04 April 2019

Donor Privacy Endangered in California

by Sean Parnell, Vice President of Public Policy, The Philanthropy Roundtable

Supporters of the right of philanthropists to keep their giving private, and even their advice on giving, had a double-dose of bad news in the last few weeks coming out of California.

In a disappointing but not surprising decision, last week the full U.S. Court of Appeals for the Ninth Circuit rejected an appeal by the Americans for Prosperity Foundation that the entire circuit hear an appeal of an earlier decision by a 3-judge panel that rejected its right to keep its major donors private. The case involves whether the California Attorney General’s office can require charitable and other nonprofit organizations to include with their state registrations an IRS form known as Schedule B, which includes the names and addresses of top donors as well as the size of their gifts. Here’s an excerpt from a Politico article on the decision:

A Koch brothers-aligned group will not get a larger judicial panel to review its complaint that California is infringing the group’s First Amendment rights by demanding a list of large donors…

In 2016, a federal judge in Los Angeles blocked the requirement, saying it put the donors in peril and that California has done a poor job of keeping the information private. However, last September, a three-judge panel of the 9th Circuit reversed that decision, calling it “clearly erroneous.” On Friday, the same appeals court declined to offer an “en banc” — or 11 judge — review of the case, even though five judges joined a spirited dissent warning that the state appears to be running roughshod over the conservative group’s First Amendment rights.

The Philanthropy Roundtable filed an amicus brief supporting the Americans for Prosperity Foundation’s en banc petition, believing strongly that the right of donors to keep their giving private is a core tenet of philanthropic freedom. The case may be appealed to the Supreme Court, where hopefully the privacy of philanthropic donors will be given greater recognition.

The second piece of bad news is legislation that was introduced by California Assemblywoman Buffy Wicks regarding donor-advised funds (DAFs). It’s not yet clear if there is a threat to donor privacy in this legislation, but the sweeping and vague language of the bill is cause for concern. The legislation, AB 1712, includes several “findings” including the following:

  • Contributions to DAFs have less transparency, oversight, and accountability associated with them than other types of charitable giving.

The bill then gifts the AG the authority to “adopt rules and regulations requiring that reports filed pursuant to this section by a donor-advised fund sponsor disclose information about individual funds or accounts maintained by the donor-advised fund sponsor that will help the Attorney General ascertain whether those funds or accounts are being properly administered, including, but not limited to any of the following…:”

The specific information the AG is directed to obtain doesn’t include anything that necessarily would violate donor privacy, but the “not limited to” language of the bill potentially gives the AG the ability to demand to know who is recommending grants from specific funds to specific grantees, something many donor-advised fund critics have sought in the past.

There are a number of California-based philanthropists and organizations that share our concerns with this bill, and the Alliance for Charitable Reform will be working with them to protect donor privacy.