Existing law, the Uniform Supervision of Trustees and Fundraisers for Charitable Purposes Act, requires a commercial fundraiser for charitable purposes and a fundraising counsel for charitable purposes to register with and to file specified reports items with the Attorney Generals Registry of Charitable Trusts, Trusts and provides that these documents the register, copies of instruments, and the reports filed with the Attorney General are subject to public inspection, as specified. Existing law requires the Attorney General to withhold any instrument so filed whose content is not exclusively for charitable purposes from public inspection, as specified.

This bill would prohibit the disclosure of a schedule of donors, as defined, by any employee, agent, or official employed by the Attorney General, or any employee, agent, or official of any other agency that has received a schedule of donors from the Attorney General for governmental purposes. The bill would subject an unlawful disclosure to a civil penalty of $10,000, and an additional civil penalty of $25,000 if that disclosure was willful, intentional, or reckless, as specified. additionally include any instrument filed with the Attorney General for these purposes among those documents to be open to public inspection. The bill would, however, require the Attorney General to withhold from public inspection any report filed with any governmental entity, as specified, that is required by law to be kept confidential, specified portions of documents that do not relate to charitable purposes or charitable assets and that are not otherwise records, public and donor information that is exempt from public inspection under a certain federal law, except as specified.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Public Records Act, except as specified, requires every state or local agency, upon request, to make records available to any person upon payment of fees to cover costs. The act exempts specific types of listed records from disclosure, including, among other things, records that are exempt or prohibited from disclosure pursuant to federal or state law, as specified.

This bill would specify that those records include a schedule of donors that is exempt from public disclosure under federal law and is provided to the Attorney General as a condition of registration or maintenance of tax exempt status by an organization that is registered as a tax exempt entity under federal law.

Existing law, the Uniform Supervision of Trustees and Fundraisers for Charitable Purposes Act, requires a commercial fundraiser for charitable purposes and a fundraising counsel for charitable purposes to register with and to file specified reports with the Attorney Generals Registry of Charitable Trusts, and provides that these documents are subject to public inspection, as specified.

This bill would prohibit the disclosure of a schedule of donors, as defined, by any employee, agent, or official employed by the Attorney General, or any employee, agent, or official of any other agency that has received a schedule of donors from the Attorney General for governmental purposes. The bill would subject an unlawful disclosure to a civil penalty of $10,000, and an additional civil penalty of $25,000 if that disclosure was willful, intentional, or reckless, as specified.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: AB 2219 (Author:Wagner)

Version: March 31, 2016

Hearing Date: June 21, 2016

Fiscal: Yes

Urgency: No

Consultant: TH

SUBJECT

Attorney General: Schedule of Donors: Confidentiality

DESCRIPTION

This bill would amend the Supervision of Trustees and Fundraisers for Charitable Purposes Act to specify that certain instruments, documents, and reports filed with the Attorney General are to be withheld from public inspection.

BACKGROUND

The Supervision of Trustees and Fundraisers for Charitable Purposes Act (Gov. Code Sec. 12580 et seq.) establishes the Attorney General’s supervisory authority over charitable trustees and entities to ensure that funds received for charitable purposes are properly managed and devoted to charitable programs. This Act is derived from the Uniform Supervision of Trustees for Charitable Purposes Act, which California enacted in 1959, and requires most charities operating in California to register with the Attorney General and file annual financial reports listing their revenues and expenditures. Under existing law, any charitable organization that seeks to solicit tax deductible contributions in California must first register with the state’s Registry of Charitable Trusts and provide certain documents to the Attorney General. These documents and other annual financial reports are used by the Attorney General to investigate and litigate cases of charity fraud and mismanagement by trustees and directors.

The Registry of Charitable Trusts, along with copies of instruments and reports filed with the Attorney General, are generally open to public inspection, subject to limitations imposed through rule or regulation. However, existing law requires any instrument filed “whose content is not exclusively for charitable purposes” to be withheld from public inspection. (Gov. Code Sec. 12590.)

This bill would further require the Attorney General to withhold from public inspection:

• any report filed with any other governmental agency of this state, another state, the United States, or any governmental subdivision thereof that is required by law to be kept confidential;
• upon request of a charity or charitable fiduciary, any part of a document filed with the Attorney General that does not relate to charitable purposes or charitable assets and that is not otherwise a public record; and
• donor information that is exempt from public disclosure under the Internal Revenue Code, as specified, unless the disclosure is pursuant to a court or administrative proceeding brought pursuant to the Attorney General’s charitable trust enforcement responsibilities, or the disclosure is in response to a search warrant.

CHANGES TO EXISTING LAW

Existing law establishes the Supervision of Trustees and Fundraisers for Charitable Purposes Act, which applies to all charitable corporations, unincorporated associations, trustees, and other legal entities holding property for charitable purposes, commercial fundraisers for charitable purposes, fundraising counsel for charitable purposes, and commercial coventurers, over which the state or the Attorney General has enforcement or supervisory powers, as specified. (Gov. Code Secs. 12580, 12581.)

Existing law requires the Attorney General to establish and maintain a register of charitable corporations, unincorporated associations, trustees, and entities that hold property for charitable purposes. Existing law authorizes the Attorney General to conduct whatever investigation is necessary, and to obtain from public records, court officers, taxing authorities, trustees, and other sources, whatever information, copies of instruments, reports, and records are needed for the establishment and maintenance of the register. (Gov. Code Sec. 12584.)

Existing law directs every charitable corporation, unincorporated association, and trustee to file with the Attorney General an initial registration form, under oath, setting forth information and attaching documents prescribed in accordance with rules and regulations of the Attorney General, within 30 days after the corporation, unincorporated association, or trustee initially receives property. A trustee is not required to register as long as the charitable interest in a trust is a future interest, but shall do so within 30 days after any charitable interest in a trust becomes a present interest. (Gov. Code Sec. 12585.)

Existing law directs the Attorney General to adopt rules and regulations as to the contents of the initial registration form and the manner of executing and filing that document or documents. (Gov. Code Sec. 12585.)

Existing law requires every charitable corporation, unincorporated association, and trustee, except as specified, to file with the Attorney General periodic written reports, under oath, setting forth information as to the nature of the assets held for charitable purposes and the administration thereof by the corporation, unincorporated association, or trustee, in accordance with rules and regulations of the Attorney General. (Gov. Code Sec. 12586.)

Existing law empowers the Attorney General to investigate transactions and relationships of corporations and trustees for the purpose of ascertaining whether or not the purposes of the corporation or trust are being carried out in accordance with the terms and provisions of the articles of incorporation or other instrument. The Attorney General may require any agent, trustee, fiduciary, beneficiary, institution, association, or corporation, or other person to appear, at a named time and place, in the county where the person resides or is found, to give information under oath and to produce books, memoranda, papers, documents of title, and evidence of assets, liabilities, receipts, or disbursements in the possession or control of the person ordered to appear. (Gov. Code Sec. 12588.)

Existing law states that, subject to reasonable rules and regulations adopted by the Attorney General, the register, copies of instruments, and the reports filed with the Attorney General shall be open to public inspection, except the Attorney General shall withhold from public inspection any instrument so filed whose content is not exclusively for charitable purposes. (Gov. Code Sec. 12590.)

This bill recasts the above provision to state, subject to reasonable rules and regulations adopted by the Attorney General, the register, copies of instruments, documents, and the reports filed with the Attorney General shall be open to public inspection, except:

• any report filed with any other governmental agency of this state, another state, the United States, or any governmental subdivision thereof that is required by law to be kept confidential;
• upon request of a charity or charitable fiduciary, any part of a document filed with the Attorney General that does not relate to charitable purposes or charitable assets and that is not otherwise a public record; and
• donor information that is exempt from public disclosure under the Internal Revenue Code, unless the disclosure is pursuant to a court or administrative proceeding brought pursuant to the Attorney General’s charitable trust enforcement responsibilities, or the disclosure is in response to a search warrant.

COMMENT

1. Stated need for the bill

The author writes:

Current law does not prohibit the Attorney General from publicly disclosing annual donor information of Internal Revenue Code Section 501(c)(3) tax exempt charitable, educational and scientific organizations. This is information that federal law makes confidential, but which the Attorney General has asserted that such organizations must provide to comply with California’s Charitable Trust registration requirements. Neither the Public Records Act nor the Government Code provisions authorizing the Attorney General to regulate charitable organizations contain any flat prohibitions [regarding such information]. Moreover, current law provides no penalties for intentional or inadvertent public disclosure of such donor information by the Attorney General or an official of any state agency to whom the Attorney General may provide such information.

State law should be clarified to protect against public disclosure donor information of public charities and educational institutions provided to the IRS, which federal law currently makes confidential, but which state law does not specifically make confidential in the possession of the Attorney General. While the Attorney General is considering adoption of a regulation to exempt such donor information from public disclosure, a regulation is insufficient to provide ironclad protection against public disclosure, either by the Attorney General or another public agency to which the Attorney General may provide such information. This legislation would enact such protections. AB 2219 would specify that those records are not subject to public disclosure, pursuant to federal or state law, and would include a schedule of donors that is exempt from such disclosure and is provided to the Attorney General as a condition of registration or maintenance of tax exempt status by an organization.

1. Impact to proposed rulemaking

On December 11, 2015, the Department of Justice (DOJ) issued a Notice of Proposed Rulemaking (NPRM) regarding the disclosure of information pertaining to, and the filing requirements for, charitable organizations and entities over which the Attorney General has enforcement and supervisory powers. DOJ’s Initial Statement of Reasons for its proposed rule states:

Chapter 4 of Title 11, Division 1 of the California Code of Regulations implements the registration and reporting requirements of the [Supervision of Trustees and Fundraisers for Charitable Purposes Act]. Section 301 requires charitable trustees and organizations subject to the reporting requirements to annually file a copy of the Internal Revenue Service Form 990, including all schedules, with the Registry. Schedule B of Form 990 is a schedule of donors that have contributed $5,000 or more to the organization. Schedule B donor information is not subject to disclosure by the Internal Revenue Service unless the organization is classified as a private foundation or a political organization as described in Section 527 of the Internal Revenue Code. Similar to the Internal Revenue Service, the Attorney General does not disclose Schedule B donor information and does not post the document on its website or otherwise make it available to the public. . . . The proposed amendments to [Section 310 codifies] the Attorney General’s practice to exempt donor information from public disclosure. . . . The proposed [amendments] codify the Attorney General’s historical and current practice that specific donor information will be exempt from public disclosure, and are not a change in policy or procedure.

The changes proposed to existing law in this bill mirror several provisions in DOJ’s NPRM regarding the disclosure of records under its proposed regulations, with one exception -- DOJ’s proposed rule would create an exception to the disclosure restrictions “in response to an administrative subpoena of an agency, bureau, or department of this state if the agency, bureau, or department agrees to maintain the confidentiality of the information received consistent with this regulation.” (See http://oag.ca.gov/sites/all/files/agweb/pdfs/charities/pdf/proposed-text.pdf? [as of June 12, 2016].) Given that this bill arguably addresses only disclosure to the public and not to other government entities, it is unclear whether the omission of this component from the text of the bill would undermine the enforcement activities of other departments and agencies that seek donor information regarding regulated charities from the Attorney General.

Suggested Amendments:

• add a provision to the bill that parallels the missing element from DOJ’s proposed rule;
• condition enactment of the bill on DOJ failing to promulgate a rule by January 1, 2017, that is substantially similar to the proposed rule.

1. Pending litigation

In the past, this Committee has raised concerns about bills that interfere with pending litigation. Any such interference could result in a direct financial windfall to a private party, prevent a court from deciding an action based upon the laws in place at the time the cause of action accrued, or create a situation where the legislative branch is used to circumvent the discretion and independence of the judicial branch.

The author has informed the Committee that the disclosure of donor information pursuant to the Supervision of Trustees and Fundraisers for Charitable Purposes Act is currently the subject of litigation in Ctr. for Competitive Politics v. Harris (E.D.Cal., No. 2:14-cv-00636-MCE-DAD). The plaintiff, Center for Competitive Politics, a non-profit educational organization under 11 U.S.C. Sec. 501(c)(3), has filed suit against the Attorney General under 42 U.S.C. Sec. 1983, seeking to enjoin her from requiring it to file an unredacted Form 990 Schedule B, arguing that disclosure of its major donors’ names is preempted by federal law and violates the right of free association guaranteed to it and its supporters by the First Amendment.

It is unlikely that the provisions of this bill would impact the Center for Competitive Politics’ ongoing litigation. As noted in Comment 2, this bill focuses on the disclosure of donor information to members of the public, not on information that must be disclosed to the Attorney General in order to operate as a charitable organization in California. As such, the concerns typically raised by the Committee regarding impacts to pending litigation are not present in this case.

Support: None Known

Opposition: None Known

HISTORY

Source: Author

Related Pending Legislation: None Known

Prior Legislation:

SB 1262 (Sher, Ch. 919, Stats. 2004) revised, recast, and added to existing law regulating charitable organizations, commercial fundraisers and fundraising counsel.

SB 2015 (Sher, Ch. 475, Stats. 2000) gave the Attorney General additional enforcement tools and resources, including enhanced civil fines, the power to revoke or suspend the registration of a charitable corporation or trustee, commercial fundraiser or fundraising counsel or coventurer, and assessments for late filings.

Prior Vote:

Assembly Floor (Ayes 79, Noes 0)

Assembly Appropriations Committee (Ayes 20, Noes 0)

Assembly Judiciary Committee (Ayes 9, Noes 0)

**************

Date of Hearing: April 13, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2219

Author:(Wagner) – As Amended Ver:March 31, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill clarifies that although all records reported by charitable organizations to the Attorney General (AG) are generally public, the following records are not public and must be withheld from public inspection:

1. Any report filed with any other governmental agency of this state, another state, the United States, or any government subdivision thereof which is required by law to be kept confidential.
2. Upon request of a charity or charitable fiduciary, any part of a document filed with the Attorney General that does not relate to charitable purposes or charitable assets and that is not otherwise a public record.
3. Donor information exempt from public inspection pursuant to specified federal law, except:
4. In a court or administrative proceeding brought pursuant to the AG’s charitable trust enforcement responsibilities, or
5. In response to a search warrant.

FISCAL EFFECT:

Any costs to the AG will be minor and absorbable.

COMMENTS:

1. Background. State law, including the Supervision of Trustees and Fundraisers for Charitable Purposes Act, vests the AG with broad authority to monitor and regulate charitable organizations and public benefit corporations, including the power to require such organizations to furnish information and reports. Pursuant to state regulations, charitable organizations must file, among other things, a complete copy of the IRS Form 990 they are required to file with the IRS, including a Schedule B that identifies their major donors.

Pursuant to the authority cited above, the AG’s Office sent letters to charitable organizations registered with the State of California in 2014, instructing them to submit to the AG complete and un-redacted copies of their Form 990s, including Schedule B information about their donors. Two of the organizations that received the letters, Americans for Prosperity (AFP) and the Center for Competitive Politics (CCP), refused to comply with the AG’s request and sued in federal court to enjoin enforcement of her demand.

The federal district court ruled against AFP on the merits of all of its claims. The AFP case, argued and submitted to the 9^th Circuit in December 2015, is pending decision by the Court of Appeal. In Center for Competitive Politics v. Harris, CCP argued that federal tax law preempted the Attorney General from obtaining the Form 990 with complete donor information. The court did not agree with CCP's argument and instead found that federal law “may support an argument that Congress sought to regulate the disclosures that the IRS may make, but they do not broadly prohibit other government entities from seeking that information directly from the organization.”

The AG proposed regulations (notice published December 11, 2015) to clarify that any Form 990 reported to her pursuant to her authority to regulate charitable organizations is not a public record. The AG’s office states that the proposed regulations “codify the Attorney General’s practice to exempt donor information from public disclosure” but allow the information to be disclosed in a court or administrative proceeding brought pursuant to the Attorney General’s charitable trust enforcement responsibilities or in response to a search warrant.

1. Purpose. This bill merely clarifies what is likely already implied in state law—that although all records retained by the AG are presumed to be public and open, some records, including Forms 990, are confidential because they are protected from public disclosure by other state or federal law. There is no opposition to this bill.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: March 29, 2016

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 2219

Author:(Wagner) – As Introduced Ver:February 18, 2016

As Proposed to be Amended

SUBJECT: ATTORNEY GENERAL: SCHEDULE OF DONORS: CONFIDENTIALITY

KEY ISSUES:

1. SHOULD THE ATTORNEY GENERAL BE PROHIBITED FROM RELEASING TO THE PUBLIC INFORMATION ABOUT CHARITABLE DONORS THAT IS REPORTED TO THE ATTORNEY GENERAL PURSUANT TO HER AUTHORITY TO REGULATE CHARITABLE ORGANIZATIONS, IN LIGHT OF THE FEDERAL LAW THAT EXEMPTS SUCH DOCUMENTS FROM PUBLIC DISCLOSURE BY THE IRS?
2. SHOULD THE RULES ABOUT THE ATTORNEY GENERAL’S DISCLOSURE OF INFORMATION COLLECTED AND RETAINED ABOUT CHARITABLE ORGANIZATIONS BE UPDATED AND CLARIFIED?

SYNOPSIS

This bill is inspired by an ongoing legal dispute between California’s Attorney General (AG), Kamala Harris, and the charitable organizations she regulates. As originally introduced, this was a sweeping bill that sought to not only prohibit the AG from disclosing donor information that is reported to the AG pursuant to her authority to regulate charitable organizations, but also to impose civil liability on the AG, her agents, her employees, and anyone who received the information from the AG. The original language was unreasonable and unworkable for many reasons. It applied large monetary penalties for disclosure of the donor information, even when such disclosure was unintentional or authorized by other laws. Also, it failed to acknowledge the mandatory “presentation” requirement for claims brought against the state, which would apply to any civil action against the AG and the fact that a state employee cannot be held personally liable for an act or omission while exercising the discretion vested in them as public employees.  (Government Code Section 820.2.)  Also, among other issues, the proposal could not be harmonized with the Information Practices Act (IPA), which prohibits, subject to certain exceptions, state agencies from disclosing an individual’s personal information and provides remedies to the individual adversely affected by an agency’s failure to comply with the provisions of the IPA, but protects state employees from liability so long as they are acting in their official capacity. (Civil Code Section 1798.53.)  

As proposed to be amended, this bill is far more limited. It merely clarifies what is likely already implied in state law: that although all records retained by the AG are presumed to be public and open, some records, including Forms 990, are confidential because they are protected from public disclosure by other state or federal law. Proposed amendments also update Section 12590 of the Government Code, the statute governing records that the AG retains about charitable organizations and whether those records are public, to account for revisions to the Uniform Supervision of Trustees for Charitable Purposes Act, upon which Section 12590 was modeled, which was revised in 2010. This author-sponsored bill has no registered support or opposition on file.

SUMMARY: Prohibits the public disclosure of confidential information, including donor information reported by charitable organizations to the AG. Specifically, this bill clarifies that although all records reported by charitable organizations to the AG are generally public, the following records are not public and must be withheld from public inspection:

1. Any report filed with any other governmental agency of this state, another state, the United States, or any government subdivision thereof which is required by law to be kept confidential.
2. Upon request of a charity or charitable fiduciary, any part of a document filed with the Attorney General which does not relate to charitable purposes or charitable assets and that is not otherwise a public record.
3. Donor information that is exempt from public inspection pursuant to subparagraph (A) of paragraph (3) of subdivision (d) of Section 6104 of the Internal Revenue Code, except for one of the following reasons:
4. In a court or administrative proceeding brought pursuant to the Attorney General’s charitable trust enforcement responsibilities.
5. In response to a search warrant.

EXISTING LAW:

1. Requires the Attorney General to establish and maintain a register of charitable corporations, unincorporated associations, and trustees subject to this article and of the particular trust or other relationship under which they hold property for charitable purposes and to obtain from public records, court officers, taxing authorities, trustees, and other sources, whatever information, copies of instruments, reports, and records are needed for the establishment and maintenance of the register. (Government Code Section 12584. All further statutory references are to this code, unless otherwise indicated.)
2. Requires every charitable corporation, unincorporated association, and trustee subject to this article to file with the Attorney General an initial registration form, under oath, within 30 days after the corporation, unincorporated association, or trustee initially receives property. (Section 12585 (a).)
3. Requires the Attorney General to adopt rules and regulations as to the contents of the initial registration form and the manner of executing and filing that document or documents. (Section 12585 (b).)
4. By regulation, requires every charitable corporation to file with the Attorney General periodic written reports, under oath, setting forth information as to the nature of the assets held for charitable purposes and the administration thereof by such corporation, including the following:
5. The Annual Registration Renewal Fee Report must be filed with the Registry of Charitable Trusts annually by all registered charities.
6. Internal Revenue Service Form 990 must be filed on an annual basis with the Registry of Charitable Trusts, as well as with the Internal Revenue Service. (11 CCR § 301.)
7. Provides, except as otherwise provided by statute, that a public entity is not liable for an injury, whether such injury arises of an act or omission of the public entity or a public employee or any other person. (Section 815.)
8. Provides that public employees are not liable for any damages caused by an act or omission exercised in the discretion vested in them. (Section 820.2.)
9. Provides, under the Public Records Act (PRA), that all public agency records are open to public inspection upon request, unless the records are otherwise exempt from public disclosure. (Section 6250 et seq.)
10. Exempts from disclosure in response to a PRA request “Records, the disclosure of which is exempted or prohibited pursuant to federal or state law.” (Section 6254 (k).)
11. Allows any agency to open its records concerning the administration of the agency to public inspection, unless disclosure is otherwise prohibited by law. (Section 6254 (f).)
12. Exempts, under federal law, the name or address of any contributor to a charitable organization, from the general rule that tax information filed by charitable organizations is required to be disclosed by the IRS to the public upon request. (Internal Revenue Code Section 6104 (d)(3)(A).)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: State law, including the Supervision of Trustees and Fundraisers for Charitable Purposes Act, set forth in Sections 12580 et seq., vests the Attorney General (AG) with broad authority to monitor and regulate charitable organizations and public benefit corporations, including the power to require such organizations to furnish information and reports. (Sections 12598 (a), 12581, 12584, 12586.) Pursuant to state regulations, charitable organizations must file, among other things, a complete copy of the IRS Form 990 they are required to file with the IRS, including a Schedule B that identifies their major donors. (See, e.g., Cal. Code Regs. tit. 11, Section 301 (2014).)

Pursuant to the authority cited above, the AG’s Office sent letters to charitable organizations registered with the State of California in 2014, instructing them to submit to the AG complete and un-redacted copies of their Form 990s, including Schedule B information about their donors. Two of the organizations that received the letters, Americans for Prosperity (AFP) and the Center for Competitive Politics (CCP), refused to comply with the AG’s request and sued in federal court to enjoin enforcement of her demand.

(According to media reports, AFP is a conservative 501(c)(4) organization that spends money in support of Republicans and against Democrats. The group, like its forerunner organization Citizens for a Sound Economy, was founded with the financial support of libertarian billionaire businessmen David and Charles Koch. (https://www.opensecrets.org/orgs/summary.php?id=D000024046.) The Center for Competitive Politics claims to be “America’s largest nonprofit working to promote and defend First Amendment rights to free political speech, assembly, and petition.” (http://www.campaignfreedom.org/) “With financial support that came largely from individuals he declines to name, [Bradley] Smith opened the Center for Competitive Politics a year later to begin challenging the current campaign finance system in both federal court and the court of public opinion. His first target is rules applying to independent, outside groups, not those imposed on candidates and political party committees.” http://www.politico.com/story/2008/08/conservatives-plot-on-campaign-finance-012460#ixzz43mM36ToT)

AFP’s complaint alleged that the AG’s request for the Form 990 with complete donor information violated the Supremacy Clause, the First Amendment, and 42 U.S.C. Section 1983 (which provides the right for a civil action based upon deprivation of any rights, privileges, or immunities secured by the Constitution). The federal district court ruled against AFP on the merits of all of its claims. Among other things, the district court rejected its Supremacy Clause arguments, noting that there is no evidence that Congress intended to “prevent state agencies from making requests for tax information such as Defendant’s directly from 501(c)(3) organizations in the language of Section 6104, or any other section of the [Internal Revenue Code].” The court also rejected AFP’s field and conflict preemption arguments on the basis that the Internal Revenue Code applies only to the disclosure of tax information filed with the IRS that could be disclosed to the public by the IRS, not to documents that state attorneys general seek from taxpayers or tax-exempt organizations, citing Stokwitz v. United States (9^th Cir. 1987) 831 F.2d 893, 895-896. The AFP case, argued and submitted to the 9^th Circuit in December 2015, is pending decision by the Court of Appeal. (See Americans for Prosperity Foundation v. Harris, 809 F.3d 536.)

In Center for Competitive Politics v. Harris, CCP argued that federal tax law preempted the Attorney General from obtaining the Form 990 with complete donor information. CCP argued that Congress intended to protect the privacy of information about donors to non-profit organizations from all public disclosure when it added 26 U.S.C. Section 6104, part of the Pension Protection Act of 2006, to the Internal Revenue Code and that allowing state attorneys general to require non-profit organizations to provide the information would conflict with that purpose. The 9^th Circuit found CCP's argument to be “unavailing.” (Ctr. for Competitive Politics v. Harris (9th Cir. 2015) 784 F.3d 1307, 1318.) Instead, the court found that Section 6104 “may support an argument that Congress sought to regulate the disclosures that the IRS may make, but they do not broadly prohibit other government entities from seeking that information directly from the organization.” (Id., at p. 1319 [emphasis added].)

Nor do they create a pervasive scheme of privacy protections. Rather, these subsections represent exceptions to a general rule of disclosure. Thus, these subsections do not so clearly manifest the purpose of Congress that we could infer from them that Congress intended to bar state attorneys general from requesting the information contained in Form 990 Schedule B from entities like CCP. (Ibid.)

California is not alone in its requirement for charitable organizations to file unredacted Forms 990. At least three other states - Hawaii, Mississippi, and Kentucky – and possibly five according to one source, including Florida and New York, also require unredacted versions of donor lists submitted with the Form 990 Schedule B to be filed with state regulators. (Ctr. for Competitive Politics v. Harris, supra, 784 F.3d at p. 1310, fn 1.)

The Public Records Act Prohibits Public Disclosure by a Government Agency of Documents Confidential Under the PRA, or Any Other Law, Likely Including Forms 990. California's Public Records Act (PRA) requires that the documents and "writings" of a public agency be open and available for public inspection, unless they are exempt from disclosure. (Sections 6250-6270.) The PRA is premised on the principle that “access to information concerning the conduct of the people’s business is a fundamental and necessary right of every person in this state.” A “public record” is defined to mean “any writing containing information relating to the conduct of the public’s business prepared, owned, used, or retained by any state or local agency regardless of physical form or characteristics.” (Section 6252 (e).)

However, not all public records are required to be disclosed by a government agency upon request. The PRA does not “require the disclosure of any of the following records” (Section 6254) and lists a number of specific documents and types of documents, including “Records, the disclosure of which is exempted or prohibited pursuant to federal or state law, including but not limited to, provisions of the Evidence Code relating to privilege.” (Section 6254 (k).)

The exemption from public disclosure under subdivision (k) of Section 6254 is permissive, not mandatory. (Marken v. Santa Monica Malibu Unified Sch. Dist. (2012) 202 Cal.App.4^th 1250, 1270.) However, where public disclosure is prohibited under state or federal law, the responsible California agency is also prohibited from publicly disclosing the records. Subdivision (f) of Section 6254 provides that “[t]his section shall not prevent any agency from opening its records concerning the administration of the agency to public inspection, unless disclosure is otherwise prohibited by law.” If public disclosure (distinct from disclosure to the Attorney General) of significant donor information is not authorized by federal law, it is likely not authorized by the Attorney General (or any other government agency) to the public under California law, either.

While it is not entirely clear that federal law makes the Form 990 with complete donor information confidential and therefore exempts it from public disclosure by any government entities other than the IRS, it appears, based upon her briefs in the cases discussed above, that the AG agrees that the forms are not public records. Furthermore, the AG proposed regulations (notice published December 11, 2015) to clarify that any Form 990 reported to her pursuant to her authority to regulate charitable organizations is not a public record. The AG’s office states that the proposed regulations “codify the Attorney General’s practice to exempt donor information from public disclosure” but allow the information to be disclosed under the following very limited circumstances:

(1) In a court or administrative proceeding brought pursuant to the Attorney General’s charitable trust enforcement responsibilities.

(2) In response to a search warrant. (http://oag.ca.gov/sites/all/files/agweb/pdfs/charities/pdf/notice-mod-proposed-text-regs-schedule-b.pdf)

While it seems reasonable to codify that Form 990 information received by the AG is exempt from public disclosure in response to a PRA request, the exemption does not need to be placed in Section 6254, as originally proposed by this bill. Subdivision (k) of Section 6254 incorporates the exemption for all “[r]ecords, the disclosure of which is exempted or prohibited pursuant to federal or state law” into the PRA. A more appropriate place to codify the non-public nature of Form 990 is Section 12590, as done by the proposed amendments, because it specifically addresses the subject of records collected and retained by the AG pursuant to her authority to regulate charitable organizations.

Revisions to Section 12590 to Conform with Revised Uniform Act. Section 12590 currently provides as follows:

12590. (a) Subject to reasonable rules and regulations adopted by the Attorney General and except as provided in subdivision (b), the register, copies of instruments, and the reports filed with the Attorney General shall be open to public inspection. The Attorney General shall withhold from public inspection any instrument so filed whose content is not exclusively for charitable purposes.

Section 12590 was drafted in 1959, modeled on the 1954 Uniform Supervision of Trustees for Charitable Purposes Act. It has not been revised since 1959 and there is no case law interpreting its meaning. The second sentence of this section seems problematic. Information submitted to the AG should not be withheld from public disclosure just because it is “not exclusively for charitable purposes.” Considering the strong preference in California law for government records to be open, records about charitable organizations that are retained by the AG should not be withheld because the “content is not exclusively for charitable purposes.” If the record is in the AG’s possession, it’s a government record that is presumed to be public and open, regardless of the purpose for which it is retained by the AG or for which it was submitted or used by the charity. Records should be withheld from the public because they are confidential, or not withheld at all.

Fortunately, the model act that was the template for Section 12590 has been updated. Now called the Supervision of Trustees and Fundraisers for Charitable Purposes Act, it was revised in 2010. Section 5 of the revised model act is entitled “Public Inspection of Register.” It is clearly very similar to Section 12590. At the same time, it has been significantly altered and updated. The comments to the revised section explain the reasons for the revisions:

Charity regulators involved in the drafting process noted that availability of information to the public serves an important function. The Act opens the registration and supporting documents to the public, with the exception of documents made confidential by any other law and, upon request of a charity or charity fiduciary, any part of a document that does not relate to charitable assets and is not otherwise a public record.

As updated by the revised model act, the provision similar to the problematic second sentence of Section 12590 is far more specific and limited, applying only to records that are confidential. In order to incorporate the revised model act’s revisions into Section 12590, the author has agreed to delete the problematic second sentence of Section 12590 and add the following exceptions to the general rule in Section 12590 that documents submitted to the AG are confidential:

1. Any report filed with any other governmental agency of this state, another state, the United States, or any government subdivision thereof which is required by law to be kept confidential.
2. Upon request of a charity or charitable fiduciary, any part of a document filed with the Attorney General which does not relate to charitable purposes or charitable assets and that is not otherwise a public record.

Findings About Legislative Intent to Limit Public Access to Donor Information. The people of California have the right, protected by our state constitution, “of access to information concerning the conduct of the people’s business.” (Cal. Const., art. I, sec. 3.) Whenever a statute limits the right of the public to access government information, the statute must be “adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.” (Ibid.)

Because the bill, as proposed to be amended by the author, will limit the ability of the public to access donor information submitted to the AG on Forms 990, these findings are still necessary. Because of the proposed amendments to the bill, including amendments to remove Section 6254 from the bill, the findings need to be modified.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Alison Merrilees / JUD. / (916) 319-2334