This post was originally published on Forbes Aug 4, 2015
Citizens United won a game-changing case in the Supreme Cout in 2010 allowing corporations to make independent political expenditures. Now it is in court trying to make extra sure that nobody, other than the IRS, knows where the money is coming from. Both Citizens United and Citizens United Foundation are suing the Attorney General of New York over donor disclosure requirements.
501(c) organizations are required to file Form 990 with the IRS. Part of the 990 is Schedule B which discloses the identity of larger donors (Think $5,000+ although it is, of course, more complicated than that.) Each entity's Form 990 is publically available (Here is Citizens United and Citizens United Foundation). Schedule B, which has the juicy stuff, is not publically available. It remains between the organization, anybody they sell their lists to (don't know whether Citizens does that ), the donors and the IRS - and anybody the IRS gives the information to.
Not Just The IRS To Worry About
In addition to the IRS exempt organizations that solicit money are also regulated by the states where they raise money. There are various filings required, sometimes much more rigorous than what the IRS requires. As part of the package though, they will usually want a copy of the Form 990 that the organization files with the IRS. That's the way it is in Massachusetts anyway and apparently in New York too. CU had been sending the New York AG its 990 since 1995. They had not been including Schedule B and nobody seemed to mind. The Charities Bureau conducted a survey of its operations in 2012 and noticed that certain organizations were not including Schedule B with annual reports. The AG implemented an across-the-board initiative to identify and notify the organizations that had not been filing Schedule B with their state reports. In April 2013 the CU organizations were notified that their filings were incomplete.
Citizens United Cries Foul
The only thing more annoying than a new rule is when they start enforcing old rules that you thought they were just letting slide. Hence the Citizens United lawsuit.
Plaintiffs Citizens United and Citizens United Foundation seek to preliminarily enjoin the New York Attorney General from enforcing his policy of requiring registered charities to disclose the names, addresses, and total contributions of their major donors in order to solicit funds in the state. Plaintiffs contend principally that the policy impermissibly trenches upon their First Amendment rights of freedom of speech and association. They also allege that the policy was adopted in violation of the State Administrative Procedure Act; that it is preempted by federal law; and that the Attorney General's enforcement of the policy violates their due process rights.
This ruling is not the ultimate decision. CU was looking for a preliminary injunction. The injunction was denied because the Court finds that plaintiffs are not likely to succeed on the merits of any of their claims. The First Amendment claim is the one that I find most interesting.
First, plaintiffs contend that the policy violates their First Amendment rights of freedom of speech and association. They identify two distinct grounds for their First Amendment challenge: (1) that the Attorney General's interests in enforcing the Schedule B policy do not justify the burdens it places on charities' rights of speech and association (the “unconstitutional burden” argument), and (2) that Article 7-A of the Executive Law is an unlawful prior restraint on speech because it confers unbridled discretion on the Attorney General to impose unlimited conditions on charities' ability to speak (the “prior restraint” argument).
That needed to be balanced against the Attorney General's need for the information.
The Attorney General has explained that requiring registered charities to file Schedule B furthers the government's interests in overseeing charitable organizations and enforcing solicitation laws because information on charities' sources of funding enables him to identify organizations that may be operating fraudulently or without a proper charitable purpose. For example, a charity's multi-year filings of Schedule B may disclose that a single donor has consistently served as its primary source of funding, causing the Attorney General to question whether the charity is in reality a tool to evade taxes or launder money. At oral argument, counsel described a specific instance in which an examination of Schedule B enabled the Charities Bureau to determine that close relatives of a major donor were the recipients of jobs with, and expenditures by, a charity, leading the Bureau to investigate whether the entity was truly pursuing charitable purposes.
The Court went with the AG.
Citizens United has not demonstrated that the balance of equities tips in its favor or that a preliminary injunction serves the public interest. On this record, the only actual, non-speculative burden that the Schedule B policy imposes on plaintiffs' speech and association rights stems from its interference with their donors' subjective desire to remain completely anonymous. As the Court has already found, that burden is negligible. On the other end of the scale, prohibiting the Attorney General from obtaining Schedules B from organizations such as plaintiffs would materially impede his oversight of charities by precluding his access to information that exposes potential violations of the law. Moreover, the public has a strong interest in the enforcement of laws that protect it from unscrupulous charities, at least when such enforcement is not likely to lead to a First Amendment violation.
Jonathan Stempel of Reuters wrote
Donald McGahn, a partner at Jones Day representing Citizens United, said the group plans to pursue the rest of its lawsuit against Schneiderman, and show that the attorney general is "acting unconstitutionally and beyond his authority."
Schneiderman, in a statement, said "today's victory over Citizens United reaffirms some of our most basic responsibilities in overseeing the nonprofit sector," including to ensure that charitable funds are properly used.
Michael Patrick Leahy of Breibart News quoted Citizens United VP Michael Boos
This is just the first step in a lengthy process to protect the privacy of our members and supporters, and we are confident that in the end we will prevail