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Federal Court Upholds New York Donor Disclosure Requirement

A federal district court in New York has upheld the New York Attorney General’s policy requiring registered charities to disclose the names, addresses and total contributions of their major donors.  This is the second federal court to rule on this issue, after the United States Court of Appeals for the Ninth Circuit upheld a similar requirement by California’s Attorney General in May in a suit brought by the Center for Competitive Politics, a 501(c)(3) public charity.

Under the New York Executive Law, certain charitable organizations that wish to solicit donations in the state are required to register with the New York State Charities Bureau.  Registered charities must submit an annual filing to the Charities Bureau, including the federal Form 990 tax return, Schedule B of which generally requires disclosure of the name, address, and total contributions of major donors.  The Schedule B filings of public charities are not made available for public inspection (in unredacted form) by the Internal Revenue Service, and only a handful of states require their inclusion in state filings.  In 2012, the Charities Bureau discovered that certain organizations were not submitting Schedule B with their annual reports and notified those organizations that they were required to do so.

In May 2014, Citizens United, a 501(c)(4) social welfare organization (and the same Citizens United that was the named appellant in the seminal 2010 Supreme Court decision on campaign finance), and Citizens United Foundation, a 501(c)(3) public charity, sought a preliminary injunction prohibiting the New York Attorney General from requiring the organizations to file unredacted copies of Schedule B with the Charities Bureau.  In their suit, the organizations claimed that this requirement violated their first amendment rights of freedom of speech and association, due process, and the New York State Administrative Procedure Act, and conflicted with federal procedures under which the Attorney General can request the Schedule B filings directly from the federal government.  The Attorney General argued, among other things, that the unredacted Schedule B provides information useful for uncovering and investigating organizations that may be operating fraudulently.

The Court agreed with the Attorney General’s position, finding, among other things, that the policy “substantially relates to the important governmental interests of enforcing charitable solicitation laws and overseeing charitable organizations for the protection of the public.”  In its press release, the Attorney General stated that the court’s opinion “reaffirms some of our most basic responsibilities in overseeing the nonprofit sector in New York State. Charitable donors, beneficiaries, and the general public deserve to know that we have the tools to ensure that charitable funds are properly used and can take action again [sic] dishonest fundraisers and solicitors.”

Although the Charities Bureau does not make Schedule B available for public review on its website, registered charities should periodically check to confirm that Schedule B has not accidentally been posted.