Explore the legislation, litigation, and advocacy surrounding nonprofit donor disclosure with The Disclosure Digest, a Ballotpedia newsletter.

Under federal law, nonprofits are generally not required to disclose to the public information about their donors. State laws, however, may require such disclosure. Some say expanded donor disclosure provisions minimize the potential for fraud and establish public accountability. Meanwhile, others say that disclosing to the public information about donors violates privacy rights and can inhibit charitable activity.

D.C. Circuit affirms district court order invalidating FEC donor disclosure regulations

On Aug. 21, the United States Court of Appeals for the District of Columbia Circuit affirmed a U.S. District Court order that overturned a Federal Election Commission (FEC) rule regulating donor disclosure requirements for entities making independent political expenditures. The D.C. Circuit affirmed the lower court’s finding that the FEC rule was impermissibly narrow in its application.

Background

The D.C. Circuit’s ruling concerns independent expenditures (IEs) — money spent on political advertising in support of, or in opposition to, particular candidates for elective office. Individuals, political committees, super PACs, select nonprofits, corporations, and labor unions can make IEs, but IEs cannot be coordinated with a candidate, a candidate’s committee, or a political party committee.

The disputed FEC rule is 11 CFR § 109.10(e)(1)(vi), which requires that groups making IEs disclose “the identification of each person who made a contribution in excess of $200” if the contribution was “made for the purpose of furthering the reported independent expenditure.”

Citizens for Responsibility and Ethics in Washington (CREW), the lead plaintiff in the lawsuit, argues that the FEC disclosure rule contradicts the Federal Election Campaign Act (FECA). In CREW’s reading, FECA “requires an IE maker to disclose any contributor who gives $200 in the aggregate, without regard to any intent to support IEs or a specific IE.” CREW filed a complaint with the FEC against Crossroads Grassroots Policy Strategies (Crossroads GPS), alleging that the latter group failed to meet disclosure requirements. The FEC dismissed the complaint, rejecting CREW’s reading of the rule and FECA.

On Feb. 16, 2016, CREW filed suit against the FEC and Crossroads GPS in the United States District Court for the District of Columbia, asking the court to invalidate the rule on the grounds of its inconsistency with FECA. On Aug. 3, 2018, Judge Beryl Howell ruled in favor of the plaintiffs. Crossroads GPS appealed the decision to the D.C. Circuit.

How did the court rule?

The D.C. Circuit voted 2-0 to uphold the district court’s ruling. Chief Judge Srikanth Srinivasan wrote the court’s opinion, which was joined by Circuit Judge Merrick Garland. The panel’s third judge, Stephen Williams, died on Aug. 7, 2020. Srinivasan was appointed to the court by Barack Obama (D), Garland by Bill Clinton (D), and Williams by Ronald Reagan (R).

Srinivasan rejected “various threshold jurisdictional and procedural arguments made by both CREW and Crossroads” before turning to the question of whether the FEC rule contradicts FECA.

Srinivasan situated the court’s ruling within the context of Chevron deference:

“

Our analysis is governed by Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., under which we accept an agency’s reasonable construction of an ambiguous statutory provision. Yet ‘under Chevron, we owe [the Commission’s] interpretation of the law no deference unless, after employing traditional tools of statutory construction, we find ourselves unable to discern Congress’s meaning.’[1]

”

Finding that Congress’ intent in adopting FECA was unambiguous, Srinivasan wrote:

“

The Rule conflicts with FECA’s unambiguous terms twice over. First, the Rule disregards [§ 30104(c)(1)’s] requirement that IE makers disclose each donation from contributors who give more than $200, regardless of any connection to IEs eventually made. Second, by requiring disclosure only of donations linked to a particular IE, the Rule impermissibly narrows [30104(c)(2)(C)’s] requirement that contributors be identified if their donations are “made for the purpose of furthering an independent expenditure.[1]

”

What are the reactions?

Jordan Libowitz, a spokesman for CREW, said, “This is yet another major win in the fight against dark money in politics. It will be much harder for donors to anonymously contribute to groups that advertise in elections. This is a great day for transparency and democracy.”

Crossroads GPS has not commented publicly on the ruling.

Joe Birkenstock, from the law firm Sandler Rieff (which, according to Politico, “advises Democratic-leaning groups”) said, “I think it’s significant. The earth moved when the district court opinion came out. That district court opinion called for much broader disclosure than had previously been the case, and [after] a period of a week or two there was real nervousness about it.”

What comes next?

Crossroads GPS has not indicated whether it will appeal the D.C. Circuit’s ruling. The case name and number are Citizens for Responsibility and Ethics in Washington v. Federal Election Commission (18-5261).

What we’ve been reading

• Politico, “Appeals court backs greater disclosure of ‘dark money’ donors,” Aug. 21, 2020
• Venable, LLP, “States’ Response to IRS Regulations on Nonprofit Donor Disclosure,” Aug. 11, 2020
• The Fulcrum, “In wake of scandal, bipartisan push in Ohio for money-in-politics transparency,” Aug. 6, 2020

The big picture

Number of relevant bills by state: We’re currently tracking 52 pieces of legislation dealing with donor disclosure. On the map below, a darker shade of green indicates a greater number of relevant bills. Click here for a complete list of all the bills we’re tracking.

Number of relevant bills by current legislative status

Number of relevant bills by partisan status of sponsor(s)

Recent legislative actions

• Nebraska LB210: This bill would revise reporting requirements for independent expenditures and establish disclosure requirements for electioneering communications.
  • Nonpartisan sponsorship.
  • Indefinitely postponed Aug. 13.
• Ohio HB737: This bill would make a number of modifications to the state’s campaign finance laws regarding independent expenditures and PACs.
  • Bipartisan sponsorship.
  • Introduced July 27.
• Ohio HB739: This bill would extend donor disclosure requirements to nonprofits and limited liability corporations that make election expenditures.
  • Democratic sponsorship.
  • Introduced July 29.
• Ohio SB347: This bill would make a number of modifications to the state’s campaign finance laws regarding independent expenditures and PACs.
  • Republican sponsorship.
  • Introduced July 30.
• Ohio SB349: This bill would require 501(c)(4) nonprofits and limited liability companies to disclose the sources of contributions made to finance political campaigns. It would also require these groups to disclose certain information about their owners and the purposes of their organizations.
  • Bipartisan sponsorship.
  • Introduced Aug. 4.
• Virginia HB5038: This bill would require referendum committees to include disclosures on political advertisements.
  • Republican sponsorship.
  • Introduced and referred to House Privileges and Elections Committee Aug. 18.

Click here to learn more.