N.C. legislators rush bill to limit nonprofit donor disclosure

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North Carolina House Republicans rushed to pass a “donor privacy” bill Thursday shortly after a Judiciary Committee hearing. The bill (SB 636) would limit the disclosure required for a range of 501(c) nonprofit organizations. It is now up to Gov. Roy Cooper to decide whether to sign it into law.

The bill would prohibit nonprofits from disclosing the list of donors without the donors’ permission, unless otherwise required by law, such as investigations by state agencies including the State Board of Elections.

Rep. Hugh Blackwell, a Burke County Republican, said the bill seeks to protect donors’ First Amendment rights. He said, “This is designed to say that if you are a donor to a charitable organization, unless you give your permission, you don’t have to worry that someone is going to disclose your name broadly to other folks who may have other purposes in mind than just being well informed.”

He said legislators proposed this bill in keeping with a recent U.S. Supreme Court decision that blocked the California Attorney General’s office from collecting the nonprofit Americans for Prosperity’s tax forms containing donor information. Justice Sonia Sotomayor dissented in the case, saying the court erroneously eliminated the burden of proof to show First Amendment violations and instead invalidated the disclosure law entirely.

Rep. Marcia Morey, D-Durham, opposed today’s House action. “We talked about free speech; We talked about free assembly. That’s not what we’re talking about here,” she said. ”We’re talking about money… money that has power to influence and oftentimes money that has power to corrupt.”

This bill would prevent the public from identifying big donors to nonprofit organizations and perpetuate secrecy in campaign finance, opponents of the bill argued.

Although the bill would not affect disclosure requirements for nonprofits to the SBOE, campaign finance watchdog groups said that the measure would expand a loophole already in the state statutes. Currently, dark money groups can funnel their money through layers of shell organizations. Since secondary disclosure of donors is not required, it is sometimes impossible to trace back the source donors.

Melissa Price Kromm

A preemptive strike

Melissa Price Kromm, executive director of N.C. Voters for Clean Elections, said the bill is nothing but a “preemptive strike” to prevent disclosure of donors if state laws close the loophole to allow for “peeling the onion” to identify sources of dark money.

“You don’t have the public clamoring for this, you have special interest clamoring for this,” Kromm said. She said the sudden passage of the bill without public notice is telling of lobbying groups’ influence. North Carolina Republican legislators recently returned from the annual conference of the American Legislative Exchange Council (ALEC). The conservative group famous for pre-written “model legislation” has pushed for similar bills in other states for years.

Rep. Blackwell was a member of ALEC’s Civil Justice Task Force, according to a memo.

The bill would apply to different kinds of nonprofits, including 501(c)(3) charitable, religious, and education organizations and 501 (c)(6) trade associations. However, Kromm said the bill would close the door to transparency for 501(c)(4) organizations, social welfare groups that often play an active role in campaign activities.

In an earlier op-ed to Policy Watch, she highlighted notable 501(c)(4) groups have abused the funneling loophole, including the National Rifle Association, the Club for Growth and Heritage Action, and Democratic-afiliated groups Future Forward, as well as the 1630 Fund.

On the House floor, Rep. Pricey Harrison, D-Guilford, proposed an amendment to limit the donor protection to 501(c)(3) charitable, religious and education organizations only. The amendment failed to gain Republican support.

The Campaign Legal Center, a Washington-based nonpartisan nonprofit organization, sent a  letter to Gov. Cooper urging him to veto the bill. The letter warned, “The bill mandates secrecy for 29 different types of nonprofit organizations.”

“While not barring current statutorily required disclosures, S.B. 636 stymies further disclosure of donor information from groups that hide their political spending in dark money shell games to avoid the reach of such statutorily required disclosures,” the letter read.

The group noted that the bill would also make it easier for North Carolina officials to hide conflicts of interest. For example, the bill could keep it in the dark when legislators solicit money from individuals associated with nonprofits who wish to buy government action in secret, the letter stated.

The group noted that former Michigan Republican Governor Rick Snyder vetoed a similar version of the bill and called it “a solution in search of a problem.”

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