Supreme Court Invokes First Amendment on California Charity Tax Filing Law

The Supreme Court building
United States Supreme Court Building. / Image courtesy Wikimedia, photograph from Carol M. Highsmith Archive, Library of Congress, Prints and Photographs Division.

Tax-exempt nonprofit organizations gained protection against compelled disclosure of donor information when the Supreme Court ruled July 1 that a California law violated the First Amendment. The decision may also provide political financiers with a stronger shield against public scrutiny.

In a 6-3 majority opinion by Chief Justice John Roberts that requires donor disclosure laws to pass a demanding review test known as “exacting scrutiny,” the court found that, given that extent of skepticism, a Golden State law that required charities to provide the state’s attorney general with the Internal Revenue Service Form 990 submitted with tax filings could not stand.

“To withstand this scrutiny, the strength of the governmental interest must reflect the seriousness of the actual burden on First Amendment rights,” Roberts wrote. “We have no trouble concluding here that [California’s] disclosure requirement is overbroad.”

Roberts’ principal assertion in support of the majority ruling was that the California law’s scope and reach was too broad, given the impact on charitable donor privacy. “Narrow tailoring is crucial where First Amendment activity is chilled — even if indirectly — because First Amendment freedoms need breathing space to survive,” the chief justice said. The charities — a foundation supporting efforts by the industrialists Charles and David Koch to persuade political leaders to adopt conservative and libertarian ideas and Thomas More Law Center, which advocates for policies to, among other things, “preserve America’s Judeo-Christian heritage” — argued that the tax form filing requirement would discourage donors and potentially subject them to retaliation for their political sympathies. 

The court found that, while California’s claimed interest in preventing charity fraud is “important,” a law that compels organizations to “reveal sensitive information about their members and supporters” has to be “narrowly tailored to the interest it promotes” in all circumstances. The California law, Roberts wrote, was “a dramatic mismatch…between the interest that the [state’s] Attorney General seeks to promote and the disclosure regime that he has implemented in service of that end.”

Roberts rejected arguments that the disclosure mandate did not pose any risk to confidentiality because the tax forms are not disclosed and that there is no “added burdens on donors” because they file the form with the IRS in any event. “Our cases have said that disclosure requirements can chill association even if there is no disclosure to the general public,” the court explained. “It is irrelevant, moreover, that some donors might not mind—or might even prefer—the disclosure of their identities to the [s]tate. The disclosure requirement creates an unnecessary risk of chilling in violation of the First Amendment, indiscriminately sweeping up the information of every major donor with reason to remain anonymous.”

Roberts also dismissed California’s argument that the state’s tax form disclosure law for charities prevented fraud. He argued that, because the attorney general’s office had not relied on any of the filings to advance investigations into deceptive conduct, the requirement was more burdensome than necessary. “California is not free to enforce any disclosure regime that furthers its interests,” Roberts wrote. “It must instead demonstrate its need for universal production in light of any less intrusive alternatives.” Roberts criticized the disclosure law as a “dragnet” and said the need for it was “dubious” because “California – one of only three States to impose such a requirement – did not rigorously enforce the disclosure obligation until 2010.”

Two justices wrote separately to note that, while they agreed with the majority’s opinion, they would have tweaked it somewhat. Justice Clarence Thomas said he was skeptical about handling the litigation over the California law as a “facial” challenge to it, meaning that it would be invalidated for all applications. Justice Samuel Alito, joined by Justice Neil Gorsuch, said he would not hold that all disclosure requirements should be subjected to “exacting scrutiny.” 

The dissenters included Justices Sonia Sotomayor, Stephen Breyer, and Elena Kagan. Sotomayor’s written statement for the trio said that the majority’s ruling meant that plaintiffs attacking a disclosure law could prevail even if they do not demonstrate any actual hardship caused by that law. “[T]he Court discards its decades-long requirement that, to establish a cognizable burden on their associational rights, plaintiffs must plead and prove that disclosure will likely expose them to objective harms, such as threats, harassment, or reprisals,” she wrote. “It also departs from the traditional, nuanced approach to First Amendment challenges, whereby the degree of means-end tailoring required is commensurate to the actual burdens on associational rights. Finally, it recklessly holds a state regulation facially invalid despite petitioners’ failure to show that a substantial proportion of those affected would prefer anonymity, much less that they are objectively burdened by the loss of it.”

Sotomayor’s dissent indicated concern that the majority’s opinion would open the door to concealment of election campaign donations. “Today’s analysis marks reporting and disclosure requirements with a bull’s-eye,” she wrote. “Regulated entities who wish to avoid their obligations can do so by vaguely waving toward First Amendment ‘privacy concerns.’” 

Ian Millhiser, a senior policy analyst at the Center for American Progress, wrote in Vox on the day the court’s decision was released that it will mean that “wealthy donors now have far more ability to shape American politics in secret.” Millhiser argued that, in 2010’s Citizens United decision – a case that largely “stripped the government of its power to limit the amount of spending on elections, especially by corporations,” the court provided a “blessing to nearly all laws requiring campaigns and political organizations to disclose their donors.” “They’ve now stripped most of the lingering meat off that bone,” he claimed.

Millhiser, a former law clerk for a federal appeals court judge and a constitutional law expert, pointed to a concurring opinion in another 2010 case by the late Justice Antonin Scalia as evidence that the court is now moving away from a recognition that assuring public opportunities to be aware of the sources of political money is vital to American democracy. “Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed,” Scalia wrote in Doe v. Reed. “For my part, I do not look forward to a society which, thanks to the Supreme Court, campaigns anonymously … and even exercises the direct democracy of initiative and referendum hidden from public scrutiny and protected from the accountability of criticism. This does not resemble the Home of the Brave.”

Doug Spencer, a visiting fellow at the University of Colorado Law School’s Byron R. White Center for the Study of American Constitutional Law and a professor of law and public policy at the University of Connecticut, is not so sure that Millhiser’s view of its implications is correct. “I don’t see the direct connection to campaign finance that other people see,” he said. “I certainly see that the court is using maneuvers that could be used in a campaign finance case.” Spencer explained that he views the decision in the California case as being about “reporting, not disclosure.” “Reporting to the IRS or reporting to a state agency is different than reporting to the public, where the threat of blowback and chilling speech could be even more serious.”

On the other hand, Spencer conceded, the court has shown a noticeable interest in facilitating concealment of political money. “The Supreme Court has notoriously been supportive of dark money and big money in politics…based on a kind of a naivete about how the political system works,” he said. “There’s a view that there are other checks in the system that don’t actually exist and because of that naive view…the court doesn’t feel like it needs to step in when it probably should.”

The case is Americans for Prosperity Foundation v. Bonta, No. 19-251.

Previous articleSupreme Court Weighs in on Controversial Arizona Voting Laws
Next article10th Circuit Oral Arguments focus on COVID Prisoner Relief, Police Search


Please enter your comment!
Please enter your name here