On May 1, 2015, the U.S. Court of Appeals for the Ninth Circuit upheld a California regulation requiring tax-exempt 501(c)(3) charitable organizations that are registered to solicit contributions to file an unredacted copy of IRS Form 990 Schedule B when it issued an opinion in Center for Competitive Politics v Harris. Schedule B generally requires a charitable organization to disclose the names and addresses of donors who have contributed more than $5,000 to the organization during the tax year. Although Schedule B and its listing of donors is required by the Internal Revenue Service as part of its annual federal Form 990 filing, the donor listing is not subject to the same public disclosure requirement as the Form 990 and may be redacted.
California Charitable Contributions Solicitation
In order to solicit charitable contributions in California, charities must be registered with the California Office of Attorney General's Registry of Charitable Trusts and, subsequently, file annual reports to maintain their registration. This registration requires submitting a Form 990 Schedule B. Historically, many charitable organizations have been providing redacted copies of their Schedule B. However, the California Attorney General has recently begun requesting that the organizations provide unredacted copies of the schedule.
In 2014, the Center for Competitive Politics (CCP), an educational nonprofit organization exempt under Section 501(c)(3), challenged the California Attorney General's request for CCP's unredacted Schedule B. They argued that the disclosure requirement infringes its and its supporters’ First Amendment right to freedom of association and that the federal law preempts California’s requirement.
The federal district court held that CCP could not demonstrate that irreparable harm would result from the required disclosure or that the public interest weighed in favor of granting the relief requested. On appeal, the Ninth Circuit also rejected CCP's argument that the disclosure requirement caused injury to CCP and its supporters. It held that CCP could not show that its donors would experience threats, harassment, or other potentially chilling conduct as a result of the California Attorney General's disclosure requirement. On the other side, the court held that the California Attorney General had a compelling interest in enforcing the laws of California and that the disclosure requirement had a substantial relationship to a sufficiently important government interest. Note, however, that the California Attorney General has indicated that donor information would be publicly disclosed.
The CCP decision is significant because it could open the door for other state attorneys general to begin requiring the filing of the unredacted Form 990 Schedule B as part of the charitable organization registration process in their states. Hawaii, Mississippi, and New York already have similar disclosure requirements. Who will be next?