Although most average Americans are not thrilled when they sign their tax returns every April, most of them do not have to worry that their returns will be on public display.  The federal penalties for releasing tax returns without authorization are severe, as they should be.  In 2013, Lois Lerner and her underlings at the IRS singled out conservative groups for discriminatory treatment and harassment, but not even they are known to have engaged in the leaking of the groups’ respective tax filings.  (These general observations do not apply universally; candidate Donald Trump’s 1995 tax return was leaked weeks before the 2016 election to the New York Times, and a portion of President Trump’s 2005 tax return was obtained and released by Rachel Maddow’s MSNBC show in March 2017.) 

Individual tax returns are not the only confidential and sensitive information in the possession of the IRS.  Each year, nonprofit 501 (c) (3) educational organizations must submit to the IRS their Form 990, which outlines the groups’ finances; the forms are available for public inspection.  Any submitted Form 990 is easy to find on the internet.  Beyond that, however, a nonprofit organization must also submit additional associated materials to the IRS.  These submissions remain private and include a Schedule B form, on which nonprofits submit the names and addresses of all who have donated more than $5,000 in the last year.  Therein lies the problem.   

The requirement that nonprofits turn over a list of their donors to the IRS through Schedule B is itself dubious.  The IRS has already certified that an organization is legitimately operating as a nonprofit and has in its possession all the relevant financial information.  It is illegal for the IRS to favor in any way those who give to one charitable organization or another.  Moreover, there is no governmental purpose in mandating that the IRS also acquire schedules of donors from nonprofit groups.  As the Secretary of the Treasury acknowledged in July 2018 when the IRS relaxed Schedule B requirements for some nonprofits, the IRS can function perfectly well without this information.  The obvious question is:  what does the IRS plan to do with lists of donors? 

Despite the aforementioned changes at the IRS, the requirements remain in place for 501 (c) (3) organizations.  The validity of the Schedule B requirement is not the focus of this blogpost, however. 

The federal Schedule B requirements are onerous and unnecessary.  But they become outright dangerous when states try to commandeer them, which is exactly the scheme that California Attorney General Kamala Harris, now a U.S. Senator, and her successor as Attorney General, Xavier Becerra, have engineered.  Under current rules, California forces any charity soliciting donations in the state to turn over its unredacted Schedule B form to the state.  Americans for Prosperity Foundation (AFP Foundation), a 501 (c) (3) nonprofit, filed suit in December 2014 claiming this requirement violated its First Amendment right to freedom of association.  AFP Foundation donors have experienced harassment and intimidation by political opponents, so its situation represents an ideal opportunity for a legal challenge.  The case has seesawed its way through the judiciary; on June 25, 2018, a panel of judges on the Court of Appeals for the 9th Circuit heard arguments on whether AFP Foundation is entitled to a permanent injunction against the requirement.  The Institute for Free Speech, then known as the Center for Competitive Politics, filed a separate challenge to the Attorney General’s Schedule B demand in March 2014.  The Institute’s case challenges the requirement for all organizations; AFP Foundation’s challenges the requirement as applied to AFP Foundation.

Regardless of what the 9th Circuit decides, this issue is likely to be settled eventually by the Supreme Court.  This year is the 60th anniversary of the 1958 NAACP v. Alabama decision, in which the Court held unanimously that the NAACP could not be required to provide the state of Alabama with a list of the names and addresses of its donors.  Anyone with even the remotest understanding of the civil rights situation in the Deep South in 1958 will not have to guess what the consequences would have been if the decision had gone the other way and the NAACP had been forced to submit its donor list to the state of Alabama.  Donor privacy has never been a theoretical issue.  Yet some still do not appreciate that the freedom to associate in America includes the freedom to associate privately.  Politicians like Kamala Harris and Xavier Becerra have not afforded NAACP v. Alabama the same respect as other Supreme Court precedents. 

As policymakers debate efforts to force public disclosure of donors to nonprofits, they should keep the following principles and arguments in mind: 

1. Transparency is for the government.  Privacy is for people.  The word “transparency” has been co-opted as an excuse for the government to collect the private information—information of no practical use to it—of ordinary citizens.   
    
2. Donors to all manner of organization have experienced intimidation, threats, and harassment both from government and private citizens.  The potential for such activity increases dramatically if government employees are keeping lists of names and addresses of people whose views and donations may differ from their own. 
    
3. Keeping such lists is not a proper function of a state government and wastes time and tax dollars; less is available to be spent on vital public services.
    
4. If a state does collect donor information, the government must treat the information of donors listed on Schedule B forms with the same sensitivity as it treats individuals’ information contained in their tax returns.  Any leaking of this material for political or ideological purposes must be considered a most serious offense.
    
5. States and localities do not always have the same strict privacy requirements that the IRS does.  The safeguards against the release of donors’ private information are often not as robust, and the potential for abuse is higher at lower levels of government, since the overwhelming number of laws, politicians, and policy issues are debated at the state and local level.  Many states and localities are attempting to mandate donor disclosure for any organization that publishes comments on the merits of a ballot initiative, for example (or even a potential ballot initiative).  A church pastor who publicly speaks against abortion, or a professor at a medical school who shares his opinion about a drug-pricing bill, could be covered by these requirements. 
    
6. Information that is shared with the IRS, like Schedule B forms, should not be shared with others like the Attorney General of California, particularly when the regulations for operating a 501 (c) (3) organization are federal in nature and a state has no legal role in enforcing those requirements.
    
7. Recently, advocates of forced donor disclosure have defended it as necessary to counter foreign influence in elections.  Do they really think Vladimir Putin is going to comply?
    
8. Federal law requires, and has required for decades, that any donations by an individual to a candidate for office that total $200 or more in an election cycle be disclosed in quarterly reports with the Federal Election Commission.  This information is available and searchable online, and this requirement is not in doubt.  Nonprofit organizations that, by law, can engage in only minimal political activity should not be subject to similar requirements. 

Until the Supreme Court decides to take up this issue once more, it will be necessary for nonprofit organizations and all concerned citizens to fight back against misguided attempts at “transparency” that chill speech, create a hostile environment for donors, and waste taxpayer dollars on maintaining lists of those who hold certain views and interests.