Supreme Court Strikes Down Donor Disclosure Rule
On July 1, 2021, the U.S. Supreme Court struck down a California law (California Code of Regulations, Title 11, Section 301) that required charitable organizations to disclose the identities of their major donors to the California Attorney General’s Office.
Charities in California renew their registrations annually with the Attorney General, and this law required the charities to provide copies of their IRS Form 990, including Schedule B, Schedule of Contributors, to the state with that registration renewal. The state imposed this law contending that having this information readily available furthers its interest in policing misconduct by charities.
The Supreme Court reversed this law, concluding that California’s disclosure requirement is invalid because it burdens the donors’ First Amendment rights in their freedom of association and is not narrowly tailored to an important government interest. The court stated that the enormous amount of sensitive information collected through Schedule B does not form an integral part of California’s fraud detection efforts.
New Jersey and Hawaii have similar laws requiring charities to provide a copy of their Form 990 Schedule B to the state. Most recently, effective January 1, 2021, New York passed a similar law (Executive Law §172-b) requiring this same donor disclosure with the state.
The New York law was already in peril of being overturned. On June 10, 2021, the New York State Senate and Assembly passed a bill to repeal this new law requiring nonprofits to file their complete Form 990 with the state. The bill still has not been signed into law by the governor.
With the Supreme Court striking down the California law, the disclosure requirements by the other three states are expected to be undone as well.
We will issue new bulletins as updates to these rulings become available.
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