NJ Statute Impinging on Independent Advocacy Rights Ruled Unconstitutional

• Published date: 01 December 2019
• Date: 01 December 2019
• DOI: http://doi.org/10.1002/npc.30664

Bruce R. Hopkins’ NONPROFIT COUNSEL

December 2019 5

THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

fied government purpose of providing more information

about the funding of lobbying.” Second, “an after-the-

fact exemption procedure does nothing to ameliorate

the chilling effect on 501(c)(3) donors.” The court’s con-

clusion: “The possibility that the Attorney General might

in the future approve a disclosure exemption would

provide cold comfort to a potential donor asked to run

the risk of threats, harassment, or reprisals.”

As to § 172-f, the court began its analysis by observ-

ing that the “First Amendment rights to publicly discuss

and advocate on issues of public interest, and to do so

anonymously, have long been recognized.” This provi-

sion, the court wrote, “sweeps far more broadly than

any disclosure law that has survived judicial scrutiny,”

noting that it is “not confined to disclosure where the

entity engages in express advocacy for a candidate

or electioneering.” Instead, the court stated, the rule

“requires disclosure whenever a 501(c)(4) engages in

pure issue advocacy before the public.”

The court held that, “[g]iven that any matter of pub-

lic importance could become the subject of legislation and

given the range of positions taken by all elected officials,

§ 172-f reaches a far broader swath of communications

than did the lobbying — and election-related statutes that

the Supreme Court and Second Circuit have upheld.”

The court wrote that the “government acknowl-

edges that the government interest at stake is the inter-

est in revealing ‘the funders of issue advocacy.’” But, the

court continued, the “cases upholding donor disclosure

requirements have never recognized an informational

interest of such breadth,” adding that the case law

“strongly suggest[s] that compelled identity disclosure is

impermissible for issue-advocacy communications.”

The state’s argument that the segregated bank account

provision causes the statute to impose merely a “limited

burden” on the plaintiffs was rejected by the court,

which stated that the provision “does nothing to remedy

the central flaw of § 172-f — that it encompasses issue

advocacy.” The court concluded that “[e]ven if a 501(c)

(4) structured its activities to employ a segregated bank

account for covered communications, it would still have

to disclose donors who fund communications on nearly

any issue of public concern.” [28.11(i)] ◆

NJ STATUTE IMPINGING

ON INDEPENDENT

ADVOCACY RIGHTS RULED

UNCONSTITUTIONAL

The US District Court for the District of New Jersey,

by decision dated October 2, enjoined the governor of

the state and other defendants from enforcing a state

law that compels disclosure of the identities of donors

to “independent expenditure committees” and enforces

compliance with the law’s financial-reporting and money-

handling requirements, on the grounds that the law

unconstitutionally infringes on the plaintiff’s First Amend-

ment rights and because it is unconstitutional as applied

to the plaintiff, as it will chill its First Amendment rights

by deterring potential contributors from contributing to

the organization (Americans for Prosperity v. Grewal).

Facts

Legislation enacted in 2019 in New Jersey updated the

state’s Campaign Contributions and Expenditures Report-

ing Act to institute new reporting requirements on certain

organizations and increase the limits on the amount of

money that may be contributed to candidates and com-

mittees. The organizations involved are termed “inde-

pendent expenditure committees” (essentially entities

described in IRC §§ 501(c)(4) and 527). These committees

must quarterly file with the state’s Election Law Enforce-

ment Commission a list of contributions over $10,000.

Governor Phil Murphy conditionally vetoed the bill

on the grounds that certain provisions may infringe

rights of free speech and free association. He observed

that the bill “covers all issue advocacy conducted at any

time, regardless of whether the advocacy is connected

to an issue before the electorate.” He later signed a

nearly identical bill, with a signing statement reiterating

his concerns, based on a “commitment” from the legis-

lature that it would pass legislation “removing advocacy

in connection with legislation and regulations from its

parameters,” thereby ensuring that the law’s disclosure

requirements apply to election-related activity. To date,

the legislature has not passed a “clean-up” bill.

AFP’s state chapter publishes a “scorecard” track-

ing legislators’ voting records on key issues. The new

disclosure rules apply to the chapter. AFP, a tax-exempt

social welfare organization, sued, claiming that the law

is unconstitutional on its face because it extends “for-

midable regulations and burdens properly reserved for

electioneering” to communications focused entirely on

issue advocacy or purely factual political information.

The charge was that the enactment “obliterate[d]” the

boundaries established by the US Supreme Court in

Buckley v. Valeo (see the previous article).

General Analysis

The court first recognized the overbreadth of the

New Jersey statute in relation to the Buckley standard. It

wrote that the “plain language of the [law] makes clear

the same disclosure obligation is triggered whether a so-

called independent expenditure committee engages in

‘influencing or attempting to influence’ a direct election

of individuals, in ‘influencing or attempting to influence’

a vote to decide a ballot question, in ‘influencing or

attempting to influence’ legislators considering legislation,

and in ‘influencing or attempting to influence’ agencies