Opinion Page: Nonprofits Should Support Not Oppose Donor Disclosure

From the Chronicle of Philanthropy, November 2, 2023:

Is donor privacy an absolute, indisputable right? Looking at the responses to the House Ways and Means Committee’s recent request for comments on the behavior of nonprofits, one might think so. Almost every major association in the charitable field from left, right, and center expressed fears that transparency would damage the sector and possibly imperil the security of donors.

The donor-privacy debate is an old and not-always-nuanced discussion over whether and when the public should be able to identify financial supporters of organizations involved in research, policy, and election-adjacent activities. One side firmly believes donor privacy should never be breached. The other side is almost as adamant in demanding full transparency.

Two primary factors are driving concerns from Congress and others about the lack of transparency required of 501(c)(3)’s, 501(c)(4)’s, and donor-advised funds, all of which, unlike foundations, are not required to reveal their donors.

The first factor is foreign funding of research institutions, universities, think tanks, and election-adjacent organizations, especially Chinese influence over scientific and policy research. But revelations about Norwegian funding of the Center for Global Development, a Washington, D.C.-based think tank focused on global poverty, and the role of Swiss national HansJorg Wyss in funding various Democratic initiatives have also triggered scrutiny.

. . . 

The second factor involves how American money eligible for the charitable tax deduction is used to influence U.S. politics and policymaking. The Tax Reform Act of 1969 restricted 501(c)(3) lobbying and election-adjacent activities, such as voter registration, education, and mobilization. But a lack of enforcement and shrewd legal maneuvers have weakened those restrictions.

. . . 

The lack of donor transparency has also stymied the ability of non-governmental watchdog groups to provide oversight. Without greater disclosure, it’s almost impossible to trace the flow of money from (c)(3)’s to (c)(4)’s or to figure out how DAF dollars help organizations engaged in lobbying and election-related activities.

Greater disclosure of foreign donors should be an easy place to start remedying the situation. No one is proposing a ban on such giving — just that it be disclosed. When the head of a think tank testifies before Congress on a foreign-policy issue, shouldn’t we know if a non-American entity, government or otherwise, is funding that institution? And if a foreign donor is supporting a nonprofit involved in voter mobilization, doesn’t the public have the right to know?

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Transparency involving American donors is more complicated. Donors to controversial groups have received verbal and even physical threats. Laws, however, are in place to protect people from abuse of this kind. In other words, disclosing donor names is not the real issue here — it’s enforcing the laws against those who make such threats.

In the absence of donor disclosure, mechanisms should be available to ensure nonprofits and their donors are adhering to lobbying and election laws. Congressional hearings would be a good first step to both identify the problem and devise potential solutions. In the 1960s, hearings were essential to creating a framework for regulating the charitable sector.

darryll k. jones