In July 2021, the U.S. Supreme Court issued its decision in Americans for Prosperity Foundation v. Bonta (AFPF), which invalidated California’s donor disclosure law for charities. The California law in question required charities and nonprofits operating in the state of California to disclose the names and addresses of their largest donors as part of their registration and annual reporting requirements. Two nonprofits successfully challenged the law on First Amendment grounds, and a divided court struck down the law.
As a result of the court’s decision, the state of California Attorney General’s Registry of Charitable Trusts posted on its website that it would no longer require charities to file Schedule B of IRS Form 990 in their registration and annual reporting requirements. This form is what the charities use to identify and disclose their most significant donors to the IRS. Some other states with similar donor disclosure laws also have followed suit.
Filing Schedule B of IRS Form 990 with the IRS
Even though nonprofit organizations no longer must file Schedule B of IRS Form 990 with the state of California, they still likely must file Schedule B with the IRS. In 2020, the IRS repealed the requirement that most nonprofits report donor names and addresses on Schedule B, but not for nonprofits operating under 501(c)(3) or 527 of the Internal Revenue Code. As a result, these nonprofits must disclose this information to the IRS and the public upon request. The IRS also requires that these nonprofits keep records of other information concerning these donors.
Although court challenges to the IRS requirement for nonprofits to file Schedule B may occur due to the AFPF decision, the Supreme Court noted that the IRS’s role in collecting tax revenue and conferring tax-exempt status might present different issues not present in the California case. Therefore, even if nonprofits challenge the IRS requirement, the AFPF decision does not ensure that such a challenge will be successful.
Future State Requests for Nonprofit Donor Information
The AFPF decision also does not preclude states, including California, from enacting policies or statutes requiring nonprofit donor information, so long as they are narrowly tailored to an important government interest. For example, California could request donor information from a nonprofit through an audit letter or subpoena as part of a fraud investigation.
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