Think-Tanker Questions Donor Confidentiality Standards

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April 4, 2011; Source: New York Times | Wealthy, politically minded donors have been funneling big (and secret) bucks into politically active nonprofits, both 501(c)(4)s that are allowed to engage in political campaign activities and even 501(c)(3) public charities, which are prohibited from doing so.

David Callahan, a senior fellow at the left-leaning think tank, Demos, thinks this secret money flow threatens American democracy. His solutions: “Require all nonprofit organizations that engage in political advocacy to reveal their donors.” And: “Create a new category for nonprofits engaged in policy advocacy . . . [that] would have to disclose all their donors, while traditional 501(c)3’s – museums and universities, for example –could continue to receive anonymous gifts.”

Callahan’s attempt to carve out new transparency rules for “nonprofits engaged in policy advocacy” is troubling, not for the transparency angle, but for the idea that you can distinguish policy advocacy nonprofits from others. Public policy advocacy is part and parcel of the bundle of free speech rights of all nonprofits, (c)(3)s as well as (c)(4)s – human service delivery organizations as well as Demos-like think tanks.

If he is concerned about partisan political campaign engagement, he could focus on new donor disclosure requirements for (c)(4)s only, but he notes – correctly in this case – that many (c)(4)s work hand-in-glove with affiliated (c)(3) arms, with the ability to shift money back and forth between them.

Callahan knows that this issue applies to the right and to the left. A Commentary Magazine blog noted that many liberal, politically engaged, organizations such as the Center for American Progress and Callahan’s own Demos do not disclose their donor lists. Even middle-of-the-road political 501(c) organizations appear no more predisposed to disclosure than the organizations on the left or the right.

Although the roots of nonprofit confidentiality go back many years aiming to protect donors from political harassment and retaliation, notably the NAACP v. Alabama (1958), the more modern concern for confidentiality emanated from nonprofits’ and donors’ fears during the debates around the Istook Amendment in the 1990s. Are nonprofits still concerned about Istook?

If the political-threat rationale for keeping donors secret is no longer valid, why not let the donations of the Koch brothers, the Scaifes, George Soros, and Herb and Marion Sandler be part of what the public needs to know about the nonprofit sector at this stage in our democratic experiment. Do NPQ readers really fear disclosure because of political harassment concerns?—Rick Cohen