Law & the Courts

California vs. Charitable Giving

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The California state government’s misguided obsession with ‘dark money’ threatens the cause of philanthropy nationwide.

Just in time for tax-filing season — when many Americans account for how much they have donated to charity — the U.S. Supreme Court will take up a case out of California that could have a major impact on charitable giving and those individuals who prefer to keep their charitable activities, specifically donations, confidential.

Americans for Prosperity Foundation v. Rodriquez (formerly AFPF v. Becerra) pits a Democratic Party bete noire — a nonprofit with close ties to Koch family foundations — against the California attorney general’s office. The state of California wants to require all nonprofits to report the names of their major donors not just to the IRS, but to the state government. This could have significant implications that would reduce charitable giving overall; infringe upon Americans’ freedoms of speech, religion, and association; threaten the ability of individual donors and nonprofits to carry out their work; and potentially put private citizens at risk of harassment or worse.

The state insists it needs such information in case certain nonprofits and their donors are mixed up in fraud or other nefarious criminal activities. But states can already call on the IRS for help in such cases, and the California AG’s office has only sought donor information in less than one percent of its investigations into charities — a total of five — in the last ten years. Instead, it appears that the real motivation behind California’s demands is the larger liberal crusade against so-called “dark money” — a phrase the Left likes to use to describe private donations going to conservative causes.

Although this reporting might sound like a simple matter, it has serious consequences, especially considering that in the past, the California AG’s office has had an unfortunate habit of failing to protect the information it has demanded. The court case — an appeal from the Ninth Circuit which upheld California’s statute — will also likely have First Amendment implications. In the Philanthropy Roundtable’s amicus brief filed in support of Americans for Prosperity Foundation, we urge the Court to protect these rights of Americans, “who wish to keep their donations confidential for a variety of good and valid reasons, including religious conviction, fear of retaliation, privacy concerns, and avoiding unwanted solicitations.”

The mere possibility that private donor information might become public could have a chilling effect on charitable giving and is a cause for concern for numerous donors and charities across the country. This is notably true in today’s era of cancel culture, but it also dates back to a key Court precedent set more than 60 years ago. In the 1958 NAACP v. Alabama case, the civil-rights organization feared that giving in to Alabama’s demand to make public the names of its members would put them at risk. In an era of lynching, this was no small matter.

In addition to First Amendment concerns, making donor names public may cause collateral damage for charitable giving. There is no way to be certain what portion of the $310 billion in charitable gifts made annually — by those who itemized their tax returns — is given anonymously. But Vanguard Charitable and the National Philanthropic Trust — two of the largest investment managers of individual charitable accounts — each report that four percent of their donors prefer to give anonymously.

If those donors were all to choose to discontinue their gifts — out of fear of personal reprisal, religious reasons, or simply because of modesty — that could mean a $12 billion reduction in overall giving. But that might understate the hit to charity: There’s no way to know whether anonymous gifts might be larger than average, but they might well be.

Consider the impact on California itself. There, the average charitable gift is about $5,400. Reducing that average by four percent — or $216 — might seem inconsequential. But Feeding America, which operates 18 food banks in California, reports that the average cost of a meal in that state is $3.28. It’s doubtful that any food provider would want to experience an overall four-percent reduction in funds. Or consider nonprofit legal services that help immigrants gain citizenship or legal status: A basic private consultation with an immigration lawyer may cost as little as $75. That sort of donation for nonprofit legal services may help even more immigrants.

Again, we simply can’t know how big of a hit charitable giving would take if those who are currently giving anonymously had to worry that their personal information would be made public. The possibility that their gifts are disproportionately generous could well mean that the impact on charity would be disproportionately large.

And for what purpose will this list of organizations supported by so-called dark money be revealed? Let’s judge organizations by their activities or their arguments, rather than unsubstantiated claims that they are controlled by puppet masters.

The potential privacy risks related to releasing the names and addresses of donors leads to a more serious risk of Americans being targeted and harassed for their personal beliefs and values. This has happened to conservative and liberal groups alike. Let’s protect every American’s right to give freely and privately in order to protect American charity as a whole.

<a title="Howard Husock's archive page" href="https://www.nationalreview.com/author/howard-husock/" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url?q=https://www.nationalreview.com/author/howard-husock/&source=gmail&ust=1619533586506000&usg=AFQjCNHF8_rXpJTFtq7bfjv5KGIZvbmNww">Howard Husock is senior executive fellow at the Philanthropy Roundtable and an adjunct fellow at the American Enterprise Institute. He is the author of the forthcoming book The Poor Side of Town: And Why We Need It.

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