Social Welfare Group Supports Proposed Donor Disclosure Regs

COMMENTS ON IRS-219-0039-0001

December 6, 2019

Jonathan Bechtle, Esq.
Treasurer/Secretary

The Opportunity Solutions Project (OSP) supports the Internal Revenue Service (IRS) update to guidance for Section 6033 of the Internal Revenue Code in order to increase and protect individual privacy, reduce risk, and alleviate the paperwork burden on IRS staff and nonprofit organizations.

OSP is a Florida nonprofit corporation that is tax-exempt under Section 501(c)(4) of the Code. It is a social welfare organization that brings together citizens and thought leaders across America to identify proven state-level reforms and promote them to voters, the media, and state policymakers. OSP often partners with educational policy organizations, sharing its high-quality research and data analysis with state lawmakers to ensure new laws are carefully crafted to expand opportunity and freedom for all.

A bedrock principle of this nation is the right of private individuals to associate together to address a societal ill or improve the Lives of their fellow Americans. This is one of the unique facets about the American experiment that has made it endure — in no other place in the world do people band together so often and in so many ways to help each other.

There is a growing vilification of charitable individuals who have associated together with the common goal of benefiting others. Constitutional privacy rights are under attack by those who would seek to malign good faith and charity under the guise of governmental transparency. Thankfully, the United States Supreme Court has upheld privacy interests of association members and rejected the thinly veiled attempts by political foes to attack private charity.

The seminal case on this issue, NAACP v. Alabama, is a perfect illustration of why individuals who want to peacefully change government policy are most in need of privacy protection, and why the proposed rule is needed.¹ Alabama sought membership lists from the local chapter of the National Association of American Colored Persons (NAACP), but the organization refused to provide them despite promises from the state that the lists would be kept private. The NAACP feared that the information would leak, exposing the names of its members, including white members who had a very reasonable fear of being harassed and ostracized by their neighbors. The Supreme Court agreed, protecting the privacy of the association members.

This rule change will reinforce those same crucial rights for private supporters of organizations like OSP. OSP partners with generous Americans who care enough about the future of their country to give their hard-earned money to advance ideas they believe in.

OSP does not hide its work or goals from the general public — everything it creates is published on its website for all to see, its goals are clear. And yet OSP staff are frequently questioned by lawmakers and reporters about who its funders are, and why they give to the organization. Their only purpose in doing so is an attempt to either discredit OSP's message or harass the organization's supporters, both exactly the ills that association rights are designed to prevent.

Two states, California and New York, have actively enforced requirements to disclose donor lists by OSP and similar nonprofits who want to solicit donations in their states.² They use the Section 6033 requirement for disclosure of supporters as a vehicle by forcing filers to provide copies of that portion of the form, While the IRS surely does not intend to cause any discouragement to donors who are afraid to affiliate with each other due to privacy concerns, the IRS's rule is enabling state entities to take actions that heighten the fear.

The chilling effect of these radical changes in California and New York is being felt by non-profit organizations across the country. OSP has been limited in its efforts to find new supporters in these states because of a fear that leaks of donor lists by ideological foes would discredit the organization with its donors. Just as consumer companies like Equifax or Target have been discredited after privacy breaches of their customer data. Except in OSP's case, the risk is not just financial loss, but relational and emotional damages as well for those individuals as well. This disturbing trend of weaponization of private charitable donor information will be prevented by implementing this important rule.

Two months ago, the US. District Court for the Southern District of New York agreed that these types of laws are dangerous when it found that New York's law was unconstitutional as a violation of First Amendment free speech and free association rights. The opinion states, "there is no question that public disclosure of donor identities burdens the First Amendment rights to free speech and free association."³

This rule change signals the IRS's desire to balance privacy and association rights with the needs of efficient tax administration, While it would not directly change the actions of the states, it would remove any entanglement the IRS might have with those actions that have, in at least one court, been struck down as violations of free association rights and are being challenged in others⁴.

OSP agrees with the reasonableness of the Explanation of Provisions note that contributor information could still be obtained on a case-by-case basis when needed by the IRS. OSP, like most nonprofit organizations, maintains meticulous records of all supporters and their donations. Not doing so would be folly, due to the many other IRS regulations and state charitable giving regulations that require good record-keeping. If an issue ever arose about the tax obligations of a donor, it would be simple for OSP to provide that information upon request to the IRS.

Conclusion

The proposed rule takes an important step to reduce the regulatory burden on organizations like OSP, but even more importantly, signals a welcome desire to reduce the risk of privacy violations or any negative impact on the right of free people to associate together to support causes they believe in.