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A Dark Day for Democracy and Campaign Finance

SCOTUS’ invalidation of California’s donor disclosure requirement opens another pathway to dark money in politics and philanthropy

Authors: Rakiba Kibria, Vice President of Revenue, Melonie Tharpe, Director Portfolio Initiatives

A few weeks ago, by a 6–3 vote along ideological lines, the Supreme Court invalidated a California rule that requires charitable organizations to disclose the names of contributors. The court said the law subjected donors to potential harassment, citing a violation of the First Amendment. In doing so, SCOTUS has made it easy for donors to secretly funnel money and further economic power to politicians while also disregarding the work of grassroots actors, and ultimately ignore the public scrutiny they would face if their actions were done by the light of day.

How we got here

In 2013, California mandated that non-profit charities soliciting donations in the state identify their substantial donors to the California attorney general, the very same information that is already required by the IRS on the IRS Form 990. Failure to comply had the potential to lead to late fees and suspicion of their registration as a charitable organization.

The 2014 challenge against the state law was brought by conservative nonprofits American for Prosperity Foundation — a Koch-affiliated group — and the Thomas More Law Center, who wanted to keep their donors’ identities secret and argued that the state had not shown a compelling reason for the law. The conservative SCOTUS judges voted that California was too precise in its required reporting, and determined that this reporting opened up donors to potential harassment, and ultimately threw the law out on a basis of protecting free speech.

The big problem with “dark money”

This ruling sets precedent for other states and Attorneys General not to demand disclosure documentation, setting a clear victory for dark money channels. Sen. Sheldon Whitehouse, D-R.I., called it a “dark, dark day for democracy,” adding “The Court That Dark Money Built just built dark money a home in our Constitution.” In fact, partisan groups, such as businesses and churches hailed this legislation, emphasizing that fact even more. Anonymous spending in federal elections topped a record $1 billion in the 2020 election, according to a tally by OpenSecrets, a nonpartisan organization that tracks money in politics. The fact is, dark money is already a potent force in politics, one we should be dismantling rather than supporting.

NPR’s Nina Totenberg reports that this could have a significant effect on federal and state laws that require public disclosure of the names of campaign contributors. Rick Hasen, a law professor at the University of California, Irvine, wrote that the “key point is that it will be much harder to sustain campaign finance disclosure laws going forward.”

The opaqueness of these financial sources in nonprofit giving has issues well beyond politics, hitting minority and LGBTQ communities. By allowing donors to give money without disclosing it to the public, they are free to ignore those who would hold them accountable for saying one thing but making donations that directly contradict the public image they try to cultivate — such as AT&T who was dragged publicly for plastering its social media with rainbows while actively funding anti-trans politicians. This level of opaqueness to shield donor data makes the sector less transparent and accountable to the public — which is their ultimate identity as a 501c3. This is also how non-politicians will use the nonprofit sector to fuel donations to candidates and other politically affiliated projects. If campaign finance laws are abolished—which this ruling sets precedent for—nonprofits could be used by partisan actors to wield political power, ultimately violating the Johnson Amendment.

“The Johnson Amendment is a provision in the U.S. tax code, since 1954, that prohibits all 501(c)(3) non-profit organizations from endorsing or opposing political candidates.”

There is hope, however. Watchdog agencies such as Charity Navigator and Candid can continue to require donor disclosure from nonprofits in order to rank compiling institutions higher. The nonprofit sector is the only sector that has no shareholders. Therefore, its books — which include investments and donations into and out of the organizations — are audited and made available for public filings. Nothing in the law prevents individual foundations from requiring donor disclosure documents as part of grants reporting requirements. Justice-minded donors and philanthropic advisors can fight back against this victory for dark money, and actively seek out nonprofits who go the extra mile in their disclosure measures and continue encouraging, funding, advocating for such practices.

Ultimately, conservative actors like American for Prosperity Foundation, the Koch Family, and the Thomas More Law Center want to use a stacked court to continue to channel economic power for conservative gains, shielded from public scrutiny. Together as a sector, we can shine a light on that dark money.


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