Supreme Court Strikes Down California Donor-Disclosure Rule

(Bloomberg) -- A divided U.S. Supreme Court invalidated a California requirement that charities list the names and addresses of their top donors in filings with the state, saying the rule violates the Constitution's First Amendment.

The 6-3 ruling is a victory for two conservative groups -- the Thomas More Law Center and the Charles Koch-backed Americans for Prosperity Foundation -- that said the California rule puts their donors at risk of harassment and intimidation.

California said it needed the information to investigate complaints of charitable fraud.

“California casts a dragnet for sensitive donor information from tens of thousands of charities each year, even though that information will become relevant in only a small number of cases involving filed complaints,” Chief Justice John Roberts wrote for the court.

The First Amendment showdown drew outsize interest, in part because of its potential implications for political campaigns. Although the California rule applied only to so-called 501(c)(3) charities, advocates of campaign-finance regulation said the case could be a step toward a direct attack on election disclosure laws.

The ruling is “a shot across the bow against the widely popular For the People Act, which is designed to bring transparency to the major donations” of groups that seek to influence the outcome of elections, said Lisa Graves, who served as a deputy assistant attorney general during the Clinton administration. The For the People Act is a Democratic-backed voting rights law that's stalled in the Senate because of Republican opposition.

Campaign Impact

The Cato Institute's Trevor Burrus, who has been critical of such laws, said that the ruling will “absolutely” spur new challenges to some campaign-related disclosure laws. He suggested that disclosures related to direct campaign donations were probably safe, but others, like those covering political actions committees or PACs, might be more susceptible to challenges now.

Even if there are more challenges, they won't ultimately be successful, said Tara Malloy, of the Campaign Legal Center, a good-governance group that often backs progressive issues. Malloy said she believes the ruling will be limited to charitable organizations because the majority was highly skeptical of California's need for the disclosures.

That contrasts with the court's position in Citizens United -- the 2010 ruling that undid contribution limits for corporations and unions -- which recognized the value of campaign-related disclosure laws.

In the California case, although the state said it keeps the information confidential, the groups said the state has a history of inadvertently disclosing information. California said any lingering public-disclosure risk doesn't outweigh the state's legitimate need for the information to evaluate complaints against charities and investigate instances of fraud.

Names, Addresses

California was one of four states -- along with New York, New Jersey and Hawaii -- that required charities to provide a copy of their Schedule B, a form organizations routinely file with their federal tax returns. That form generally provides the names and addresses of people who contributed more than $5,000.

The majority opinion in Americans for Prosperity Foundation required a close “fit” between the claimed governmental interest and the manner in which it went about achieving it. Malloy said campaign-related disclosures laws have already been subject to -- and satisfied -- the need to show a close nexus between the ends and the means.

Liberal Justices Sonia Sotomayor, Stephen Breyer and Elena Kagan dissented, saying the challengers hadn't shown the donors wanted privacy or were burdened by disclosure.

“Today's analysis marks reporting and disclosure requirements with a bull's-eye,” Sotomayor wrote for the group. “Regulated entities who wish to avoid their obligations can do so by vaguely waving toward First Amendment ‘privacy concerns.'”

Even so, the challengers had an ideological cross-section of backers that said they have strong donor privacy interests of their own. They included the NAACP Legal Defense and Educational Fund, the American Civil Liberties Union, and the Human Rights Campaign, an LGBTQ advocacy group.

The cases are Americans for Prosperity Foundation v. Bonta, 19-251, and Thomas More Law Center v. Bonta, 19-255.