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.