On July 1st, 2021, the U.S. Supreme Court reversed a California law that required non-profit charities to give the names of their donors to the state, creating a rough path for future financial policing in the state. 

In Americans for Prosperity Foundation v. Bonta, Attorney General of California[1]the 6 to 3 vote favored Americans for Prosperity Foundation in their case against California Attorney General Rob Bonta, the previous policing force of charitable donations. Americans for Prosperity Foundation, a Christian organization, and all non-profits can now keep large donations anonymous. 

At the heart of the dispute between the litigants is Schedule B to IRS Form 990, which requires charities soliciting funds in California to disclose the names and addresses of their major donors, which the state asserts that it uses to police misconduct by charities. 

California requires charitable organizations to register with the Attorney General and annually renew their registrations, which renewal requires the charity to file copies of their Internal Revenue Service Form 990, wherein the charity provides information about their mission, leadership and finances.  Schedule B of Form 990   identified donors who gave more than $5,000 in donations to the charity. 

This case has created a great deal of conflict among party lines in the U.S. House of Representatives. Chief Justice John G. Roberts Jr. stated that the California law violated the First Amendment’s protection of the freedom of association and put donors at risk to potential harassment. 

Democrats’ concerns focus on the future of political campaigns and the disclosure of funds and donations. 

Believing that the charities had not demonstrated that the disclosure of their donors would expose them to threats or harassment, Justice Sonia Sotomayor argued in her dissent that “[d]isclosure requirements burden associational rights only indirectly and only in certain contexts”, which she did not find present in the case.  She continued: “Today’s analysis marks reporting and disclosure requirement with a bully’s-eye. Regulated entities who wish to avoid their obligations can do so by vaguely waving toward First Amendment ‘privacy concerns.’”

This ruling could spur long term effects on federal and state laws’ public disclosure policies regarding campaign contributors which many fear could potentially lead to financial misconduct. 

Jan Masaoka, the CEO of the California Association of Nonprofits, stated that all states need this crucial information on donors in order to detect fraud within a non-profit organization. Tax regulators are also looking to enforce new restrictions in order to prevent financial misconduct within tax-exempt organizations. 

[1] 594 U.S.____ (2021)