History of Anonymous Giving / Nonprofit legal history / Philanthropy in the News

The Charitable Solicitation Context of Americans for Prosperity Foundation v. Beccerra

Editors’ note: Joseph Mead situates the pending Supreme Court case Americans for Prosperity Foundation v. Beccerra within the broader history of efforts to regulate charitable solicitation.

The Supreme Court will soon decide a case with potentially significant implications for regulating nonprofits, Americans for Prosperity Foundation v. Beccerra. In the upcoming case, two nonprofits have challenged the constitutionality of a California law that prohibits the organizations from soliciting charitable donations in the state unless they submit to the state a list of their major donors. Although there are political overtones clouding the case – worries about dark money, the optics of conservative organizations challenging a liberal state’s regulatory regime – the legal issue at play is one with decades of interesting constitutional history: what conditions can the state put on charitable solicitation?

The past century has brought repeated conflicts between states and solicitors, triggering several Supreme Court rulings in favor of organizations’ right to ask for donations. Historically, governments sought to starve politically-unpopular organizations of needed funds by restricting charitable solicitation, such as southern states’ retaliation against the NAACP following the victory in Brown v. Board of Education. In response, the Supreme Court has repeatedly ruled that the very act of charitable solicitation is itself protected free speech, and courts must scrutinize conditions placed on solicitation. But the Court has left some unresolved questions about what conditions the Constitution permits, leading to the present lawsuit.

By way of background, most states regulate charitable solicitation through some form of registration requirement, typically by requiring soliciting charities to report basics such as the amount of money raised through solicitation and information about the organization’s mission. For decades, California required soliciting organizations to add their names to the state’s charity register. A few years ago, California began mandating organizations on the register to submit to the state their IRS Form 990 – the annual tax filing required for federally tax-exempt organizations. As part of their federal filing, organizations must disclose their major donors. Federal law already makes most of the Form 990 public, but allows nonprofits to redact the identities of major donors. It is this redacted information that California now demands, and the nonprofits resist.

The plaintiffs – conservative organizations Thomas More Law Center and Americans for Prosperity Foundation – have challenged California’s rules. They argue that disclosure of donor identities can discourage people from donating to controversial organizations and could subject them to harassment or retaliation. Further, while California nominally promises to keep donor identity secret, the state has failed to live up to that promise in practice. In contrast, California argues that access to donor information will help the state identify sham charities and improper self-dealing.

The story of modern charitable solicitation law starts 80 years ago. Newton Cantwell and his two sons, practicing their faith as Jehovah’s Witnesses, were arrested for soliciting donations without a license. In Cantwell v. Connecticut (1940), the Supreme Court unanimously agreed with the Cantwells that the First Amendment protected their right to openly ask strangers for donations, striking down a state law that gave undue discretion to an official to decide whether to allow the solicitation to proceed.

Despite the Court’s teachings, governments repeatedly tried to limit charitable solicitation in the decades that followed, often for nefarious purposes. For example, in retaliation for Brown v. Board of Education (1954), southern states breathlessly called special legislative sessions with the singular goal of driving the NAACP out of their states; onerous restrictions on charitable solicitation (including membership disclosure) was a favorite tool.

A few years later, in 1964, the United States House of Representatives voted to ban fundraising by LGBT advocates, driven by Representative John Dowdy’s outrage at receiving a request for a donation from the Mattachine Society, an organization working to end discriminatory attitudes and laws towards gay people. Appearing before Dowdy’s committee, Frank Kameny defended the Mattachine Society’s right to exist, likely marking the first time an openly gay individual testified before Congress. Representative Dowdy spent two long committee days lobbing slurs at Kameny before convincing the House to ban the Mattachine Society from fundraising in the District of Columbia. Although the bill did not pass the Senate, the House’s effort had its intended effect: the Mattachine Society lost its license when it refused to disclose the identities of its supporters.

Other laws have been overtly protectionist, favoring local interests over national causes. For example, in 1916, the City of Los Angeles forbade the Salvation Army from raising funds in the city unless it promised that all donations would stay local and benefit the city. In the 1960s, Dayton, Ohio, refused to permit the American Cancer Society from seeking donations on fears that it would unnecessarily compete with the local hospital’s fundraising efforts.[1] Between 1950 and 1980, most states adopted comprehensive sets of regulations that governed charitable solicitation conducted by organizations, including strict limits on the amount of money an organization could spend on solicitation activities.

When the Supreme Court once again reviewed charitable solicitation laws in the 1980s, the Court confirmed that charitable solicitation was a form of First Amendment speech. Through three cases in the 1980s, the Supreme Court articulated the current standard and test for evaluating charitable solicitation, and in the process, struck down every limit on charitable solicitation it considered. For example, the Court invalidated a law that denied solicitation permits to any organization that spent more than 25% of its donations on the costs of solicitation activities. The Court also struck down a law that required a caller to disclose information about costs before asking for a donation.

Several things are notable about the Court’s 1980s rulings, which continue to provide the governing framework for evaluating restrictions on charitable solicitation. One of the most significant parts of the Court’s analysis is that the Court treated charitable solicitation as entitled to the highest level of First Amendment protection. The Court rejected the argument that solicitation should be treated as mere conduct (instead of speech) and viewed charitable solicitation as more sacred than commercial speech that would suggest a non-charitable economic transaction.

In the decades that followed, courts have sometimes struggled to articulate the precise standard for evaluating new state and local laws that limit solicitation, but the overarching framework has remained stable. One significant development is that courts in recent years have extended the doctrine to recognize that individuals, as well as organizations, have the Constitutional right to ask for donations, and determined that anti-panhandling laws unconstitutionally limit this right.

In a few weeks, the US Supreme Court will hear oral argument on whether California’s law requiring information about major donors is an unconstitutional condition on the nonprofit’s right to charitable solicitation. Much of the dispute will come down to levels of scrutiny and burdens of proof: Has California sufficiently explained and proved an interest in learning about major donors? However the Court rules on this specific dispute, the analytical choices that the Court makes could have broader implications for regulating charity.

For example, charitable solicitation laws are stuck in the past. Some state statutes still direct regulation at solicitation by telegraph but not internet, creating rules that apply awkwardly or uncertainly to modern forms of communication. National organizations with a geographically diverse donor network must comply with repetitive, costly regulations imposed state-by-state (and even city-by-city). Smaller or ignorant charities simply fail to comply. These paperwork mandates seem to hold little meaningful benefit, particularly when compared to their cost. The Court’s opinion may reshape the constitutional landscape and give states and cities the impetus to modernize their solicitation statutes.

            Fundraising itself has also become increasingly decentralized and less compatible with existing regulatory schemes. Peer-to-peer fundraising continues to grow in popularity, and online crowdfunding platforms (like GoFundMe) can raise large sums of money bypassing formal charitable institutions altogether. There are current debates about when a person charged with a crime can fundraise for their legal defense. Sometimes, the literal-but-unenforced language of a state regulatory system applies to these new modes of charity. But applying registration and disclosure requirements on individualized behavior would stifle these forms of direct charity.

            With Americans for Prosperity Foundation v. Beccerra, the Court is not writing on a blank page, but the next chapter in a book filled with decades of disputes between the state and solicitors. In issuing its ruling, the Court should ignore the attempts to politicize this case, and instead recognize the charitable solicitation context in which the case arises, and its implications for organizations well beyond those appearing before the Court.

-Joseph Mead

Joseph Mead is a faculty member at Cleveland State University, where he holds a joint appointment in the Cleveland-Marshall College of Law and the Maxine Goodman Levin College of Urban Affairs. He studies the intersection of the nonprofit sector and the First Amendment. 

[1] Am. Cancer Soc’y v. City of Dayton, 114 N.E.2d 219, 226 (Ohio 1963)

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