Court Declares New York's Donor Disclosure Laws Unconstitutional

Date01 December 2019
Published date01 December 2019
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
The US District Court for the Southern District of
New York, on September 30, held that two provisions
of a New York state law relating to elections and cam-
paigning that require certain categories of tax-exempt
organizations to publicly disclose their donors unconsti-
tutionally burden their First Amendment rights of free
speech and freedom of association and thus are facially
invalid (Citizens Union of the City of New York v. Attor-
ney General of the State of New York).
New York Governor Andrew Cuomo announced pro-
posed ethics-reform legislation in 2016. A press release
distributed by his office described the proposal as “first-
in-the-nation action to curb the power of independent
expenditure campaigns unleashed” by the decision by
the US Supreme Court in Citizens United v. Federal Elec-
tion Commission. In the language of the press release,
Citizens United “ignited the equivalent of a campaign
nuclear arms race and created a shadow industry in New
York — maligning the integrity of the electoral process
and drowning out the voice of the people.” The release
said the coming reforms would include “[r]equir[ing]
additional disclosures for individuals and entities making
independent expenditures.”
A public charity is required to disclose all donors
who contributed over $2,500 if it makes a grant to
a social welfare organization that engages in lobby-
ing in New York, either on its own behalf or through
a retained lobbyist (§ 172-e of the New York law).
A social welfare organization is required to disclose
donors who contributed at least $1,000 where the
entity expends more than $10,000 in a year on commu-
nications made to at least 500 members of the public
concerning the position of any elected official relating
to any potential or pending legislation, with an excep-
tion for contributions made to a segregated account
not used to support these types of communications (§
172-f). (Governor Cuomo, in a memorandum submit-
ted to the state legislature, stated that “[d]isclosure
of political relationships and funding behaviors widely
recognized to be influential, but which operate in the
shadows, is essential to restoring the public’s faith and
trust in our political process.”)
These disclosures must be on New York state gov-
ernment websites. The New York attorney general may
determine, however, that disclosure need not be made if
it may cause “harm, threats, harassment, or reprisals to
the source of the donation or to individuals or property
affiliated with the source of the donation.”
In the Citizens United case (2010), the Supreme
Court held that a federal statute prohibiting corpora-
tions, including nonprofit corporations, from using their
general treasury funds to make independent electoral
expenditures, advocating for or against candidates, vio-
lated the First Amendment (opinion summarized in the
March 2010 issue).
As the court in the present case wrote, “There is
no question that public disclosure of donor identities
burdens the First Amendment rights to free speech and
free association.” The US Supreme Court identified three
governmental interests that may justify donor disclosure
in the context of election campaigns, despite their bur-
dens on First Amendment rights (Buckley v. Valeo (1976)
(discussed in, e.g., the June 2019 issue)).
The court provided an exhaustive summary of the
cases striking down disclosure requirements as facially
overbroad, cases upholding disclosure requirements, and
cases finding disclosure requirements unconstitutional as
applied to particular plaintiffs.
More Law and Analysis
The court first decided that the standard under which
the constitutionality of these two state law provisions,
being content-neutral, is to be evaluated is the exacting
scrutiny standard. It cited a US Supreme Court opinion
that this form of scrutiny requires a “substantial relation
between the disclosure requirement and a sufficiently
important governmental interest” (John Doe No. 1 v.
Reed (2010)).
The court found that § 172-e “places a significant
burden on the First Amendment interest in freedom of
association.” It wrote of donors who desire anonymity,
motivated by fear of economic or official retaliation, by
concern about social ostracism, or by a desire to preserve
some privacy. As a result of these fears, compelled disclo-
sure can, the court held, place a “substantial restraint”
on the exercise of the right to freedom of association.
The court stated that “[t]here is no substantial rela-
tion between the requirement that the identity of donors
to 501(c)(3)s be publicly disclosed and any important
government interest.” It noted that disclosure laws that
have been upheld based on a showing that the disclo-
sures furthered the interests identified in Buckley “have
been drawn far more narrowly than § 172-e.” The opin-
ion added that “[n]one have approached the tangential
and indirect support of political advocacy at issue here.”
The court noted that the provision requires “disclosure
of the identities of donors to a 501(c)(3), an entity whose
primary purpose must be something other than lobbying
and that by definition cannot make lobbying a ‘substan-
tial’ part of its activities.”
The exemption was held to not remedy the provision’s
constitutional law deficiencies. First, “it does nothing to
remedy the poor fit between the statute and the identi-

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