circuit Court of Appeals’ opinion in Americans For Prosperity v. Becerra, issued in 2018, cited court testimony in the Citizens United case: “The court [in Citizens United v Schneiderman] agreed with the state that knowing the source and amount of large donations can reveal whether a charity is doing business with an entity associated with a major donor. The information in a Schedule B also permits detection of schemes such as the intentional overstatement of the value of noncash donations in order to justify excessive salaries or perquisites for its own executives. Collecting donor information on a regular basis from all organizations facilitates investigative efficiency, and can help the Charities Bureau to obtain a complete picture of the charities’ operations and flag suspicious activity simply by using information already available to the IRS. Because fraud is often revealed not by a single smoking gun but by a pattern of suspicious behavior, disclosure of the Schedule B can be essential to New York’s interest in detecting fraud.”[2]
  • In Center for Competitive Politics v. Harris (2015), Assistant Attorney General Belinda Johns, the senior assistant attorney general who oversaw the California Charitable Trusts Section, said: “[I]f we subpoenaed it or sent a letter to the charity, that would tip them off to our investigation, which would allow them potentially to dissipate more assets or hide assets or destroy documents, which certainly happened several times; or it just allows more damage to be done to [the] charity if we don’t have the whole document at the outset.” Rather than having “to wait extra days,” she wanted to “take the action that needs to be taken as quickly as possible.”[2]

Argument: Disclosure limits the influence of major donors using nonprofits to advance private interests

  • In a 2021 amicus brief filed in the Americans for Prosperity v. Becerra case, a group of Democratic members of the United States Senate commented on the legal challenges to California's mandatory disclosure law: "This appeal is just the latest move in the steady and methodical campaign pursued by powerful interests to both cement and obscure their influence over the public sphere since this Court’s decision in Citizens United v. Fed. Elec. Comm'n. The effect of these efforts has been to deprive the citizenry of information and make our democracy less representative.”[3][4]

Argument: Exposure of donor information is rare, and the risk to donors and nonprofits is low

  • Judges writing for the majority in the Ninth Circuit Court of Appeals’ opinion in Americans for Prosperity v. Becerra (2018) said: “The risk of inadvertent disclosure of any Schedule B information in the future is small, and the risk of inadvertent disclosure of the plaintiffs’ Schedule B information in particular is smaller still.”[2]
  • In that same Ninth Circuit Court of Appeals decision in Americans for Prosperity v. Becerra in 2018, the appeals court panel said: “The strength of the state’s interest in collecting Schedule B information reflected the actual burden on First Amendment rights because the information was collected solely for nonpublic use, and the risk of inadvertent public disclosure was slight.”[2]
  • In the Ninth Circuit Court of Appeals’ opinion in Americans for Prosperity v. Becerra, the appeals court panel concluded: “Nothing is perfectly secure on the internet in 2018, and the [California] Attorney General’s data are no exception, but this factor alone does not establish a significant risk of public disclosure. As the Second Circuit recently explained, ‘[a]ny form of disclosure-based regulation – indeed, any regulation at all – comes with some risk of abuse. This background risk does not alone present constitutional problems.’”[2]
  • The California Association of Nonprofits, which describes itself as a “voice of the California nonprofit community," agreed that data security concerns are not an adequate rationale for eliminating nonprofit donor disclosures: “Limited security breaches in the past are not a reason to stop providing information, especially given that security measures have been increased and new security systems are adequate to protect private information. We should not hinder law enforcement by over-reacting to a few small, isolated incidents in the past.”[5]

Argument: Disclosure prevents foreign influence in politics and elections

A major claim in the debate over nonprofit donor disclosures is that foreign entities have shifted donor activity to politically active nonprofit organizations to shape and influence American politics. As of 2021, federal law prohibits foreign nationals from making contributions or expenditures in federal, state, or local elections. It is also illegal for American political parties and political committees to accept contributions from foreign nationals.

  • Sheila Krumholz, Executive Director of the Center for Responsive Politics, whose mission is "to track the flow of money in American politics," testified before the Senate Democratic Policy and Communications Committee on July 19, 2017. Krumholz said, “We already know from past campaign finance scandals that foreign corporations, individuals and governments had the wherewithal and the willingness to try to shape U.S. elections in the past. Given this, it defies logic to think that those motivations or opportunities no longer exist – particularly since foreign donations can be given easily, legally and secretly to nonprofits that are now allowed to be highly politically active.. . .Given foreign meddling in U.S. elections, lax enforcement, the rise of megadonors and secret channels through which to fund politics, it is urgent for public officials to provide the American people with a comprehensive and trustworthy means by which to verify who is bankrolling politically active nonprofits and how they shape our elections and policies.”[6]
  • In an October 2020 letter to the Environmental Protection Agency, Rep. Lance Gooden (R) raised the possibility that foreign donors were channeling funds to American environmental nonprofit groups. Gooden wrote, "Based on information recently brought to my attention, I believe there is considerable evidence of foreign interference in our government, perpetrated through environmental groups like these taking shelter behind the nonprofit status of donor anonymity."[7]
  • Brendan Fischer, director of the federal reform program at The Campaign Legal Center (a nonprofit which “supports strong enforcement of United States campaign finance laws”), was quoted in a February 2020 article in The Intercept: “The only donor disclosure reports that dark-money groups file with any federal agency are the confidential Schedule B reports filed with the IRS. These confidential donor reports are one of the few ways that federal agencies could detect and deter foreign money in U.S. elections.”[8]

Argument: Disclosure and donor visibility benefits nonprofits as an endorsement of their mission

Proponents of nonprofit donor disclosure (even if the data is reported only to government entities and remains confidential) argue it is in the interests of both America's nonprofit sector and the public to have well-run, trustworthy nonprofit organizations. Further, they argue that donor disclosure requirements, such as the IRS Form Schedule B, are necessary to maintain the nonprofit sector’s trustworthiness.

  • The California Association of Nonprofits, which describes itself as "a statewide membership organization that brings nonprofits together to advocate for the communities we serve," argued in 2021 in support of the State of California in Americans for Prosperity Foundation v. Rodriquez that by requiring the filing of donor information, Attorneys General fulfill the important role of ensuring the continued trustworthiness of America’s nonprofit organizations. “The [California Association of Nonprofits] points out that the Attorney General may be the sole actor with the ability to prevent charities from misusing donor funds. . .the Association argues that since society as a whole relies on nonprofits and that nonprofits rely on society to enable them to further their missions, it is vital that the state—through its Attorney General—maintains that trust.”[9][10]
  • In the 2021 Supreme Court opinion in Americans for Prosperity v. Bonta, justices writing for the minority said: “The average donor is probably at most agnostic about having their information confidentially reported to California’s attorney general. A significant number of the charities registered in California engage in uncontroversial pursuits. They include hospitals and clinics; educational institutions; orchestras, operas, choirs, and theatrical groups; museums and art exhibition spaces; food banks and other organizations providing services to the needy, the elderly, and the disabled; animal shelters; and organizations that help maintain parks and gardens. [. . .] It is somewhat hard to fathom that donors to the Anderson Elementary School PTA, the Loomis-Eureka Lakeside Little League, or the Santa Barbara County Horticultural Society (‘[c]elebrating plants since 1880’) are less likely to give because their donations are confidentially reported to California’s Charitable Trusts Section.”[11]
  • Writing in support of the California nonprofit donor disclosure regulations, the California Association of Nonprofits argued that "Schedule B is a powerful deterrent, similar to 'speed limits enforced by aircraft.' Schedule B discourages 'bad actors' from using nonprofit legal entities for private benefit or fraud, knowing that they could be caught through Schedule B. Each fraud case disproportionately erodes public confidence in nonprofits and results in fewer donations and lower usage by people in need. Nonprofits support the investigation and prosecution, if needed, of people who misuse nonprofit legal frameworks for non-charitable purposes, including for fraud or embezzlement."[5]

Argument: Nonprofit donor disclosures do not deter donors from contributing

  • Judges for the Ninth Circuit Court of Appeals wrote in the majority decision in Americans for Prosperity v. Becerra (2018) that the Thomas More Law Center, a co-plaintiff in the case, had "over-disclosed contributor information on Schedule Bs filed with the IRS. Although by law, the Law Center is required to disclose only those contributors furnishing 2 percent or more of the organization’s receipts (about five to seven contributors a year), it has instead chosen to disclose all contributors providing $5,000 or more in financial support (about 23 to 60 contributors a year). This voluntary over disclosure tends to undermine the Law Center’s contention that Schedule B disclosure meaningfully deters contributions.”[2]

Argument: Providing information on donors does not burden nonprofits and builds trust

  • The California Association of Nonprofits, an advocacy organization for California’s nonprofit sector, argued in the Americans for Prosperity v. Becerra case (2018): “Submitting Schedule B to the IRS and the California AG is not an onerous burden on nonprofits. We must keep records of donations and grants anyway, and Schedule B is simple to complete. It is well worth a very small investment of our time to support the integrity of the nonprofit sector.”[5]

Overview of arguments taxonomy

See also: Taxonomy of arguments about donor disclosure and privacy

Ballotpedia broke down the debate over donor disclosure and privacy according to the following three subject areas that each had supporting and opposing arguments:

Arguments about disclosure of nonprofit donor information to governments

Arguments about disclosure of nonprofit donor information to the public

Arguments about donor disclosure and political polarization

See also

External links

Footnotes

  1. ↑ NPR, "Supreme Court Eyes Rich Activists, Their Anonymous Donations And Tax Breaks," April 26, 2021
  2. ↑ 2.0 2.1 2.2 2.3 2.4 2.5 U.S. Courts, "Americans For Prosperity v. Becerra," accessed October 21, 2021
  3. ↑ U.S. Supreme Court, "Brief of U.S. Senators as Amici Curiae in Support of Respondent," March 31, 2021
  4. ↑ Amici Curiae in the case included: Sheldon Whitehouse (D-Rhode Island), Patrick Leahy (D- Vermont), Ron Wyden (D-Oregon), Richard J. Durbin (D-Illinois), Amy Klobuchar (D-Minnesota), Jeffrey A. Merkley (D-Oregon), Christopher A. Coons (D-Delaware), Richard Blumenthal (D-Connecticut), Tammy Baldwin (D-Wisconsin), Mazie K. Hirono (D-Hawaii), Elizabeth Warren (D-Massachusetts), Edward J. Markey (D-Massachusetts), Cory Booker (D-New Jersey), Chris Van Hollen (D-Maryland), and Tammy Duckworth (D-Illinois)
  5. ↑ 5.0 5.1 5.2 California Association of Nonprofits, "Nonprofit case at U.S. Supreme Court has misleading opponents and potentially huge impact," accessed October 21, 2021
  6. ↑ Open Secrets, "Dark money and potential foreign influence," July 19, 2017
  7. ↑ inForney, "Following request by Congressman Gooden, EPA investigation on foreign influence in Presidential election referred to DOJ," October 26, 2020
  8. ↑ The Intercept, "Foreign-Funded Dark-Money Groups Lobby IRS to Repeal Remaining Reporting Requirements," February 15, 2020
  9. ↑ California Association of Nonprofits, "About Us," accessed October 21, 2021
  10. ↑ Cornell University, "Americans for Prosperity Foundation v. Rodriquez," accessed October 21, 2021
  11. ↑ U.S. Supreme Court, "Americans for Prosperity v. Bonta," accessed October 21, 2021
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