Supreme Court Ruling Threatens Privacy of Donors to 501(c)(4) Nonprofits

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On September 18 the Supreme Court denied an application for stay in the case of Crossroads v. CREW, allowing to stand a long and complex decision of the U.S. District Court for the District of Columbia issued on August 3. Under the District Court’s ruling, the Federal Election Commission (FEC) is required to issue new regulations that will require full disclosure of donor identities by any groups that fund activities that are explicitly in support of or against a particular candidate for federal office. The defendant in the case, a political action group called Crossroads Grassroots Policy Strategies, or Crossroads GPS, had asked the Supreme Court to issue an emergency stay of the District Court’s ruling pending its appeal.

Needless to say, the ruling raises significant concerns for 501(c)(4) social welfare organizations that conduct political activities in support of candidates for office. Prior to this decision 501(c)(4) organizations have long relied on FEC regulations that do not require 501(c)(4) organizations to disclose most donors. The court in the Crossroads case determined that the regulation is inconsistent with the disclosure requirements of the Federal Election Campaign Act of 1971 (FECA), 52 U.S.C. § 30104. Under the new ruling, social welfare organizations will presumably be required by court-mandated FEC regulations to disclose the names of individuals who contribute $200 or more to “independent expenditures” (i.e., expenditures that are not coordinated with a candidate’s campaign) that are directed at influencing the outcome of federal elections.

We recommend that affected organizations contact their attorneys before moving forward with any plans to act in support of candidates for federal office. Among other things, social welfare organizations routinely assure their donors that their identities will be kept confidential. For some the consequence of this ruling may be that it is preferable to not continue with a campaign rather than be required to disclose the names of donors who expected to have their identities kept secret. Affected organizations will need to give careful consideration to their donors’ expectations and the organization’s ability to comply with as-yet unknown disclosure rules.

The Church Law Center of California provides nonprofit governance counsel to religious and secular nonprofits. We are closely watching developments following the Crossroads decision. If your 501(c)(4) is trying to come to grips with its obligations in light of the ruling, please contact us. We can be reached at (949) 892-1221 or through our contact page.

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