Q&A #76 – Is Form 990, Schedule B donor information required with my organization’s state charitable solicitation registrations?
Question: I have heard that there have been controversies involving certain states that required Form 990, Schedule B donor information to be provided by charities when filing their charitable solicitation registrations. Is Schedule B donor information required by any states?
Answer: The answer should be no, for now. This past summer, the Supreme Court invalidated California’s requirement to include unredacted Form 990, Schedule B donor information as part of its charitable solicitation registration law in Americans for Prosperity Foundation v. Bonta, No. 19-251 (July 1, 2021). Prior to this decision, California was one of a handful of states that required this donor information, along with New York, New Jersey, and Hawaii. All except for Hawaii have since explicitly suspended this requirement in response to Bonta, and Hawaii has not yet clarified its position.
The Bonta case was decided by a 6-3 majority, with Chief Justice Roberts writing the majority opinion. The Court held that California’s law must satisfy an “exacting scrutiny” standard, which requires “a substantial relation between the disclosure requirement and a sufficiently important governmental interest” and a showing that the law is “narrowly tailored to the government’s asserted interest.” The Court noted that there was a “dramatic mismatch” between the donor disclosure requirement and California’s interests in preventing wrongdoing by charitable organizations and protecting the public from fraud. In holding that California’s Schedule B requirement failed this test, the Court observed that “California casts a dragnet for sensitive donor information from tens of thousands of charities each year, even though that information will become relevant in only a small number of cases involving filed complaints.”
While it is possible, in theory, for a state to draft a future donor disclosure law in a way that satisfies the exacting scrutiny standard under Bonta, it does not appear that any state wants to test these waters at this time.
However, be aware that Bonta only invalidated broad-based and sweeping Schedule B disclosure requirements like California’s. State governments can still subpoena donor information that is specifically relevant to an investigation. The validity of any particular subpoena would be decided by a court and would depend on the specific facts and applicable law.
Planning Tip – Be careful to never inadvertently disclose donor information when submitting your organization’s charitable solicitation registrations. If you mistakenly include the Schedule B with the Form 990 that you submit with your charitable solicitation registration, the state government will probably not redact or remove it (unlike the IRS), and many states post all documents provided with the charitable solicitation registration as downloadable files on their public website. Always insist that your tax preparer provides a “public disclosure copy” of the Form 990 each year with the Schedule B removed. Make the public disclosure copy your default document for all state registrations and public requests. This will help to ensure that you don’t provide the “IRS copy” by mistake.
Lastly, note that some have speculated whether the requirement to provide Form 990, Schedule B to the IRS might itself be invalidated in a future case based on the breadth of the rationale of the majority opinion in Bonta. Public opinion differs as to the likelihood of this scenario, but this would be a very different case with unique considerations. 501(c)(3) organizations should assume that they will continue to be required to include a Schedule B with their Form 990 filings for the foreseeable future.
