A Victory for Free Speech at the IRS

A new tax rule protects the identity of donors to nonprofits.

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Historically, the IRS has not been a guardian of our free speech rights. It has a long and troubling history of political abuses and targeting unpopular viewpoints, which includes the 2013 targeting of conservative and Tea Party groups. But a new tax rule indicates the IRS may have a newfound respect for Americans’ First Amendment rights.

The IRS recently amended its nonprofit donor reporting rules to protect the identities of contributors. From now on, nonprofits (except for 501(c)(3) charities and 527 political groups) are not required to disclose their largest donors on annual tax returns. The organizations must still maintain this information for a potential audit, but the IRS will stop routinely collecting these names. 

Compelled disclosure of donors to nonprofit groups offends the First Amendment. As the Supreme Court acknowledged in Buckely v. Valeo, 424 U.S. 1, 64 (1976) (per curiam), compelled disclosure, in and of itself, can seriously infringe on privacy of association and belief. After all, an individual’s freedom to speak, to worship, and to petition the government for the redress of grievances cannot be vigorously protected from state interference unless the freedom to engage in a group effort to promote these interests is also guaranteed.

The IRS does not need or use this donor information to enforce the tax code. Multiple IRS officials, including the commissioner and the taxpayer advocate, have acknowledged this fact. The agency can enforce laws against self-dealing, fraud, embezzlement, and the like with other tax filings that provide detailed views of potential conflicts of interest, payments to officers and directors, and organizational finances. The IRS may obtain any additional information it needs through its ordinary investigatory process instead of requiring annual reporting of sensitive donor information by every nonprofit.

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  1. Avatar photo
    Tracie

    Regarding:

    "Americans have a right to support social causes without being harassed. The best way to protect that right is for the IRS to avoid collecting their sensitive information in the first place. The IRS should collect only information that it needs to enforce the tax code."

    I think few Americans want to expand the IRS's powers. Unfortunately, almost nobody wants to read about it either.

    We're interested in sex and culture war scandals ad nauseum, but the tax code? Campaign finance reform? Leave that to people who like bookkeeping.

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  2. Avatar photo
    Jeff Walden

    It's also worth noting NAACP v. Alabama (1958) here. Alabama issued a subpoena against the NAACP for its membership lists, ostensibly for violating a business-registry requirement (not that anyone should believe them). After a long series of ups and downs from state courts to the Supreme Court and back, in which Alabama courts repeatedly refused to recognize the NAACP's free speech/assembly interests in the contents and privacy of those lists, the Supreme Court eventually unanimously decided the NAACP had such interests and even decided the case on its own (rather than remand it to state courts that pretty clearly would continue resisting).

    Sadly, this is not the most recent time these sorts of hijinks have been attempted. As the author is undoubtedly aware, California is attempting similar things now against not merely one, but _every_ nonprofit soliciting donations in California. https://www.scotusblog.com/case-files/cases/institute-for-free-speech-v-becerra/ There are at least three such petitions pending at the Court now, and the solicitor general has been asked for his views in two of them, so there's definitely some interest at the Court in this matter.

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