Argued
and Submitted June 25, 2018 Pasadena, California
Appeal
from the United States District Court D.C. Nos.
2:14-cv-09448-R-FFM, 2:14-cv-09448-R-FFM,
2:15-cv-03048-R-FFM, 2:15-cv-03048-R-FFM for the Central
District of California Manuel L. Real, District Judge,
Presiding
Derek
Shaffer (argued), William A. Burck, Eric C. Lyttle, Keith H.
Forst, and Jonathan G. Cooper, Quinn Emanuel Urquhart &
Sullivan LLP, Washington, D.C.; Harold Barza, Quinn Emanuel
Urquhart & Sullivan, LLP, Los Angeles, California; for
Plaintiff-Appellee/Cross-Appellant.
Tara
Malloy, J. Gerald Hebert, and Megan P. McAllen, Campaign
Legal Center, Washington, D.C., for Amicus Curiae Campaign
Legal Center.
Jeremy
Talcott and Joshua P. Thompson, Pacific Legal Foundation,
Sacramento, California, for Amicus Curiae Pacific Legal
Foundation.
Marc
Rotenberg, Alan Butler, James T. Graves, and John Davisson,
Electronic Privacy Information Center, Washington, D.C., for
Amicus Curiae Electronic Privacy Information Center.
David
Weiner and Robert Leider, Arnold & Porter Kaye Scholer
LLP, Washington, D.C., for Amicus Curiae The Philanthropy
Roundtable.
Keith
Joseph Miller, Assistant Attorney General; Dominic E. Draye,
Solicitor General; Mark Brnovich, Attorney General; Office of
the Attorney General, Phoenix, Arizona, for Amici Curiae
States of Arizona, Alabama, Louisiana, Michigan, Nevada,
Texas, and Wisconsin.
Mark
Joseph Fitzgibbons, American Target Advertising, Manassas,
Virginia, for Amicus Curiae American Target Advertising, Inc.
Allyson Newton Ho and John C. Sullivan, Gibson Dunn &
Crutcher LLP, Dallas, Texas; C. Dean McGrath Jr., McGrath
& Associates, Washington, D.C.; for Amici Curiae Pacific
Research Institute, Cato Institute, and Competitive
Enterprise Institute.
Christopher H. McGrath and Samuel S. Sadeghi Paul Hastings
LLP, Costa Mesa, California; George W. Abele, Paul Hastings
LLP, Los Angeles, California; Brett Harvey, Alliance
Defending Freedom, Scottsdale, Arizona; Nathaniel Bruno,
Alliance Defending Freedom, Washington, D.C.; for Amicus
Curiae Alliance Defending Freedom.
Brian
Timothy Burgess, Goodwin Procter LLP, Washington, D.C.; David
J. Zimmer, Goodwin Procter LLP, Boston, Massachusetts; for
Amici Curiae NAACP Legal Defense and Educational Fund, Inc.
Andrew
P. Pugno, Law Offices of Andrew P. Pugno, Fair Oaks,
California, for Amicus Curiae Proposition 8 Legal Defense
Fund.
Herbert W. Titus, Jeremiah L. Morgan, William J. Olson, and
Robert J. Olson, William J. Olson P.C., Vienna, Virginia;
Joseph W. Miller, Ramona, California; Michael Boos,
Washington, D.C.; for Amici Curiae Free Speech Defense and
Education Fund, Free Speech Coalition, Citizens United,
Citizens United Foundation, National Right to Work Committee,
U.S. Constitutional Rights Legal Defense Fund, U.S. Justice
Foundation, Family Research Council, Western Center for
Journalism, Conservative Legal Defense and Education Fund,
The Leadership Institute, Public Advocate of the United
States, Downsize DC Foundation, Downsize. Org, Gun Owners
Foundation, Gun Owners of America, 60 Plus, 60 Plus
Association, America's Foundation for Law and Liberty,
America's Liberty Committee, Citizen Outreach Foundation,
Citizen Outreach, LLC, Law Enforcement Alliance of America,
Liberty Guard, Coalition for a Strong America, The Jesse
Helms Center, Americans for Constitutional Liberty,
Catholicvote.org, Eberle Communications Group, Inc.,
Clearword Communications Group, Davidson & Co., and JFT
Consulting.
Before: Raymond C. Fisher, Richard A. Paez and Jacqueline H.
Nguyen, Circuit Judges.
SUMMARY[*]
Civil
Rights
The
panel vacated the district court's permanent injunctions,
reversed the bench trial judgments, and remanded for entry of
judgment in favor of the California Attorney General in two
cases challenging California's charitable registration
requirement as applied to two nonprofit organizations that
solicit tax-deductible contributions in the state.
Plaintiffs
qualify as tax-exempt charitable organizations under §
501(c)(3) of the Internal Revenue Code, 26 U.S.C. §
501(c)(3). They challenge the Attorney General of
California's collection of Internal Revenue Service Form
990 Schedule B, which contains the names and addresses of
their relatively few largest contributors. Plaintiffs argue
the state's disclosure requirement impermissibly burdens
their First Amendment right to free association.
The
panel held that the California Attorney General's
Schedule B requirement, which obligates charities to submit
the very information they already file each year with the
IRS, survived exacting scrutiny as applied to the plaintiffs
because it was substantially related to an important state
interest in policing charitable fraud. The panel held that
plaintiffs had not shown a significant First Amendment burden
on the theory that complying with the Attorney General's
Schedule B nonpublic disclosure requirement would chill
contributions. The panel further concluded that even assuming
arguendo that the plaintiffs' contributors would face
substantial harassment if Schedule B information became
public, the strength of the state's interest in
collecting Schedule B information reflected the actual burden
on First Amendment rights because the information was
collected solely for nonpublic use, and the risk of
inadvertent public disclosure was slight.
Alexandra
Robert Gordon (argued), Jose A. Zelidon-Zepeda, Kevin A.
Calia, and Emmanuelle S. Soichet, Deputy Attorneys General;
Tamar Pachter, Supervising Deputy Attorney General; Douglas
J. Woods, Senior Assistant Attorney General; Xavier Becerra,
Attorney General; Office of the Attorney General, San
Francisco, California; for
Defendant-Appellant/Cross-Appellee.
OPINION
FISHER, CIRCUIT JUDGE.
We
address the constitutionality of a California charitable
registration requirement as applied to two nonprofit
organizations that solicit tax-deductible contributions in
the state. Americans for Prosperity Foundation (the
Foundation) and Thomas More Law Center (the Law Center)
qualify as tax-exempt charitable organizations under §
501(c)(3) of the Internal Revenue Code, 26 U.S.C. §
501(c)(3). They challenge the Attorney General of
California's collection of Internal Revenue Service (IRS)
Form 990 Schedule B, which contains the names and addresses
of their relatively few largest contributors. The Attorney
General uses the information solely to prevent charitable
fraud, and the information is not to be made public except in
very limited circumstances. The plaintiffs argue the
state's disclosure requirement impermissibly burdens
their First Amendment right to free association by deterring
individuals from making contributions.
The
district court held that the Schedule B requirement violates
the First Amendment as applied to the Foundation and Law
Center and permanently enjoined the Attorney General from
demanding the plaintiffs' Schedule B forms. We have
jurisdiction under 28 U.S.C. § 1291, and we vacate the
injunctions, reverse the judgments and remand for entry of
judgment in the Attorney General's favor.
We hold
that the California Attorney General's Schedule B
requirement, which obligates charities to submit the very
information they already file each year with the IRS,
survives exacting scrutiny as applied to the plaintiffs
because it is substantially related to an important state
interest in policing charitable fraud. Even assuming arguendo
that the plaintiffs' contributors would face substantial
harassment if Schedule B information became public, the
strength of the state's interest in collecting Schedule B
information reflects the actual burden on First Amendment
rights because the information is collected solely for
nonpublic use, and the risk of inadvertent public disclosure
is slight.
I.
A.
California's
Supervision of Trustees and Charitable Trusts Act requires
the Attorney General to maintain a registry of charitable
corporations (the Registry) and authorizes him to obtain
"whatever information, copies of instruments, reports,
and records are needed for the establishment and maintenance
of the [Registry]." Cal. Gov't Code § 12584. To
solicit tax-deductible contributions from California
residents, an organization must maintain membership in the
Registry. See id. § 12585. Registry information
is open to public inspection, subject to reasonable rules and
regulations adopted by the Attorney General. See id.
§ 12590.
As one
condition of Registry membership, the Attorney General
requires charities to submit a complete copy of the IRS Form
990 they file with the IRS, including attached schedules.
See Cal. Code Regs. tit. 11, §
301.[1]
One of these attachments, Schedule B, requires 501(c)(3)
organizations to report the names and addresses of their
largest contributors. Generally, they must report "the
names and addresses of all persons who contributed . . . $5,
000 or more (in money or other property) during the taxable
year." 26 C.F.R. § 1.6033-2(a)(2)(ii)(f). Special
rules, however, apply to organizations, such as the
Foundation and Law Center, meeting certain support
requirements. These organizations need only "provide the
name and address of a person who contributed . . . in excess
of 2 percent of the total contributions . . . received by the
organization during the year." Id. §
1.6033-2(a)(2)(iii)(a). An organization with $10 million in
receipts, for example, is required to disclose only
contributors providing at least $200, 000 in financial
support. Here, for any year between 2010 and 2015, the Law
Center was obligated to report no more than seven
contributors on its Schedule B, and the Foundation was
required to report no more than 10 contributors - those
contributing over $250, 000 to the Foundation.
The IRS
and the California Attorney General both make certain filings
of tax-exempt organizations publicly available but exclude
Schedule B information from public inspection. See
26 U.S.C. § 6104; Cal Gov't Code § 12590; Cal.
Code Regs. tit. 11, § 310. At the outset of this
litigation, the Attorney General maintained an informal
policy treating Schedule B as a confidential document not
available for public inspection on the Registry. See
Americans for Prosperity Found. v. Harris, 809 F.3d 536,
542 (9th Cir. 2015) (AFPF I). In 2016, the Attorney
General codified that policy, adopting a regulation that
makes Schedule B information confidential and exempts it from
public inspection except in a judicial or administrative
proceeding or in response to a search warrant. See
Cal. Code Regs. tit. 11, § 310 (July 8, 2016). Under the
new regulation:
Donor information exempt from public inspection pursuant to
Internal Revenue Code section 6104(d)(3)(A) shall be
maintained as confidential by the Attorney General and shall
not be disclosed except as follows:
(1) In a court or administrative proceeding brought pursuant
to the Attorney General's charitable trust enforcement
responsibilities; or
(2) In response to a search warrant.
Id. § 310(b). In accordance with this
regulation, the Attorney General keeps Schedule Bs in a
separate file from other submissions to the Registry and
excludes them from public inspection on the Registry website.
B.
Thomas
More Law Center is a legal organization founded to
"restore and defend America's Judeo-Christian
heritage" by "represent[ing] people who promote
Roman Catholic values," "marriage and family
matters, freedom from government interference in
[religion]" and "opposition to the imposition of
Sharia law within the United States." Americans for
Prosperity Foundation was founded in 1987 as "Citizens
for a Sound Economy Educational Foundation," with the
mission of "further[ing] free enterprise, free
society-type issues." The Foundation hosts conferences,
issues policy papers and develops educational programs
worldwide to promote the benefits of a free market. It
operates alongside Americans for Prosperity, a 501(c)(4)
organization focused on direct issue advocacy.
Charities
like the Foundation and the Law Center are overseen by the
Charitable Trusts Section of the California Department of
Justice, which houses the Registry and a separate
investigative and legal enforcement unit (the Investigative
Unit). The Registry Unit processes annual registration
renewals and maintains both the public-facing website of
registered charities and the confidential database used for
enforcement. The Investigative Unit analyzes complaints of
unlawful charity activity and conducts audits and
investigations based on those complaints.
Beginning
in 2010, the Registry Unit ramped up its efforts to enforce
charities' Schedule B obligations, sending thousands of
deficiency letters to charities that had not complied with
the Schedule B requirement. Since 2001, both the Law Center
and the Foundation had either filed redacted versions of the
Schedule B or not filed it with the Attorney General at all.
Each plaintiff had, however, annually filed a complete
Schedule B with the IRS. In 2012, the Registry Unit informed
the Law Center it was deficient in submitting Schedule B
information. In 2013, it informed the Foundation of the same
deficiency.
C.
In
response to the Attorney General's demands, the Law
Center and the Foundation separately filed suit, alleging
that the Schedule B requirement unconstitutionally burdens
their First Amendment right to free association by deterring
individuals from financially supporting them. The district
court granted both plaintiffs' motions for a preliminary
injunction, concluding they had raised serious questions
going to the merits of their cases and demonstrated that the
balance of hardships tipped in their favor. See ...