KVIG Informative

Social welfare groups can lobby without limit and take part in campaigns within limits, and most do not publicly name their donors. The reasons sit in a Supreme Court case and a long disagreement over transparency.

Under the rules CRS summarizes, 501(c)(4) social welfare organizations may engage in campaign activity as long as it is not their primary activity, and they may lobby without a cap. They report political activity to the IRS on Schedule C of Form 990 and their larger donors on Schedule B. The donor schedule lists names and addresses of people who gave more than $5,000 in a year or, in some cases, more than 2 percent of the group’s total contributions. Form 990 itself is public, but the donor schedule generally is not.

The Paired-Group Structure The 1983 Supreme Court decision in Regan v. Taxation With Representation of Washington explains why many advocacy efforts involve two organizations. The Court noted that a 501(c)(3) charity may create a 501(c)(4) affiliate to pursue its goals through lobbying. The group in that case had itself been formed to take over the work of two earlier nonprofits, one of each type. Training materials from the League of Women Voters stress that the charity and the social welfare arm must be kept separate to protect the charity’s status.

What the Supreme Court Decided in 2021 In Americans for Prosperity Foundation v. Bonta, decided July 1, 2021, the Supreme Court ruled 6-3 that California’s blanket requirement that charities hand their Schedule B to the state attorney general was facially unconstitutional. The Court applied exacting scrutiny, under which a disclosure rule must be narrowly tailored to an important government interest. It found that California had an important interest in preventing charitable wrongdoing but that the blanket demand was not narrowly tailored, because Schedule Bs were rarely used in investigations. California was one of three states with such a requirement, along with New York and Hawaii.

The plaintiffs, Americans for Prosperity Foundation and the Thomas More Law Center, are both 501(c)(3) charities. They argued that their supporters had faced threats, harassment, and violence, and that disclosure would discourage giving. The case concerned donor information collected by a state, not the federal donor reporting that groups already file with the IRS.

The Other Side of the Argument The Campaign Legal Center, which supports disclosure, argued that California’s attorney general used the confidential donor information to enforce nonprofit rules and to guard against charitable fraud and self-dealing. It said the ruling raised the standard of scrutiny beyond what earlier disclosure cases required, while noting that the decision does not call into question the public disclosure laws that apply to campaign spending. Supporters of the ruling say the justices protected associational privacy for donors across the political spectrum.

Two Kinds of Disclosure The case separates two things that are often blended in public debate. One is what the IRS and state regulators can collect to police fraud and compliance. The other is what the public can see about who funds political spending. The ruling addressed the first, in a state setting, and left the separate campaign-finance disclosure rules in place. Critics use the term dark money for political spending whose donors the public cannot identify, while defenders describe the same arrangement as donor privacy.

How to Look Up a Group The IRS’s Tax Exempt Organization Search shows a group’s type and links to its Form 990. Schedule C on that filing shows political activity, and comparing it to the group’s affiliated organizations shows how a movement divides its work between charity and advocacy. The donor schedule will usually remain out of view, but spending, officers, and affiliations are public.

The disagreement has not settled. Supporters of more disclosure and supporters of donor privacy both cite the First Amendment, and Congress and the states remain free to revisit how much donors must reveal and to whom.