In order to legally solicit tax-deductible contributions in California, entities must first register with the state’s Registry of Charitable Trusts, which is administered by California’s Department of Justice.
To support its activities, the Institute for Free Speech (formerly the Center for Competitive Politics) solicits charitable contributions nationwide, including in California. Consequently, IFS registers with the State, and submits its publicly available IRS Form 990 to the Attorney General. In 2014, for the first time since IFS began soliciting contributions in California in 2008, the Attorney General requested an unredacted copy of IFS’s Schedule B, which lists the private information of its significant supporters.
Schedule B is an addendum to Form 990, which lists the names and addresses of the Institute’s contributors. While a redacted version of this form is publicly available, per the disclosure and privacy provisions of the Internal Revenue Code (IRC), the Schedule B contributor information of § 501(c)(3) organizations is exempt not only from public disclosure, 26 U.S.C. § 6104(d)(3), but also from disclosure to state officials. The IRC creates a specific means for state officials to seek confidential tax return information by direct request to the Secretary of the Treasury. But § 501(c)(3) organizations are explicitly exempted from this provision.
Therefore, California Attorney General’s request for IFS’s Schedule B violates the clear terms of the IRC and ignores the Supremacy Clause of the United States Constitution, which forbids state actions that conflict with federal law. Worse still, the Attorney General cites no authority whatsoever to substantiate his demand for the Schedule B.
The Attorney General’s demand creates a stark choice for IFS. Either of its potential courses of action would result in constitutional harm actionable under 42 U.S.C. § 1983. IFS may refuse to comply with the Attorney General’s demand and risk losing its ability to solicit charitable contributions in California, despite Ninth Circuit and U.S. Supreme Court precedent holding that fundraising for charitable organizations is fully protected speech.
On the other hand, if the Institute gives the Attorney General its confidential Schedule B as a precondition of engaging in protected fundraising speech, its First Amendment right to associate with its contributors, many of whom would rather not be disclosed, and their right to freely associate with each other, will be chilled.
As the United States Supreme Court first recognized in the civil rights cases of the 1950s, the anonymity of contributors to nonprofit educational organizations is generally protected, lest an individual be subject to retaliation for supporting an organization that educates the public on an unpopular topic. The state may only demand disclosure of an organization’s funders if necessary to advance a sufficiently important governmental interest. Defendant has not even attempted to make such a showing.
Should IFS act in the interest of its contributors and forgo fundraising efforts in the state to protect its donors’ names and addresses, the organization and its donors will be irreparably harmed. This will include not only lost contributions (and a corresponding loss of funding to advance the Institute’s mission) during the pendency of this litigation (which IFS will not be able to recover as damages from the state at a later time), but also the silencing of the Institute’s speech directed at potential donors in California.
As a result, the Institute for Free Speech filed suit in the United States District Court for the Eastern District of California, asking for a preliminary injunction preventing the Attorney General from obtaining the Institute’s confidential donor list. You can find a litigation backgrounder summarizing the case at this link. You can find an updated backgrounder on the implications of the Ninth Circuit’s decision at this link.
Note: This case began in 2014 as “CCP v. Harris” and was updated to “IFS v. Becerra” before a final change to its current name in 2021, IFS v. Bonta. Older court filings may refer to the case by those names.
