Citizens United loses challenge of N.Y. law requiring disclosure of donors

By Carrie Salls | Mar 5, 2018

NEW YORK (Legal Newsline) – The U.S. Court of Appeals for the Second Circuit has upheld a ruling by the U.S. District Court for the Southern District of New York that dismissed claims filed by Citizens United that challenged a New York law that requires nonprofit organizations to reveal the names of donors.

In a statement made following the 2nd Circuit’s ruling, New York State Attorney General Eric T. Schneiderman said: “Today’s ruling affirms that Citizens United can no longer shroud its biggest donors in secrecy. State law demands that organizations like Citizens United disclose their biggest donors to regulators so they can police fraud and abuse in the nonprofit sector. 

"We are pleased the court agreed with our position and rejected Citizens United’s incorrect First Amendment and due process claims. Today’s ruling is a victory for all those who believe in fairness across this vital sector of New York’s economy.”

Citizens United appealed a district court order holding that New York's requirement that registered charities disclose their donors did not violate the First Amendment, that federal tax law do not preempt it and that due process claims were not ripe.

The Second Circuit agreed with the district court on all but one part of its ruling.

“We find that the mere requirement on a tax-exempt organization to disclose its donor list to a state’s authority charged with regulating nonprofits does not impermissibly chill speech or assembly rights,” the Second Circuit wrote. “Nor does it operate as a prior restraint on non‐profits’ solicitation of donations.”

Hearing the case were circuit judges Jon O. Newman, Pierre N. Leval and Rosemary S. Pooler.

The Second Circuit did reverse the lower court’s finding that Citizens United’s due process claim “was not ripe,” but sent that claim back to the district court to be “dismissed with prejudice for failure to state a valid claim,” the opinion said.

According to the Second Circuit opinion, Citizens United argued that the donor disclosure law violates the First Amendment “by creating a climate of fear among donors that limits their ability to raise the funds to promote controversial causes and by operating as a prior restraint on their ability to ask for money.”

“We have already articulated the important government interests at stake: preventing fraud and self‐dealing in charities,” the decision says. “The attorney general’s regulations clearly further those interests by making it easier to police for such fraud.”

Citizens United also argued “that these regulations are preempted by the Internal Revenue Code’s disclosure rules and that the attorney general went beyond his authority by including 501(c)(4) organizations in the regulations’ definition of ‘charitable organization,’” the opinion said.

Also, the court said Citizens United claims that the attorney general’s decision to “more zealously enforce the regulations” in recent years “without prior notice amounts to a violation of the due process clause of the 14th Amendment.”

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