U.S. Supreme Court Finds California Disclosure Requirement Unconstitutional As Infringement On First Amendment Associational Rights

• Published date: 10 August 2021
• Subject Matter: Litigation, Mediation & Arbitration, Disclosure & Electronic Discovery & Privilege, Trials & Appeals & Compensation
• Law Firm: Snell & Wilmer
• Author: Tracy A. Olson and Brett W. Johnson

By Hanna Reinke, ¹ Tracy A. Olson and Brett W. Johnson

On July 1, 2021, the U.S. Supreme Court issued a 6-3 decision, holding that California's blanket demand for charities to disclose donor information to the state Attorney General (AG) is facially unconstitutional. ² In addition to First Amendment general free speech principles, this ruling is primarily significant for nonprofit entities who choose not to disclose their donor information for fear of a chilling effect on current, and potentially future, donors.

In Americans for Prosperity Foundation v. Bonta, two nonprofits challenged a California law that requires charities soliciting donations in the state to submit an unredacted copy of their IRS Form 990 on an annual basis. Notably, Schedule B of Form 990 requires the disclosure of any donor contributing $5,000 or more to the nonprofit organization. While the nonprofits complied with all other requirements under the California law, they alleged that compelled disclosure of their major donors was a violation of their First Amendment rights and the associational rights of donors. ³

While the majority agreed that the blanket requirement to disclose sensitive donor information was facially unconstitutional, the six justices voting to strike down the law diverged regarding which scrutiny standard should apply. Three justices (Chief Justice Roberts and Justices Kavanagh and Barrett) agreed that the Court should apply an exacting scrutiny standard'a more flexible standard than strict scrutiny'requiring the law demonstrate "a substantial relation between the disclosure requirement and a sufficiently important governmental interest. ⁴ Accordingly, the requirement must be "narrowly tailored to the interest it promotes, even if it is not the least restrictive means of achieving that end." ⁵ Because the Court has implemented exacting scrutiny when determining the constitutionality of other disclosure requirements, the plurality opinion concluded that the same standard should be applied here. ⁶

In contrast, Justice Thomas would have applied the higher, strict scrutiny standard and require that any law "directly burdening the right to associate anonymously, including compelled disclosure laws," be "the least restrictive means of achieving a compelling state interest." ⁷ Justices Alito and Gorsuch determined that it was not necessary for the Court to announce a categorical standard for evaluating disclosure laws at this time because the California law at issue would...