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At Least 10 States Going After Donor Disclosure

The U.S. Supreme Court recently heard oral arguments in a key donor disclosure case that’s made its way through the California courts during the past decade. The issue of donor disclosure isn’t going away and has been popping up at the state level this year.

In Michigan, Secretary of State Jocelyn Benson determined that a nonprofit did not have to report sources of its contributions. A former legal advisor to the Michigan Chamber of Commerce, Bob LaBrant had filed a complaint arguing that Michigan Citizens for Fiscal Responsibility (MCRF) qualified as a ballot committee because of contributions to Unlock Michigan, a petition effort to repeal a 1945 law that allows Gov. Gretchen Whitmner to declare a state of emergency.

Some $1.8 million of the $2.8 million raised by Unlock Michigan through 2020 came from MCFR, which does not disclose fundraising sources, according to The Detroit News.

Jake Rollow, spokesperson for the Michigan Department of State, said the Bureau of Elections “obtained the information available and necessary to evaluate the complaint” but there was sufficient evidence to prove a violation of the Michigan Campaign Finance Act (MCFA).

At least 10 states have considered legislation this year to restrict requiring nonprofits to report on a confidential basis the names of donors, which they report annually to the Internal Revenue Service (IRS) via Schedule B of the Form 990.

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According to the National Council of Nonprofits, lawmakers in South Dakota enacted two laws prohibiting the executive branch from requiring any filing or report that is “more stringent, restrict, or expansive than that required by state or federal law” or provide the state with “personal affiliation information” of any member, supporter, volunteer or donor to a nonprofit in the state. Similar legislation is under consideration in:

  • Arkansas
  • Iowa
  • North Carolina
  • Oklahoma
  • Tennessee
  • West Virginia

Legislation in Nebraska, New York and Wyoming failed to move because of legislative deadlines.

In North Carolina, Senate Bill 636 would prevent disclosure of contributors to nonprofits, prohibiting legislators and government workers from disclosing confidential information. Primary sponsors are state Sens. Joyce Krawiec (R-Forsyth), Norm Sanders (R-Craven), and Bob Steinberg (R-Chowan). State Sen. Dan Blue (D-Wake) is a co-sponsor. The bill was passed on 1st Reading in April and referred to the Committee on Rules and Operations.

North Carolina’s law is likely related to the U.S. Supreme Court case, to look at ensuring that donor information is kept private and not publicly disclosed by state agencies, according to David Heinen, vice president for policy and advocacy, at North Carolina Center for Nonprofits.

As currently drafted, the bill has some problems but Heinen is confident that it could be improved as it works its way through the legislative process. The way it’s worded, he said, board approval would be required for any kind of disclosure of someone giving money or goods to a nonprofit. “That seems a little overboard and probably out of alignment with how most nonprofits operate,” Heinen said. There are many instances when donors, individuals or businesses give to a nonprofit for publicity or want credit for sponsorships. “You don’t normally get board approval for that,” he said, or things like college and universities recognizing donors in an annual report.

The North Carolina bill would have to pass the Senate by May 13 to then be taken up in the house. Heinen said it’s a good bet that it will move forward given the prominent committee chairs sponsoring it.

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Mark Hrywna

Senior Editor, NonProfit Times. Journalist currently covering various aspects of the nonprofit sector, including fundraising, finance, technology and more for The NonProfit Times, a national trade publication.

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