Dark Money Is About to Get Much Darker

The Supreme Court’s conservative majority just gutted donor disclosure rules.

Charles Koch, chief executive officer of Koch Industries, in 2019.AP Photo/David Zalubowski, File

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The conservative Supreme Court majority ruled in favor of the Koch-backed Americans for Prosperity on Thursday, holding that a California law that requires nonprofit organizations to disclose their donors to state regulators was unconstitutional. The ruling is likely to have far-reaching ramifications, potentially upending disclosure laws across the country and making it far easier for deep-pocketed interests to pour money into political causes anonymously. 

Under longstanding state and federal rules originally instituted to protect the safety of donors to civil rights groups such as the NAACP, nonprofits have been exempt from disclosing their donors to the public. (They do, however, have to disclose their donors to the Internal Revenue Service.) In recent years, politically-active nonprofit groups have taken advantage of this system to shield their funders from public scrutiny, even as they have engaged in political advocacy aimed at shaping elections, opposing or supporting legislation, and generally influencing the public discourse. These so-called “dark money” groups have emerged as major players in the electoral battlefield, and some states have imposed their own regulations compelling political nonprofits to disclose to state regulators the donor lists they supply to the IRS. 

In the California case, Americans for Prosperity and the Thomas More Law Center, a Christian conservative legal activist group, claimed the state’s requirement that all nonprofit groups file a list of their top donors violated their First Amendment rights. California officials contended they need the information on hand in case there are complaints of fraud or wrongdoing and that they do not disclose the information publicly, but in 2015 donor information for some groups, including those associated with the Koch political network, was accidentally disclosed.

Attorneys for AFP and Thomas More said this disclosure posed a threat to the privacy and safety of donors and discouraged donors from supporting their causes. The Supreme Court’s six conservative justices agreed. This new ruling doesn’t change what the public knows about a nonprofit’s backers—which is almost nothing—but strikes down requirements that the nonprofits provide state regulators with donor information. 

In her dissent, justice Sonia Sotomayor, joined by justices Elena Kagan and Stephen Breyer, savaged the ruling, saying AFP and Thomas More failed to show that most donors wanted to be anonymous or that any burden was created by having to privately tell state regulators who their biggest funders are. Sotomayor predicted the ruling would more broadly endanger transparency requirements and give shady operators cover to violate the law.

“Today’s analysis marks reporting and disclosure requirements with a bull’s-eye,” Sotomayor wrote. “Regulated entities who wish to avoid their obligations can do so by vaguely waving toward First Amendment ‘privacy concerns.'” She added, “Neither precedent nor common sense supports such a result.” 

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