Donor privacy or secrecy? Nonprofit disclosure bill nears law

By: - April 17, 2023 6:45 am

Lawmakers and nonprofits want to protect their donors' privacy, but transparency advocates argue those who are politically involved shouldn't be able to maintain anonymity. (Getty Images)

Indiana’s state and local governments wouldn’t be able to require or publicly disclose nonprofit donor data under a proposal that is nearing law.

Lawmakers and philanthropic organizations have said it protects donor privacy, which can be critical in securing donations. But transparency groups say it could obfuscate the role big donors play in politics and beyond.

Charities and churches can obtain tax-exempt nonprofit status, but so can business leagues, farmers cooperatives, social clubs and politically oriented organizations.

House Bill 1212 would block all levels of Hoosier government from forcing nonprofits to hand over “personal information” — defined as any compilation of data identifying nonprofit members, supporters, volunteers or donors. It would additionally ban the public release of that information.

Sen. Liz Brown, R-Fort Wayne (Courtesy Indiana Senate Republicans)

And it would bar government agencies from requiring — or requesting — that their contractors or grantees provide lists of nonprofits they’ve supported, financially or not.

The bill classifies the information as confidential and exempts it from public records requests. But it also contains a lengthy list of exceptions, with existing campaign finance and lobbyist filings at the top.

“What we’re doing is saying: if we want to make changes, that’s a legislative decision,” the bill’s Senate sponsor Sen. Liz Brown, R-Fort Wayne, told the Capital Chronicle. “Just to make sure that an agency … is not allowed to make those decisions.”

Making donation decisions easier

Donors don’t need to give money, and nonprofit advocates want to assuage their fears through privacy guarantees.

Claudia Cummings (Courtesy Indiana Philanthropy Alliance)

“Speaking with our members, it’s clear that donor privacy is one of the basic things that they’re asked when consulting with donors,” said Claudia Cummings, the president and CEO of the Indiana Philanthropy Alliance.

The organization, one of the bill’s major supporters, represents numerous charitable foundations. Members are generally 501(c)3 groups, a type barred from political activity.

Cummings said donors may want anonymity out of a simple desire for privacy or humility. Or, they may want to avoid harassment, retaliation or solicitation.

“Donors get to choose how they spend their money — these are their private dollars,” she noted. “They can choose to save it, they can choose to buy something with it, or they can choose to give it. … If those donors were to withdraw from investment in the social sector, what impact would that have?”

Cummings and other House Bill 1212 supporters have said they want to codify the anti-disclosure concept into state law.

Although the U.S. Supreme Court has repeatedly invalidated laws compelling donor disclosure along First Amendment lines, some states have recently moved to implement such rules.

Case law goes back decades, to the Jim Crow era’s National Association for the Advancement of Colored People v. Alabama. The high court ruled that requiring the civil rights organization to disclose its membership would expose those people to retaliation.

The justices most recently acted in 2021’s Americans for Prosperity v. Bonta, which involved several conservative advocacy groups and a California law mandating disclosure of top donors. A divided court struck that law down as well.

Right to know

But because Indiana’s bill also includes nonprofits that are allowed to engage in politics — including 501(c)4 groups like Americans for Prosperity — some say it would reduce transparency.

Aaron McKean (Courtesy Campaign Legal Center)

“These kinds of bills … make it harder to get information about who is trying to influence our government officials or or our elected officials,” said Aaron McKean, legal counsel for pro-transparency nonprofit Campaign Legal Center. “And that’s information that voters need in order to be able to assess whether the government is actually working on their behalf or if government is working on behalf of those wealthy special interests who are lining their pockets.”

McKean said such legislation could make it easier for elected officials to hide conflicts of interest stemming from relationships with donors or politically active nonprofits.

“When you choose to get involved in politics, you choose to step into the public sphere,” said Pete Quist, deputy research director at OpenSecrets, a nonpartisan nonprofit that tracks campaign finance and lobbying.”… It’s the people’s right, the public’s right, to know who is funding their politicians. And that for us, trumps any donor privacy.”

Pete Quist (Courtesy Follow the Money)

Bill sponsor Brown said she believed in the right to privacy regardless of political involvement — or affiliation, offering the abortions rights group Planned Parenthood and anti-abortion pregnancy resource centers as examples.

“Whether they’re a 501(c)3 or a 501(c)4, I think that’s a protection that we all seem to agree is important, and I think we should continue that,” Brown said. “I hope that — I didn’t feel we were doing this just for political advocacy protection.”

“I think we’re doing it because, in my neck of the woods, I have been a donor. I have been part of an organization soliciting funds: Boys and Girls Clubs, different things like that,” she continued. “And I can tell you that people sometimes like to give, but they like to give anonymously.”

Abundant exceptions

The bill isn’t indiscriminate. Instead, it treads a narrow path between broad protections for donors and nonprofits and a detailed, 12-part list of exceptions.

Existing campaign finance and lobbying disclosure laws top the list.

That’s followed by warrants, requests for the legal process of discovery, court evidence, voluntary release to an agency, other reports to the secretary of state, State Board of Accounts examinations, attorney general investigation-related requests, payment-related state auditor efforts, licensing and hospitals.

Many of the exceptions themselves apply only if specific conditions are met.

McKean said he hadn’t looked at Indiana’s bill in detail, but that similar proposals in other states underwent “little tweaks” that collectively “riddled” the legislation with exceptions.

“It’s not clear why — it’s not clear to me, anyway — why you’d push so hard for a bill that is going to end up being riddled with all these exceptions, especially when you don’t need it,” McKean said.

Nationally, mixed receptions

Numerous states have approved similar legislation, including New Hampshire and Virginia. More have attempted.

Missouri is among those with a law in effect, but lawmakers there are coming back with edits: more exemptions. Republican Gov. Mike Parson’s office and the state’s budget, contracting and public safety agencies have complained that the bipartisan measure hampers some of their key functions.

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And the Missouri Independent reported Parson’s office has pointed to the law to rebuff public records requests.

Other governors have outright vetoed such proposals, including Democrat Gov. Roy Cooper of North Carolina in 2021 and Republican former Gov. Rick Snyder of Michigan in 2018.

Indiana, House Bill 1212 is heading to conference committee because senators added several exceptions with which House lawmakers disagreed. They’ll hash out their disagreements before sending it to Gov. Eric Holcomb’s desk.

Another nonprofit-focused bill, this one authored by Brown, is awaiting his signature. Senate Bill 302 would bar state agencies and officials from giving nonprofits filing and reporting requirements stricter than existing state or federal law.

Note: The Indiana Capital Chronicle is an affiliate of States Newsroom, a 501(c)3 nonprofit that discloses its large donors.


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Leslie Bonilla Muñiz
Leslie Bonilla Muñiz

Leslie joins the Indiana Capital Chronicle after covering city government and urban affairs for the Indianapolis Business Journal for more than a year. She graduated from Northwestern University in March 2021, and has reported for the Chicago Tribune, Voice of America and student publications in Evanston, Illinois, Washington, D.C., and Doha, Qatar.