The Disclosure Digest: April 22, 2019
Explore the laws governing nonprofit donor disclosure with Ballotpedia. Each weekly edition of The Disclosure Digest will highlight noteworthy legislation, pending litigation, and major activities by advocacy groups.
Nonprofit organizations do not distribute surplus revenues as profits or dividends to shareholders. Instead, nonprofits use revenues for self-preservation or expansion. Tax-exempt nonprofits are regulated under Section 501 of the Internal Revenue Code. States may subject nonprofits to additional regulations beyond those imposed by the federal government. Under federal law, nonprofits are generally not required to disclose to the public information about their donors. State laws, however, may require such disclosure. Some say expanded donor disclosure provisions minimize the potential for fraud and establish public accountability. Meanwhile, others say that disclosing information about donors violates privacy rights and can inhibit charitable activity.
This week, we shine a spotlight on an ongoing lawsuit involving IRS donor disclosure practices.
Montana, New Jersey state governments ask federal judge to overturn IRS donor disclosure rule
On April 17, 2019, the Montana and New Jersey state governments asked a federal judge to overturn an Internal Revenue Service (IRS) rule exempting select classes of nonprofit organizations from donor disclosure requirements. The plaintiffs requested summary judgment in the matter, meaning they asked the judge to rule in their favor without going to trial.
- What is at issue? On July 16, 2018, the IRS issued Revenue Procedure 2018-38, which exempts 501(c) nonprofit entities from reporting the names and addresses of their contributors to the IRS. The rule modification does not apply to 501(c)(3) organizations.
- Who are the parties to the suit, and what are they saying?
- The plaintiffs are Montana Gov. Stephen Bullock (D) and the Montana Department of Revenue. The state of New Jersey later joined the suit. Montana operates under divided government. Bullock, a Democrat, holds the governorship, but Republicans control both chambers of the state legislature. New Jersey is a Democratic trifecta.
- In a court filing, attorneys for the plaintiffs said, "Reduced transparency for 501(c) organizations at the federal level has significant downstream effects. In the context of elections and election spending, reduced transparency at the IRS upends settled expectations that federal tax-exempt organizations are what they purport to be: domestically-funded social welfare groups validly participating in elections, for example."
- The defendants are the Internal Revenue Service, Acting IRS Commissioner David Kautter, and the U.S. Department of the Treasury.
- U.S. Department of Justice attorneys for the defendants said, "Neither state has ever before sought or received from the IRS the information they are now trying to force the IRS to continue collecting, and both states lack the ability to obtain this information from the IRS even if it was collected. In issuing Revenue Procedure 2018-38, the IRS exercised its longstanding statutory discretion to determine what information it collects from exempt organizations to meet its tax administration needs."
- The plaintiffs are Montana Gov. Stephen Bullock (D) and the Montana Department of Revenue. The state of New Jersey later joined the suit. Montana operates under divided government. Bullock, a Democrat, holds the governorship, but Republicans control both chambers of the state legislature. New Jersey is a Democratic trifecta.
- What comes next? The plaintiffs have asked for summary judgment in their favor, and the defendants have asked that the case be dismissed due to lack of standing. Judge [[Brian Morris]], of the U.S. District Court for the District of Montana, is presiding. Morris was appointed by President Barack Obama (D) in 2013. The case name and number are Bullock v. Internal Revenue Service, 4:18-cv-00103.
What we're reading
- Charleston Gazette-Mail, "Campaign finance bill closes loophole on anonymous political spending," April 20, 2019
- ProPublica, "How the IRS Gave Up Fighting Political Dark Money Groups," April 18, 2019
- Eastern Arizona Courier, "Tempe dark money law withstands court challenge," April 15, 2019
The big picture
Number of relevant bills by state: We're currently tracking 72 pieces of legislation dealing with donor disclosure. On the map below, a darker shade of green indicates a greater number of relevant bills. Click here for a complete list of all the bills we're tracking.
Number of relevant bills by current legislative status
Number of relevant bills by partisan status of sponsor(s)
Recent legislative actions
Below is a complete list of legislative actions taken on relevant bills in the past week. Bills are listed in alphabetical order, first by state then by bill number. Know of any legislation we're missing? Please email us so we can include it on our tracking list.
- Connecticut HB07329: This bill would expand disclosure requirements for entities making independent expenditures.
- Legislative Commissioners' Office reported favorably April 18.
- Connecticut SB00269: This bill would narrow the definition of a contribution as it applies to state legislative candidates.
- Legislative Commissioners' Office reported favorably April 18.
- Montana SB134: This bill would revise the definitions of contributions, expenditures, and independent expenditures as they apply to electioneering communications.
- Conference committee hearing April 16.
- New Hampshire SB156: This bill would require that political contributions made by limited liability companies be allocated to individual members in order to determine whether individuals have exceeded contribution limits.
- House Election Law Committee hearing April 16.
See also
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