NYC Donor-Disclosure Rules Upset Nonprofit

MANHATTAN (CN) – A civil liberties group has joined in the call for a federal judge to strike down new donor-disclosure provisions in New York that allegedly stray from their anticorruption goals, hurting the protected speech rights of both nonprofits and donors.

Watchdog group Citizens Union fired the first shots last week, taking aim at sections 172-e and 172-f of New York Executive Law.

The new law mandates the public disclosure of all donors and donations to a 501(c)(3) in excess of $2,500 whenever that organization makes an “in-kind donation” of over $2,500 to certain 501(c)(4)s engaged in lobbying activity.

For 501(c)4 disclosure, the law lowers the threshold from $50,000 to $15,000 in annual lobbying spending. Donors that give $2,500 or more meanwhile must disclose details of the transaction, dropping the minimum down from $5,000.

The legislation became Chapter 286 when Gov. Andrew Cuomo signed it into law on Aug. 24, 2016, touting it as the “nation’s strongest protections to combat Citizens United” – a landmark Supreme Court decision that tossed out the ban on campaign-spending limits for corporations.

While other parts of Chapter 286 attempt to target quid-pro-quo corruption, campaign spending and coordination in elections, Citizens Union notes that “Parts F and G do not.”

“Instead, they regulate substantial speech on matters of public concern,” the complaint states.

“These sweeping provisions go far beyond electoral transparency and accountability instead, they impermissibly burden the everyday, citizen-to-citizen dialogue at the heart of First Amendment,” the Dec. 12 complaint continues.

The American Civil Liberties Union Foundation brought a similar challenge on Dec. 21.

Both worry that the tighter disclosure rules will chill donors, forcing them to choose between protected speech and subjecting themselves to “invasive” and “burdensome” disclosures.

Citizens Union noted in a statement that the provisions were only made public 24 hours before the bill was passed and the most recent legislative session ended.

Public disclosures must now include the names and addresses of the donors and the recipients, the names of any persons who exert operational or managerial control over the donor entities, and the date of the donation.

“With no ethics reform on the agenda, the governor pivoted and proposed changes he claimed would address the big money and independent expenditures loopholes permitted by the Supreme Court’s Citizens United case,” said Citizens Union executive director Dick Dadey in a statement. “In the guise of addressing Citizens United, he attacked Citizens Union and other good government groups who challenge our government to do better and work to hold our elected officials accountable. We will not be cowed by unconstitutional acts aimed at undermining our fundamental free speech rights.”

The complaint says Citizens Union’s membership support, contributions and fundraising provided more than 99 percent of the group’s unrestricted revenue in 2013 and 2014.

Citizens Union estimates that complying with the new disclosure regulation would add around 800 staff hours per year to its current operational requirements.

The group is a 501(c)(3) organization that conducts research on public policy, provides information to the public, and promotes public policy solutions.

According to its mission statement, co-plaintiff Citizens Union of the City of New York is a 501(c)(4) organization that “advances legislation to improve our government and political system, and conducts evaluations of candidates for city and state offices.”

The Joint Commission on Public Ethics declined to comment on pending litigation.

Representatives for the governor and Attorney General Eric Schneiderman did not return requests for comment.

Citizens Union and the Citizens Union Foundation are represented by Randy Mastro at Gibson, Dunn & Crutcher.

The ACLU, which sued along with the NYCLU, is represented by William Cavanaugh with Patterson Belknap.

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