Greetings, fellow nonprofiteer. This blog will take a slightly different turn from my usual, and it may be something that will be more of a focus going forward. I have been a newswire writer for the Nonprofit Quarterly for a number of years and have really enjoyed the process. I have learned so much as a writer for them, hearing about what is going on around the country for nonprofits and for the sector as a whole. I have lauded the newswires as a source of critical information to many nonprofits.
There has been a change of leadership at NPQ in recent months and, as is completely their right, there has also been an editorial change. The focus now is on equity, inclusion, leadership, and reshaping the economy in our country. While I applaud the focus on these topics, I really do miss reading and writing the newswires.
So, in this blog let’s turn to an event that is happening that poses some very interesting questions. As this is a blog, it allows me to be a bit more editorial than the newswires. I would very much appreciate your thoughts not only on the topic, but also on this as a blog.
On April 26 the Supreme Court of the United States is going to hear arguments in a case brought by Americans for Prosperity and the Thomas More Law Center against the state of California. Essentially what it boils down to is that these organizations do not want to have to disclose the names of their donors to the State when they file their taxes.
In the IRS Form 990 that is filed with the Feds, major donors over $5,000 have to be listed. Those names can be redacted when filing the 990 in most of the states around the country. There are some notable exceptions: California, New York, and New Jersey, for example, require nonprofits to include the names of the major donors when the 990 is included as part of the tax filing. A more detailed description of the case can be found on Vox.
Given that race relations and racism have been so prominent in the minds of Americans over the past year, leading to the guilty verdict in the George Floyd case, it is interesting to note that this case, too, finds its roots in racism.
In the late 1950s, the NAACP were told by the State of Alabama that they had to disclose the names of their donors or face a fine of $100,000 (supposedly the equivalent of $1 million in today’s economy). This was at a time when the NAACP was leading the battle against Jim Crow laws. The fear, of course, is that someone at the State would then be able to leak the names of the donors to the public, allowing employers to know about and potentially fire employees who were on the list. Even scarier, the Klu Klux Klan could get hold of the names.
This case went all the way to the Supreme Court of the United States who ruled that the State of Alabama could not make this demand as it would put the donors too much at risk. Since then it has become normal for states to allow nonprofits to redact the names of their donors. The Feds still have the names on the Form 990, but not the states.
In California, a law was passed recently that required disclosure. The argument is that this allows the State to track if there is anything going on that needs to be investigated. For example, disclosure would allow the State to see that a corporation or individual made a major donation to the nonprofit and was then hired by that nonprofit. That would be akin to money-laundering as the donor takes the tax deduction and then gets it right back through the contract.
On the other hand, the plaintiffs in the case argue that, as with the NAACP case in the 1950s, because of their political leaning, being arch conservative, disclosure puts their donors at risk. Despite the fact that the law promises that no information will be given to anyone other than during an investigation, one of the plaintiffs hired someone who was able to break into the archives and draw some of the information. This leak has been fixed, but it does represent a threat.
There are many questions this case raises in my mind, and I do not believe I have the answers to all of them.
We always promise donors the right to be anonymous. That is, in fact, one of the benchmarks in the Standards for Excellence and at the Nonprofit Academy of Wisconsin we promote using the Standards as a guide. Does the California law make that promise moot? Not if, as they promise, no information about the donors will ever be accessible.
Should the whole law be struck down because of this, or should individual organizations be allowed to redact the names if they can legitimately claim potential threat to their donors? This would leave the majority of nonprofits with the mandate to disclose. It would seem that the threat to the plaintiffs’ donors is not as severe as in the NAACP case, but I can see the point. However, this is not how the argument is being made: they are asking for the whole law to be struck down, not for the right to have an exception.
What are the implications if the law is struck down? The Vox article, an opinion piece by Ian Millhiser, argues that this could have an impact on elections. Right now in most states, mega donors can remain anonymous when giving to a nonprofit that works to effect legislation. Are we comfortable that people can have that level of impact, spending millions to support a candidate through issue ads, without revealing who they are? Millhiser offers a telling quote from an opinion written by the former Justice Scalia on this arguing that in a true democracy, people stand up openly for what they believe, stepping forward to have their voices heard, not hiding behind a screen.
These are just some of the issues and questions that this case brings up. There is one other issue that has come up. According to a report in Forbes, Democrats are calling for the newly appointed justice, Amy Coney Barrett, to recuse herself from the case because and organization related to one of the plaintiffs, Americans for Prosperity Foundation, spent at least a million dollars in support of her appointment. In fact, that money was spent on her appointment at the very time the Supreme Court were deciding whether or not to take up the case.
This is one example of things that are going on around the country that affect the nonprofit sector. We should be paying attention to what is going on, and talking with each other and our legislators about them. In this case, do you think that nonprofits should be required to disclose their donor list to the state where they are registered as long as the state promises to hold the information confidential? Is that level of transparency important to allow the states to investigate wrongdoing? Or is the fact that the feds have the information enough, and the states don’t need it?
Finally, fellow nonprofiteer, I hope you enjoyed reading this blog, even though it is a bit long. Please let me know if this is the kind of blog you would like to see, at least from time to time as issues come up.
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