Donor privacy is a critically important principle for nonprofit organizations. It enables potentially controversial or less popular causes to receive financial support from individuals without posing a public risk to donors. Currently, 501(c)(3) charitable organizations and 501(c)(4) social welfare organizations are permitted to protect the privacy of their donors and prevent them from being made public.
The Supreme Court’s Citizens United decision contributed to an unprecedented influx of money into the election process, raising questions about donor disclosure by 501(c)(4) tax-exempt organizations. A highly politicized issue, Members of Congress and the public have begun to both call for, and question, increased scrutiny of 501(c)(4) organizations that appear to be engaged in partisan political activity.
Since Citizens United, a series of legislation introduced in Congress would require 501(c)(4) organizations to disclose their donors. The DISCLOSE Act has been introduced multiple times since 2010, and would generally require any 501(c)(4) organization with partisan political activity expenditures over a certain threshold to publicly disclose donors.
In 2013, Independent Sector’s board adopted a set of Principles for Political Activity, which included a section on donor disclosure. Specifically, the Principles stated:
- 501(c)(4) organizations that have a Board policy and organizational practice of not engaging in electoral campaign activity should not be subject to donor disclosure requirements.
- 501(c)(4) organizations that engage in electoral campaign activity (i) should be required to disclose the identity and contribution amount of donors who give more than a specific annual contribution threshold, unless the donor prohibits the use of his/her donated funds for electoral campaign activity, and (ii) should be required to be transparent with donors, members, and the public about their work on electoral campaign activity.
- If an organization has not notified a donor in writing at the time of solicitation that the funds may be used for electoral campaign activity and may subject the donor to disclosure, then it should be prohibited from using those funds for electoral campaign activity unless written consent is obtained from the donor to use the funds for that purpose and to disclose the donor’s identity as required by law or regulation.
- Organizations should not be subject to donor disclosure requirements if a federal regulatory body determines that the organization’s exempt purpose involves issues for which donor disclosure would create a substantial likelihood of personal harm to donors.
Several other bills addressing donor disclosure have been introduced since 2012. The most recent introduced as the first bill of a new Democrat-controlled House in 2019. H.R. 1—the For the People Act—is a broad “anti-corruption” bill that includes language from the DISCLOSE Act requiring certain nonprofits to publicly list donors that contribute $10,000 or more. H.R. 1 passed the U.S. House of Representatives on March 8, 2019.