During almost two hours of oral arguments, the justices grappled with the question of whether the First Amendment prohibits California from requiring tax-exempt charities to report, confidentially and for state oversight purposes, their major donors. A decision from the conservative-majority court is expected by the end of June.
California is widely regarded as the gold standard for donor disclosure laws, both political and otherwise. If the Supreme Court blocks the state's nonpublic disclosure rule for charities, then its public disclosure rules for election spending could also be in jeopardy. This would be a blow to transparency not only in the Golden State, but to other states looking to emulate California's standards.
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"A case about California's constitutional and confidential tax reporting laws should not turn into a case about well-established precedents for a voter's right to know who is spending in elections. A reason we are involved in this case is there is a risk that could happen," said Beth Rotman, money in politics and ethics program director at Common Cause, which filed an amicus brief in support of California's law.
Since 2010, California has required nonprofits to provide the state attorney general with names and addresses of major donors — similar to the federal tax forms charities must send to the IRS. This information is not publicly disclosed, and California officials say it helps the state combat fraud and misuse of charitable contributions.
But the Americans for Prosperity Foundation, founded by the influential GOP megadonors Charles and David Koch, and the Thomas More Law Center, a conservative Catholic legal group, argue California has failed to keep certain donor records confidential and their donors could face potential harassment from the public.
In 2014, the two groups filed separate lawsuits on the matter, and federal courts ruled in their favor. But in 2018, their cases were combined in an appeal, and California's law was upheld as constitutional. Following that decision, the two groups appealed their consolidated case to the Supreme Court, which agreed to hear the case in January.
This dispute over California's disclosure law has become one of the highest profile cases on the Supreme Court's docket this year (at least among those who monitor campaign finance laws) because of the implications it holds for transparency across the board.
The two conservative groups are seeking a ruling that invalidates California's disclosure law as unconstitutional, or at minimum exempts them from having to adhere to it.
The concern among good-government groups is that if an exemption is granted, it could be expanded in the future and ultimately relieve the two petitioners or other nonprofits from campaign finance disclosure rules.
"The problem is that if the Americans for Prosperity Foundation wins at the Supreme Court, every nonprofit that launders dark money for corporations or the wealthy will rely on this new case to keep the dark money sources under wraps. And that's bad news for our democracy," Ciara Torres-Spelliscy, a fellow at the Brennan Center for Justice, wrote in an article about the case.
The Campaign Legal Center, Citizens for Responsible Ethics in Washington and the League of Women Voters of California — joined with Common Cause on an amicus brief in support of California's disclosure law. They wrote that the challenge to California's nonpublic reporting requirement is "a solution in search of a problem," and that the First Amendment injury claim by the two petitioners is "highly speculative" and contrary to their own experience.
"Neither petitioner has demonstrated that California's nonpublic reporting requirement imposes an 'actual burden' on expressive or associational rights," the brief states. "Yet their entire legal argument — and their demand for the most stringent degree of constitutional scrutiny — rest on the presumption that donor disclosure laws 'always [represent] a severe burden on First Amendment rights.'"
But the Americans for Prosperity Foundation and the Thomas More Law Center are using a 1958 Supreme Court case to argue they don't have to reveal their donors to the state of California, even on a confidential basis.
In NAACP v. Alabama, the Supreme Court ruled that the NAACP did not have to release the names of its members because it would have put Black people at risk of harassment, or worse, in the Deep South in the 1950s. The Americans for Prosperity Foundation and the Thomas More Law Center are arguing their donors will also face harassment, so they have a constitutional right to keep them confidential (which they already are by California law).
Historically, the Supreme Court has strongly upheld disclosure laws, but it's not clear to legal experts how the three newest justices (Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett) will rule on transparency issues.
For Barrett, this case in particular could be a conflict of interest. The political advocacy affiliate of the Americans for Prosperity Foundation acknowledged spending "seven figures" — but did not disclose an exact amount — on advertising in support of Barrett's nomination to the Supreme Court last fall.
As a result, three Democratic lawmakers wrote a letter urging Barrett to recuse herself from the case, USA Today reported. But she did participate in Monday's arguments.