U.S. Supreme Court: California’s requirement for disclosure of identities of donors violates First Amendment

California’s requirement that charitable organizations must disclose the identities of their major donors violates the First Amendment.

Requirement that charitable organizations must disclose the identities of their donors

The U.S. Supreme Court today held that California’s requirement that charitable organizations must disclose the identities of their major donors violates the First Amendment.

In a decision written by the Chief Justice, the Court reversed the Ninth Circuit. There are concurring and dissenting opinions. The case is: Americans for Prosperity Foundation v. Bonta, No. 19-251 (S. Ct. July 1, 2021). Read the decision [PDF 282 KB]

Charitable organizations soliciting funds in California must disclose the identities of their major donors to the state Attorney General’s office and generally must register with the Attorney General and renew their registrations annually. The Attorney General requires charities renewing their registrations to file copies of their Form 990, Return of Organization Exempt From Income Tax, and Schedule B to Form 990 requiring organizations to disclose the names and addresses of their major donors. California contended that this information furthered its interest in policing misconduct by organizations.

Two tax-exempt organizations, in an effort to preserve their donors’ anonymity, declined to file unredacted Schedules B. The state in 2010 increased its enforcement of charities’ Schedule B disclosure obligations, and the Attorney General ultimately threatened the organizations  with suspension of their registrations and penalties for noncompliance. The organizations challenged this action in federal district court which ultimately entered judgment in their favor and enjoined the Attorney General from collecting their Schedules B. The Ninth Circuit vacated those injunctions.

Today, the Supreme Court reversed the Ninth Circuit and remanded the case for further proceedings.

KPMG observation

This case does not directly address tax filings, with the IRS or state tax authorities, and thus does not automatically change the requirement that tax-exempt organizations must file their Schedules B with their federal Forms 990.

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

Carrie Garber Siegrist | +1 202 533 3056 | carriesiegrist@kpmg.com


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