Colinvaux, Associational Rights Versus Nonprofit Transparency
For decades, the nation’s charitable and nonprofit organizations have been required to file an information return, known as the Form 990, with the Internal Revenue Service. Congress mandates that the return be made publicly available. Such information reporting, both to the IRS and to the public, is the cornerstone of the federal government’s approach to assuring that nonprofit organizations are legally compliant. The Supreme Court’s decision in Americans for Prosperity Foundation v. Bonta (APF), however, casts a shadow on the constitutionality of nonprofit reporting requirements. In APF, the Court held unconstitutional California’s effort to require charities to disclose their major donors, finding that compelled disclosure rules presumptively impose a burden on First Amendment associational rights, even for confidential disclosures to the government. The Court also said that compelled disclosure rules are subject to exacting scrutiny and narrow tailoring. The federal nonprofit reporting regime therefore, post-APF, must undergo exacting scrutiny for the first time and may fail under the First Amendment.
After the Introduction to the Article, Part II summarizes the development of the First Amendment compelled disclosure cases alongside Congress’s steady enactment of nonprofit disclosure rules and the Form 990, from 1941 to the present day. These two tracks of law, once parallel, now intersect, with APF posing a presumptive challenge to the constitutionality of Form 990 reporting. Part III discusses APF and critiques the Court’s new exacting scrutiny standard as unworkable in other contexts and of limited precedential value. Part IV applies APF’s exacting scrutiny to the hundreds of items of information on the Form 990, first on a confidential basis to the IRS and then on a public basis. The Part provides a new framework, consistent with APF, to assess the constitutionality of compelled disclosures rules based on their impact on expressive association. Using this framework, the Part reasons that most compelled information on the Form 990 relating to charitable nonprofits should survive a constitutional challenge, whether on a public or nonpublic basis, because of the government’s strong and vital interests in oversight and transparency, even information that is closely related to expressive association. As discussed in this Part, publicity and comprehensive information reporting are instrumental to any credible compliance for charitable nonprofits. Disclosures about noncharitable nonprofits (such as 501(c)(4) social welfare organizations), however, are constitutionally vulnerable given the breadth of the disclosure requirement and the comparatively weaker governmental interests in transparency and oversight for noncharitable nonprofits as a class. Governance-related disclosures are also vulnerable. The Article concludes that regardless of the ultimate verdict on the constitutionality of nonprofit compelled disclosure rules, Congress, the IRS, and nonprofit stakeholders should take up the challenge presented by APF and update information reporting for the Internet age in light of associational concerns while maintaining a strong commitment to transparency.
Lloyd Mayer