Nonprofits

Cuomo resurfaces nonprofit donor disclosure plan

The governor wants to make major donors to nonprofits public despite losing a legal battle over a similar 2016 law.

Nonprofits major donors are kept confidential, Gov. Cuomo is trying to change that.

Nonprofits major donors are kept confidential, Gov. Cuomo is trying to change that. Vasiliy Koval/Shutterstock

Gov. Andrew Cuomo is again trying to require nonprofits and political advocacy organizations to publicly disclose their donors, after a similar law he spearheaded was struck down in court in October. But representatives from nonprofits fear that the proposal would quash charitable giving and violate free speech protections.

It seems that charities would be most affected by Cuomo’s proposal, which would publicize the names of their donors who give more than $5,000. Nonprofits already disclose their major donors on tax forms to both the Internal Revenue Service and state attorney general’s office, but that information is currently kept confidential. This proposal in the state budget would require the state to list the major donors to nonprofits online.

Cuomo’s proposal would also apply to other kinds of tax-exempt groups but its effect would likely be undercut by rules proposed by the IRS. The agency is expected to push regulations that would allow business associations, 501(c)(6) organizations, and political advocacy organizations, 501(c)(4)s, to omit identifying information about their donors on tax forms. New York, among other states, has come out against the proposed rule because they say it would make it more difficult to oversee these organizations. This rule is particularly controversial because these tax-exempt 501(c)(4) political advocacy organizations – the National Rifle Association and the American Civil Liberties Union are well-known examples – have been criticized as a means of funneling unlimited amounts of “dark money” into politics without having to disclose their donors.

Nonprofits argue that requiring public donor disclosures for most organizations would discourage charitable giving. Donors may face harassment for giving to controversial issues, if their identities were revealed. Others may simply not want to be solicited for money from other organizations.

“Donors have legitimate and personal reasons for why they wouldn’t want to be disclosed or labeled (and) why they would want to give anonymously,” said Chai Jindasurat, policy director at Nonprofit New York, a membership and training organization for nonprofits. Financially strapped nonprofits are already seeing recent declines in giving, which was exacerbated by the 2017 federal tax law that gave people fewer incentives to deduct charitable gifts.

“The public has a right to know who is backing these organizations so voters can better understand the sources for their positions and make decisions with full knowledge of the facts,” Jason Conwall, a spokesman for the governor, wrote in a statement. “Everyone supports transparency until it shows up at their own front door.”

This recent proposal is not Cuomo’s first attempt at mandating additional transparency. On the final day of the 2016 state legislative session, lawmakers approved an ethics bill that was meant to ensure that money given to charitable nonprofits isn’t used for political purposes.

“This reform package includes new disclosure requirements and stiffer penalties that will shine a light on what now is the shadowy intersection of government, lobbying, and political consulting,” Cuomo said in a statement in 2016 about the law’s passage.

It required public donor disclosures from charities giving more than $2,500 to 501(c)(4) political advocacy groups engaged in lobbying or for political advocacy organizations spending more than $10,000 on political communications.

There already are some restrictions on the relationship between a charity and its related political advocacy arm. Charities can only exchange money or resources with political advocacy groups if those groups agree to not use them for political purposes, or if they pay the full fair value for them.

The current proposal includes similar provisions which would require charities to submit a separate donor disclosure if they give more than $10,000 to political advocacy organizations.

But some nonprofit advocates don’t see why more transparency is needed given that the state already knows who donates to charities.

“If it is a problem, we’re happy to try and figure out a way to address transparency for all types of nonprofits,” Jindasurat said. “We just don’t know if it’s actually an issue.”

In the court battle over the 2016 law, Nonprofit New York and Citizens Union, which each sued the state over the law, argued that donor confidentiality was an important free speech issue.

U.S. District Court Judge Denise Cote agreed in her ruling last year, writing that the portion of the 2016 law relating to political communication “sweeps far more broadly than any disclosure law that has survived judicial scrutiny.” And given the broad scope of the state’s current proposal, it would probably face a similar examination if challenged in court.

“The proposal advanced in the Executive Budget is more narrowly tailored and we are confident it will withstand judicial scrutiny,” Conwall wrote in a statement, though the governor’s office only specified one provision that was narrower. The part of the proposal requiring disclosures for political communications now only would apply to restricted gifts and donations, which are earmarked by the donor for a specific purpose. “There is a clearer connection between the electioneering type conduct and the donor which cure any infirmities identified by the court in the Citizens Union case,” Freeman Klopott, a spokesman with the state Division of the Budget, wrote in an email.

Other states have enacted similar donor disclosure rules, though their provisions seem more tailored than New York’s. Washington State Gov. Jay Inslee signed a law that would require any nonprofit that expects to spend at least $25,000 on state election campaigns or ballot initiatives to disclose their top 10 donors who contribute more than $10,000 in a year. For comparison, the 2016 New York law was dinged for being too broad because its scrutiny of issue-oriented nonprofits was not confined to “express advocacy for a candidate or electioneering.”

“The devil will be in the details of what’s actually passed,” said Randy Mastro, who represented Citizens Union in its lawsuit over the 2016 measure. “If it’s broader, it’ll be dead on arrival when it’s challenged in the courts. But it’s a very serious matter when government takes actions that violate the constitutional rights of citizens and citizen good-government groups.”

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