Taking Aim Again at Mandatory Donor Disclosures: Swinging Against New Jersey

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Can controversial nonprofits expect government protection from mandatory disclosures of their donor participants?  New Jersey is the latest state to respond “No,” at least when Section 501(c)(4) social welfare organizations engage in lobbying or other politically related activity. Americans for Prosperity Foundation, a Section 501(c)(4) organization has asserted “Yes,” challenging this so-called “dark money” reporting and donor disclosure law as a First Amendment violation. AFP’s challenge follows on the heels of its valiant (but thus far defeated) effort against California’s more narrow donor disclosure law. Balancing our nation’s constitutional history regarding freedom of speech, association and expression rights, and related privacy interests against New Jersey’s onerous donor disclosure requirements, AFP should win the day with its newly filed injunction action.

The Startlingly Broad New Donor Disclosure Law

New Jersey Governor Phil Murphy signed the new legislation on June 17, 2019, roughly one month after he conditionally vetoed the same legislation.  Known as Senate Bill 150 (or S150), the Act imposes expenditure reporting and corresponding donor disclosure requirements on any organization (termed “independent expenditure committees” under the Act) raising or spending $3,000 or more annually “that engages in influencing or attempting to influence the outcome of any election or the nomination, election, or defeat of any person to any State or local elective public office, or the passage or defeat of any public question, legislation, or regulation, or in providing political information on any candidate or public question, legislation, or regulation.” In other words, a lobbying organization that spends above this relatively low financial threshold is now subject to donor disclosure requirements, even if it does not engage in campaign election activity. Notably (and unlike the California donor disclosure law), the Act expressly excludes Section 501(c)(3) public charities.[1]

The term “political information” is defined broadly to include “any statement including, but not limited to, press releases, pamphlets, newsletters, advertisements, flyers, form letters, Internet or digital advertisements, or radio or television programs or advertisements which reflects the opinion of the members of the organization on any candidate or candidates for public office, on any public question, or which contains facts on any such candidate, or public question whether or not such facts are within the personal knowledge of members of the organization.” In other words, stating facts about candidates, such as to include simple biographical information or to explain their stance on “public questions” even if such information is publicly available, falls within the gambit of the Act’s disclosure requirements.

Issue advocacy touching on politics, whether about pro-life causes, the environment, pension relief, or any one of a myriad of matters of public concern, will situate 501(c)(4) organizations within the scope of the Act’s disclosure requirements. The Act is incredibly broad indeed.

There’s more. The Act requires covered organizations to report donor information, including “the name and mailing address of each person or group from whom moneys . . . or other things of value have been contributed . . .  and the amount contributed by each person or group in excess of $10,000, and when the contributor is an individual, . . .  the occupation of the individual and the name and mailing address of the individual's employer.”   

And more: All reports required to be filed under the Act’s provisions will be publicly available on the New Jersey Election Law Enforcement Commission (“ELEC”) website!   Further, the Act’s disclosure requirements do not appear to require any nexus to the State of New Jersey.  As a result, any donation to a Section 501(c)(4) organization from anywhere in the country regarding New Jersey political matters, which is in excess of $10,000, requires donor disclosure reporting with the donor’s information being posted on the New Jersey Election Law Enforcement Division’s website, regardless of where the donor resides or the funds spent. 

And even more, finally: Failure to comply with these sweeping donor disclosure requirements will result in civil and even criminal penalties. As a result, many organizations in New Jersey and beyond will have to carefully evaluate whether to stop their issue advocacy, legislative efforts, and other political activity, or to report their activities and donor information under this overbroad new law.  Such hefty reporting and disclosure requirements compel a constitutional challenge, and AFP has stepped up to carry the litigation torch.

AFP’s New Constitutional Injunction Suit

A week after the Act became New Jersey law, Americans for Prosperity (AFP) filed suit in Americans for Prosperity v. Grewal. The trial court’s ruling is scheduled for August 5, 2019, on AFP’s motion for preliminary injunctive relief and to invalidate the Act as unconstitutional.[2] All concerned eyes will be on Judge Brian Martinotti, a 2016 Obama appointee to the U.S. District Court for the District of New Jersey, as he weighs the arguments and renders his decision soon.

AFP’s complaint rightly asserts that New Jersey enacted S150 “even though virtually identical provisions in prior statutes were struck down as unconstitutional or drastically limited in order to salvage them.”[3] Undeterred, the New Jersey Legislature apparently believes that courts today might be more favorable. AFP recognizes that the views of its donors (in addition to those of its founding Koch Brothers), are not “universally popular” - offering examples of its supporters who have faced repercussions “ranging from threats to kill or maim to boycotts, firings, and public shaming.“  (Complaint ¶10).  Advocacy organizations across the ideological spectrum should take notice, however, since the views of few if any groups can claim “universal popularity.” The Act’s effect thus threatens to “chill” donors’ participation - that is, to intimidate or otherwise convince them to refrain from participating through making contributions to covered organizations.

AFP’s complaint and motion present compelling legal arguments, well grounded in Supreme Court precedent.  AFP cites the U.S. Supreme Court’s venerable NAACP v. Alabama decision, issued in 1958, for the legal principle that the First Amendment protects our right to associate privately. Similarly, the U.S. Supreme Court recognized the right to advocate anonymously in McIntyre v. Ohio Election Comm’n (1995). More recently, as AFP notes at length, the Court reiterated in its 2006 Rumsfeld v. FAIR decision that “[t]he right to speak is often exercised most effectively by combining one’s voice with the voices of others.” The First Amendment therefore protects a “right to associate for the purpose of speaking.” Laws requiring membership list disclosure “make group membership less attractive and consequently violate the First Amendment by affecting the group’s ability to express its message.” (Complaint ¶ 59 (internal quotations omitted)). AFP concludes by terming it no “less noxious to compel disclosure of an organization’s donors than to compel disclosure of its members.”[4]

Forging Ahead with AFP’s First Amendment Challenges

As noted above, AFP has also challenged California’s law requiring inclusion of Section 501(c)(3) organizations’ “major donor information” in its annual reports submitted to the California Attorney General. The IRS requires “major donor information” on IRS Form 990, submitted by tax-exempt organizations whose gross receipts are normally over $50,000 per year.  California requires this same information to be submitted as part of the annual report California requires of all charities soliciting funds in the State. AFP’s refusal to include its major donor information in its annual report led to a series of lawsuits including two District Court decisions, two decisions by 3-judge panels of the Ninth Circuit Court of Appeals, and finally a denial of a rehearing en banc with a resounding five-judge dissent. AFP’s Supreme Court petition for certiorari is due by August 26, 2019.

With respect to New Jersey, upholding its new reporting and disclosure law would seem to require dramatic departure from standing precedent with respect to political and campaign-related speech and donor privacy. AFP’s path to judicial victory thus seems much clearer than in California.

As Yogi Berra once said, “It’s tough to make predictions, especially about the future.” AFP’s challenge to the California law might face longer odds since that law, at least on its face, does not allow for public disclosure of donor information. The en banc dissenters, however, may provide a forecast for a favorable high court decision. A victory for AFP in either of the First Amendment cases should prove a victory for all Section 501(c)(3) public charities, Section 501(c)(4) social welfare organizations, their donors, and other supporters. Without governmental hindrance, fear of retaliation, or other adverse consequences, they should all be able to freely – and privately – exercise their constitutional rights of free speech, association, and expression.


[1] For a detailed treatment of AFP’s litigation journey against the California Attorney General’s donor disclosure law, which resulted recently in an en banc court denial but with a vigorous five-judge dissent arguing for stronger First Amendment protections, see here.

[2]See here (including links to complaint and injunction motion).

[3] Complaint at ¶7 (citing ACLU of New Jersey v. New Jersey Election Law Enforcement Commission, 509 F. Supp. 1123 (D.N.J. 1981); New Jersey State Chamber of Commerce v. New Jersey Election Law Enforcement Commission, 411 A.2d 168 (N.J. 1980)). 

[4] Complaint ¶ 62 (citing Buckley v. Valeo, 424 U.S. 1, 66 (1976)).