On February 26, 2021, the Public Policy Legal Institute and the National Taxpayers Union Foundation filed a friend of the court (amici curiae) brief in the consolidated cases of Americans for Prosperity Foundation v. Becerra, No. 19-251, and Thomas More Legal Center v. Becerra, No. 19-255. Both these cases involve demands by the California Attorney General for an obscure federal tax form listing major donors to charities. The two charities contend that the Attorney General’s demands violate the First Amendment rights of association; the Attorney General contends that he needs to collect the form from all charities that want to operate or fundraise in California in order to find and prosecute those who want to misuse the charities.

The PPLI/NTUF amici brief takes a different approach from most of the briefs filed in this case, which directly discuss the First Amendment issues and precedents. The new brief points out that this case is not just about the First Amendment, but also about the Sixteenth Amendment, which grants government very broad powers to collect income taxes, but must also respect taxpayer privacy. In other words, it’s not just the rights of donors, but also the need for government to protect the American tradition of voluntary tax compliance, which is the highest in the world. One of the reasons President Richard Nixon resigned was his misuse of the Internal Revenue Service; in the wake of Nixon’s “enemies list,” Congress passed strong privacy protections for taxpayers, including donors to charities. Ignoring those privacy protections undercuts taxpayer confidence.

The Attorney General’s plan to use charities’ donor lists to tilt at “dark money” windmills risks slaying the voluntary tax compliance goose that lays the golden eggs

The brief also addresses an over-reach in which the federal government argued that it could withhold First Amendment rights if a “public subsidy” was involved. In these cases, the Attorney General argued that it could require the charities to give up their donors’ names and addresses as a condition of being exempt from taxes. But that position is an overstatement of a long-standing line of “public subsidy” cases, with the most recent case handed down just last year. Only Congress, not the Attorney General, can pass a law requiring such a condition, and then only within specific limits. The “public subsidy” argument does not mean that charities must surrender all constitutional rights in order to get a tax subsidy, and the Attorney General’s demand for donor identification falls far short of the tests used to see if such conditions are constitutional.

The Attorney General should not be able to leverage an arguably legitimate use of Schedule B into a condition on an endless array of constitutional rights

The Summary of Argument from the PPLI/NTUF amici brief says:

These cases involve the First Amendment, but this is not just a First Amendment case. These cases are also, at heart, about taxpayer confidence, and its effect on government and society.

Respondent Attorney General of California, according to a letter dated December 9, 2019 and also signed by 19 other attorneys general, seeks to use charities’ donor information against “corporations, wealthy individuals, and special interests [who] seek to influence politics without leaving fingerprints.” The use of donor lists and other taxpayer information for non-tax purposes is the reason Congress enacted extensive tax privacy provisions after President Nixon’s misuse of the IRS. Ignoring the lessons taught by the federal experience could cause the revival of “enemies lists,” undercut the taxpayer confidence that underlies the world’s highest voluntary tax compliance rate, and reverse long-standing donor privacy rights.

Schedule B to IRS Form 990, the obscure tax form sought here, was never intended to be used to uncover wrongdoing; it was created in 2000 to protect donor information against leaks. It immediately failed, as it leaked again and “opposition researchers” discovered it as a rich source of donor information.

Nor is Schedule B useful for the purposes sought by the Attorney General, compared to the rich data available from Form 990. For twenty years, the IRS has tested Schedule B’s general questions against the more detailed and targeted information obtained on the publicly-available Form 990. The result is that the IRS no longer uses Schedule B. Nor do 47 states. Schedule B simply can’t be used, where Form 990 offers precisely what the IRS and the Attorney General seek. The IRS has been trying to get rid of Schedule B since 2016.

The same is true of any similar use of donor lists in the absence of the type of particularized evidence of wrongdoing the Form 990 was designed to uncover. To find wrongdoing, there are efficient and effective ways of identifying problem areas; Schedule B and other donor lists generally are neither efficient nor effective, especially compared to their propensity to leak. Advance mass collection of donor lists undermines taxpayer confidence that is essential to support government, especially if it is merely politicians tilting ineffectually at campaign finance windmills.

The contention in the amicus brief for the United States that “the disclosure of a group’s donors, when imposed as a condition of administering a voluntary governmental benefit program or similar administrative scheme, is not a compelled disclosure subject to exacting scrutiny or the narrow-tailoring requirement” is an overstatement and a misreading of this Court’s decisions. This Court has held that the condition may not be on the recipient as a whole, but only on a statutorily-defined program. The condition may not prohibit the recipient from conducting its activities using “private” money, and it may not be so burdensome that the organization cannot function. Language that suggests otherwise, such as in Regan v. Taxation With Representation, 461 U.S. 540 (1983), should be clarified. Among other things, this characterization ignores the special role of donor lists, the varied interests underpinning the tax system, and taxpayer confidence.

Finally, the lower court misunderstood how federal tax privacy protections operate and their effect. While the court below believed that the “risk of inadvertent disclosure of any Schedule B information in the future is small,” the Attorney General’s failure to provide even basic protections such as tracking and logging those who accessed the donor information means that the Attorney General wouldn’t even know when the protected information leaked.

This Court long ago established that the First Amendment bars the Attorney General here. The Court should reverse the decision below.

To see a copy of the amici brief, click here:

Last summer, street mural painting became a very big legal controversy. Can you paint a popular, but unofficial slogan on city streets? After all, huge “Black Lives Matter” slogans appeared on city streets across the country.

On February 18, 2021, Judge Lorna Schofield of the U.S. District Court for the Southern District of New York handed down a decision in Women for America First v. DeBlasio, which denied a request to paint a mural on a Brooklyn street conveying a different message (“Engaging, Inspiring and Empowering Women to Make a Difference!”) from a recent “Black Lives Matter” mural which had been painted by private citizens, but then “adopted” by New York City’s Mayor Bill DeBlasio. Judge Schofield said that, though the original BLM painters had been private, the Mayor’s adoption of the street painting (and expanding painting to all five boroughs) was an endorsement sufficient to convert the original mural into government speech. “The New York City government preserved the Murals and played a role in the creation of the six later murals.” Slip Op. 3.

But ordinarily, no. And the reason why is complicated, because sometimes the answer is yes. It matters whether you’re asking about sloganeering in the streets or on the streets. And it matters who is doing the painting: private citizens or the city. And it matters if the city adopts the painted slogan, even after the fact, as its own “government speech.”

As the Supreme Court noted in Waters v. Churchill (1994), when the government acts as a sovereign to regulate private speech, it has far less power than when it acts as employer or as speaker, both of which involve its own speech or at least the public perception that it is the government speaking. That is the point of the First Amendment. But the closer speech is to core governmental functions, the more power the government has to regulate it. The classic example of this “speech spectrum” is government employees’ speech: the more the employees’ speech looks like the government’s own speech, the greater the government’s ability to regulate. As the Supreme Court said in 1995 in Rosenberger v. Rector of Univ. of Virginia, “when the State is the speaker, it may make content-based choices.”

So, can anyone paint on a city street? No. Think “in” vs. “on” the street. Streets are traditionally open “public fora,” where speech in the street is expected and protected, as the Supreme Court noted in 2009’s Pleasant Grove City, Utah v. Summum decision. But, the surface of the street is not a public forum. Slick, bright paint on streets can cause accidents and confuse drivers. So, Judge Schofield pointed out, “New York City does not generally permit private citizens to paint on streets open to traffic.”

The plaintiffs contended that allowing the BLM mural to remain on the street turned the street from a non-public to a public forum. But converting a non-traditional forum into a public one requires an intentional act for that purpose. Walker v. Tex. Div., Sons of
Confederate Veterans, Inc. (2015). New York City did not intentionally convert the street surface into a public forum for slogans. Government’s silence or even some limited disclosure is not enough to convert a forum into an open, public one. And a government adopting, paying for, or endorsing someone else’s speech as the government’s own speech does not convert the forum either (in fact, this type of First Amendment “forum analysis” does not apply to government speech in the first place).

So, do people have a right to force the government to speak their message? They do, but not by painting on public streets. They do it at the ballot box. As the Supreme Court said in Walker, “it is the democratic electoral process that first and foremost provides a check on government speech”, not the First Amendment.

Bottom line: you ordinarily don’t have a right to paint your slogan on the street. That’s for safety reasons. That said, you can paint on a street’s surface, if you can get your friendly government to adopt your slogan as its own. And you do that through the First Amendment’s rights of public policy advocacy, assembly and petition, or the ballot box, not by asking a court to force government speech.

Following discussions with participants in the First Tuesday Lunch Group, a bipartisan discussion group of public policy practitioners, we have revised The Curious History of Schedule B legal analysis published last week into a new one, called “Revising the Nixon ‘Enemies List,’ Using IRS Form 990, Schedule B.” The new analysis is longer and more detailed, with additional discussion of how useful and effective Schedule B to Form 990 actually is. In particular, we have added specific looks at arguments already presented in court by the California Attorney General as justification for demanding that any charity that wishes to operate or raise funds in California reveal its donors.

Some excerpts:

• Schedule B is one of the simplest tax forms: a list of names, addresses and other details which could identify those who have given large amounts to charities. Schedule B’s content makes it one of the most highly-protected federal tax forms because donor information, “if in the hands of the IRS at all, should be categorically sheltered from disclosure.” The Attorney General does not comply with federal data security requirements and usage restrictions, and so can’t get Schedule B from the IRS; he must ask for it directly from the charity.
• The charities are challenging the Attorney General’s demands as violating the First Amendment’s freedom of speech and association. They have shown that the Attorney General’s office has a long and sordid history of leaking tax information on the Internet, endangering their donors’ safety and livelihoods.
• The Attorney General claims to need the Schedule B to enforce California’s laws against fraud and abuse of charitable status because it would be more “efficient.” But the Attorney General did not mention to the lower courts, and the parties did not raise, a December 9, 2019, letter that he and 19 other Attorneys General sent to the IRS commenting on proposed regulations on Schedule B. The Attorneys General Letter indicated that the Attorney General actually had knowledge of, and intentions to continue, use of Schedule B for purposes far different from the limited charitable law enforcement he told the courts was his sole purpose in obtaining the Schedule B forms.
• Most prominent among those other purposes was to use Schedule B to fight against “dark money” organizations, which, by law, are not charities: “corporations, wealthy individuals, and special interests seek to influence politics without leaving fingerprints. … The revised donor reporting requirements that the IRS now proposes are certain to make federal and state review of this spending far more difficult if not impossible.”
• In other words, the Attorneys General of several states wanted to use Schedule B as a new kind of “enemies list,” targeting those who, entirely lawfully, want to enjoy the confidentiality promised under federal tax law.
• Schedule B was a well-intentioned, but ultimately unsuccessful attempt to protect donors from disclosure. A significant number of State Attorneys General have indicated that they view Schedule B not only as a source of taxpayer information that federal law protects from disclosure, but as “a powerful tool” to use as they choose, no matter what federal law forbids. This difference of opinion sets up a variety of constitutional clashes over rights of individuals, organizations, and States themselves, under the First (freedom of speech and association), Fourth (freedom from unreasonable searches and seizures) and Sixteenth (tax) Amendments.
• Not all these clashes are present in the cases pending before the Supreme Court. The lower courts and the parties have limited their briefings to the First Amendment issue of whether the State can request donor lists knowing that they will inevitably injure donors. The charities’ evidence of harassment and injury is strong, but disputed by the California Attorney General and in the Ninth Circuit Court of Appeals decisions.
• Like a movie monster rising from the grave, Schedule B is essentially obsolete and unwanted. It injures people and undermines taxpayer confidence that is essential to support government. It is not essential or efficient in regulating charities. It raises unnecessary constitutional questions. More efficient and targeted methods are already available than the upfront collection of thousands of charities’ donors’ information.
• The Supreme Court should use long-established First Amendment interpretations to help protect charitable donors, the organizations that depend on them, and the interests of the federal tax system in voluntary compliance. Otherwise, “enemies lists” may not only be revived, but will multiply.

To read or download the full analysis, click here:

On January 8, 2021, the Supreme Court of the United States decided to review two cases challenging the California Attorney General’s requirement that any charity seeking to operate in California file an unredacted copy of Schedule B, a simple tax form listing major donors to the organization. The cases, Americans for Prosperity Foundation v. Becerra, No. 19-251, and Thomas More Law Center v. Becerra, No. 19-255, were consolidated and oral arguments may be held this spring or fall. Recently, some articles have appeared that suggest that these cases will dramatically affect campaign finance laws, but that’s a stretch.

The Attorney General requires charities that want to operate in California to file an unredacted copy of Schedule B as part of their annual State applications. Donor information is highly protected under federal law, but the Attorney General demands the form as filed with the IRS. The same information is already filed with California’s Franchise Tax Board, which supervises tax-exempt organizations in California as an attachment to the CA 199 form, California’s annual tax form for tax-exempt organizations, and some organizations voluntarily file their Schedule B instead of a less formal list. The Attorney General does not, however, comply with federal data security requirements and usage restrictions, and so cannot get the information from the Franchise Tax Board.

The charities are challenging the Attorney General’s demands as violating the First Amendment’s freedom of speech and association. They have shown that the Attorney General’s office has a long and sordid history of leaking tax information on the Internet, endangering their donors’ safety and livelihoods. Under unbroken precedent dating back to NAACP v. Alabama, that showing should be enough to protect the donor information. But the Attorney General claims to need the Schedule B to enforce California’s laws against fraud and abuse of charitable status because it would be more “efficient,” and prevailed when the U.S. Court of Appeals for the Ninth Circuit refused to believe the charities’ evidence and the findings of the trial court.

The campaign finance angle is an interesting assertion, since a big part of these cases involves the charities distinguishing themselves from the statutes and judicial interpretations that have evolved from campaign finance litigation. For example, one of the biggest debates in these cases is over the “standard of review,” which tests what the opposing parties have to prove to win. Should that standard be “strict” or merely “exacting?” Traditionally, First Amendment cases have usually involved strict scrutiny, but even First Amendment-related campaign finance cases are now judged by the lower “exacting” standard. The reason is “corruption” or the “appearance of corruption” which PPLI has weighed in on before. The charities now before the Court are not looking to change campaign finance law, but to avoid using the same, lower standard for reviewing their case.

More likely, the articles are referring to the same debate that erupted over changing the IRS regulations that govern Schedule B, which PPLI has also weighed in on. The argument there was that State Attorneys General want to use IRS information to enforce campaign finance laws. In fact, on December 9, 2019, many State Attorneys General sent a letter to the IRS saying exactly that: “The revised donor reporting requirements that the IRS now proposes are certain to make federal and state review of this spending far more difficult if not impossible.” In its final Schedule B regulations on May 20, 2020, the IRS soundly rejected the Attorneys’ General plea (as PPLI had requested), noting that: “Use of returns or return information received from the IRS under these sections for purposes other than those listed above (for example, for the enforcement of campaign finance laws or consumer protection laws) is not consistent with states’ authorized use under sections 6103(d) and 6104(c).”

That didn’t stop the California Attorney General before, and likely won’t now. The Attorney General sought the filed Schedule B directly from the charities, not from the IRS. The IRS’s position is that the federal tax privacy provisions only protect against disclosures by the IRS, not by States demanding them directly from the charities. Some courts have upheld the IRS’s interpretation. But the Supreme Court isn’t bound by those interpretations, and may decide to follow the actual statutory language, which is broader than the IRS view.

Because the parties in these cases haven’t directly raised that interpretation, the Supreme Court likely won’t consider it. But the history of Schedule will likely provide context for the Supreme Court’s consideration. But tying these cases to some dramatic change in campaign finance law is a stretch.

PPLI has prepared a very long (and complicated) summary of the history of Schedule B. UPDATE: This is a new revision of this legal analysis, as of February 3, 2021, based, in part, on comments from and discussions with public policy law practitioners in the First Tuesday Lunch Group. The changes are significant and the document is both longer and more detailed, including analyses of the need for and effectiveness of Schedule B. You can find it here: