Citizens Union Of The City Of New York et al v. The Governor of the State of New York et al
Filing
178
OPINION AND ORDER.....The plaintiffs May 24, 2018 motion for summary judgment is granted, and defendants June 25, 2018 cross-motion for summary judgment is denied. (Signed by Judge Denise L. Cote on 9/30/2019) Filed In Associated Cases: 1:16-cv-09592-DLC-KHP, 1:16-cv-09854-DLC-KHP, 1:17-cv-01655-DLC-KHP(gr)
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 1 of 67
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------- X
:
CITIZENS UNION OF THE CITY OF NEW
:
YORK, et al.,
:
:
Plaintiffs, :
:
-v:
:
ATTORNEY GENERAL OF THE STATE OF NEW :
YORK,
:
:
:
Defendant.
:
-------------------------------------- X
16cv9592 (DLC)
OPINION AND ORDER
APPEARANCES
For plaintiffs Citizens Union of the City of New York and
Citizens Union Foundation, Inc. of the City of New York:
Randy M. Mastro
Akiva Shapiro
Timothy Sun
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
For plaintiffs American Civil Liberties Union Foundation, New
York Civil Liberties Union Foundation, and New York Civil
Liberties Union:
William F. Cavanaugh
Stephanie Teplin
D. Brandon Trice
Michael D. Schwartz
Patterson Belknap Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036
For plaintiffs Lawyers Alliance for New York and Nonprofit
Coordinating Committee of New York:
Lawrence S. Lustberg
J. David Pollock
Gibbons P.C.
1
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 2 of 67
One Gateway Center
Newark, NJ 07102
For the defendant:
Andrew Amer
James M. Thompson
Office of the New York Attorney General
28 Liberty Street
New York, New York 10005
DENISE COTE, District Judge:
In 2016, New York state enacted an Ethics Law addressing
several issues related to elections, campaigning, and conduct in
office by state officials.
Two provisions of the Ethics Law
require entities that are exempt from federal taxation -- under
26 U.S.C. § 501(c)(3) and 501(c)(4) -- to publicly report their
donors under certain circumstances.
The plaintiffs assert that
these two provisions unconstitutionally burden their First
Amendment rights of free speech and association.
For the
following reasons, the plaintiffs’ motion for summary judgment
is granted.
These provisions of the Ethics Law, N.Y. Exec. Law
§§ 172-e and 172-f, are invalid on their face.
Background
Before addressing the legal issues at stake in this summary
judgment motion, this Opinion describes the federal law that
governs 501(c)(3) and 501(c)(4) entities, and transfers of funds
or support from a 501(c)(3) to a 501(c)(4); the legislative
2
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 3 of 67
history of §§ 172-e and 172-f, the two sections of the New York
Ethics Law that are challenged in this lawsuit; the provisions
of §§ 172-e and 172-f; and the procedural history of this
litigation.
I.
Federal Regulation of Tax-Exempt Entities
Certain entities are exempt from federal taxation.
To
qualify for tax exemption under 26 U.S.C. § 501(c)(3), an entity
must have an exempt purpose.
It must be “organized and operated
exclusively for religious, charitable, scientific, testing for
public safety, literary, or educational purposes, . . . no part
of the net earnings of which inures to the benefit of any
private shareholder or individual.”
known as a “501(c)(3).”
Such an entity is commonly
In addition to a 501(c)(3) being itself
exempt from taxation, donations to a 501(c)(3) are taxdeductible.
Id. § 170.
Section 501(c)(3) places two restrictions on such an
entity’s activities.
political activity.
These restrictions concern lobbying and
An entity loses its 501(c)(3) tax exemption
if “a substantial part of the activities of such organization
consists of carrying on propaganda, or otherwise attempting, to
influence legislation.”
501(c)(3).
Id. § 501(h)(1); see also id. §
This language limits a 501(c)(3)’s ability to engage
in lobbying, such as “contact[ing], or urg[ing] the public to
3
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 4 of 67
contact, members or employees of a legislative body for the
purpose of proposing, supporting, or opposing legislation” or
“advocat[ing] the adoption or rejection of legislation.” 1
The
Internal Revenue Service (“IRS”) evaluates whether a
“substantial part” of the 501(c)(3)’s activities consist of
lobbying, based on “a variety of factors, including the time
devoted (by both compensated and volunteer workers) and the
expenditures devoted by the organization to the activity.” 2
Alternatively, a 501(c)(3) may choose to have its lobbying
activity evaluated under the “expenditure test,” which, based on
the organization’s size, provides a maximum amount that the
501(c)(3) may spend on lobbying.
26 U.S.C. §§ 501(h), 4911. 3
IRS, Charities and Nonprofits: Lobbying (Aug. 7, 2019),
https://www.irs.gov/charities-non-profits/lobbying.
1
IRS, Measuring Lobbying: Substantial Part Test (Dec. 13, 2018),
https://www.irs.gov/charities-non-profits/measuring-lobbyingsubstantial-part-test; see also All. for Justice, Lobbying Under
the Insubstantial Part Test (last visited Sept. 29, 2019),
https://bolderadvocacy.org/wp-content/uploads/2018/06/Lobbying_
under_the_insubstantial_part_test.pdf (“Most tax practitioners
generally advise that charities can safely devote 3-5% of their
overall activities toward lobbying.”).
2
The lobbying ceiling is determined by the 501(c)(3)’s exempt
purpose expenditures. 26 U.S.C. §§ 501(h), 4911; 26 C.F.R. §§
1.501(h)-1, 56.4911-1, 56.4911-4. For example, if a 501(c)(3)’s
exempt purpose expenditures are less than or equal to $500,000,
the lobbying ceiling is 20% of the exempt purpose expenditures;
or, if the exempt purpose expenditures exceed $17,000,000, the
lobbying ceiling is $1,000,000. IRS, Measuring Lobbying
Activity: Expenditure Test (Feb. 25, 2019), https://www.irs.gov/
3
4
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 5 of 67
An entity also loses its tax-exempt status if it
“participate[s] in, or intervene[s] in (including the publishing
or distributing of statements), any political campaign on behalf
of (or in opposition to) any candidate for public office.”
U.S.C. § 501(c)(3).
26
“Contributions to political campaign funds
or public statements of position (verbal or written) made on
behalf of the organization in favor of or in opposition to any
candidate for public office clearly violate the prohibition
against political campaign activity.” 4
A 501(c)(3), however, may
participate in “certain voter education activities (including
presenting public forums and publishing voter education guides)
conducted in a non-partisan manner.” 5
In order to retain its tax exemption, an entity “must be
both organized and operated exclusively for” charitable
purposes.
26 C.F.R. § 1.501(c)(3)-1(a)(1).
“If an organization
fails to meet either the organizational test or the operational
test, it is not exempt.”
Id.
In order to satisfy the
charities-non-profits/measuring-lobbying-activity-expendituretest.
IRS, The Restriction of Political Campaign Intervention by
Section 501(c)(3) Tax-Exempt Organizations (Aug. 7, 2019),
https://www.irs.gov/charities-non-profits/charitableorganizations/the-restriction-of-political-campaignintervention-by-section-501c3-tax-exempt-organizations.
4
5
Id.
5
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 6 of 67
organizational test, an entity must have articles of
organization that (1) “[l]imit the purposes of such organization
to one or more exempt purposes” and (2) “[d]o not expressly
empower the organization to engage, otherwise than as an
insubstantial part of its activities, in activities which in
themselves are not in furtherance of one or more exempt
purposes.”
Id. § 1.501(c)(3)-1(b).
To satisfy the operational test, an entity must “engage[]
primarily in activities which accomplish one or more of such
exempt purposes.”
Id. § 1.501(c)(3)-1(c)(1).
“It is well-
settled that an incidental non-exempt purpose will not
disqualify an organization, but a single substantial nonexempt
purpose or activity will destroy the exemption, regardless of
the number or quality of exempt purposes.”
Family Tr. of Mass.,
Inc. v. United States, 892 F. Supp. 2d 149, 159 (D.D.C. 2012)
(citation omitted).
“[T]he presence of a single substantial
purpose that is not described in section 501(c)(3) precludes
exemption from tax . . . .”
Giving Hearts, Inc. v. Comm’r of
Internal Revenue, 118 T.C.M. (CCH) 102 (T.C. 2019).
An
organization fails the operational test if “a substantial part
of its activities is attempting to influence legislation by
propaganda or otherwise.”
(ii).
26 C.F.R. § 1.501(c)(3)-1(c)(3)(i) to
“[A]n organization will be regarded as attempting to
6
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 7 of 67
influence legislation if the organization” (1) “[c]ontacts, or
urges the public to contact, members of a legislative body for
the purpose of proposing, supporting, or opposing legislation;”
or (2) “[a]dvocates the adoption or rejection of legislation.”
Id. § 1.501(c)(3)-1(c)(3)(ii).
There is a second type of tax-exempt entity that is
relevant to the discussion that follows.
Under 26 U.S.C. §
501(c)(4), “[c]ivic leagues or organizations not organized for
profit but operated exclusively for the promotion of social
welfare” are tax-exempt.
An entity exempt from federal taxation
under this provision is commonly referred to as a “501(c)(4).”
In order to be a 501(c)(4), an organization must be “primarily
engaged in promoting in some way the common good and general
welfare of the people of the community.”
1.501(c)(4)-1(a)(2)(i).
26 C.F.R. §
Unlike a 501(c)(3), a 501(c)(4) may
engage in substantial lobbying.
Compare 26 U.S.C. § 501(c)(3),
with id. § 501(c)(4); see also Regan v. Taxation Without
Representation of Wash., 461 U.S. 540, 543 (1983). 6
See also IRS, Action Organizations (May 13, 2019), https://
www.irs.gov/charities-non-profits/action-organizations (“Seeking
legislation germane to the organization’s programs is a
permissible means of attaining social welfare purposes. Thus, a
section 501(c)(4) social welfare organization may further its
exempt purposes through lobbying as its sole or primary activity
without jeopardizing its exempt status.”); All. for Justice,
Comparison of 501(c)(3) and 501(c)(4) Permissible Activities
(last visited Sept. 29, 2019), https://www.bolderadvocacy.org/
6
7
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 8 of 67
There are limitations, however, on the extent to which a
501(c)(4) may participate in political activities.
“The
promotion of social welfare does not include direct or indirect
participation or intervention in political campaigns on behalf
of or in opposition to any candidate for public office.”
C.F.R. § 1.501(c)(4)-1(a)(2)(ii).
26
But a 501(c)(4) “may engage
in some political activities, so long as that is not its primary
activity.”
IRS, Social Welfare Organizations (May 13, 2019),
https://www.irs.gov/charities-non-profits/other-non-profits/
social-welfare-organizations (emphasis added); see also 26
C.F.R. §1.501(c)(4)-1(a).
Unlike donations to 501(c)(3)s,
donations to 501(c)(4)s are generally not tax-deductible. 7
Congress has chosen “not to subsidize lobbying as extensively”
as the activities to which a 501(c)(3) may properly be
dedicated.
Regan, 461 U.S. at 544.
As a result of the requirement that a 501(c)(3) be
organized and operated “exclusively for” charitable purposes, a
501(c)(3) is limited in its ability to transfer funds or offer
wp-content/uploads/2018/06/Comparison_of_501c3_and_50c4_
Permissible_Activities.pdf.
IRS, Donations to Section 501(c)(4) Organizations (Mar. 26,
2019), https://www.irs.gov/charities-non-profits/other-nonprofits/donations-to-section-501c4-organizations; see also 26
U.S.C. § 170(c)(2)(B).
7
8
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 9 of 67
in-kind support to a 501(c)(4).
A 501(c)(3) must at a minimum
“keep records adequate to show that tax deductible contributions
are not used to pay for lobbying.”
Regan, 461 U.S. at 544 n.6;
see also Bob Jones Univ. Museum & Gallery, Inc. v. Comm’r, 71
T.C.M. (CCH) 3120 (T.C. 1996) (holding that a tax-exempt entity
may pay rent to a taxable entity, where the rent is an “ordinary
and necessary business expense[]” and not paid for the purpose
of “funnel[ing] tax-deductible contributions” to the taxable
entity.).
Some commentators describe it as a best practice for
a 501(c)(3) to not subsidize a 501(c)(4) in any way. 8
But the
See All. for Justice, 501(c)(3) and 501(c)(4) Collaboration 10
(last visited Sept. 29, 2019), https://bolderadvocacy.org/wpcontent/uploads/2019/08/BA-Power-of-Collaboration.pdf (“When
(c)(3)s and (c)(4)s share resources, the key principle to keep
in mind is that a (c)(3) may not subsidize a (c)(4).”); Carolyne
R. Dilgard et al., Section 501(c)(3) Tax-Exempt Entities Forming
Affiliations With Other Entities 14 (June 2011), https://
www.probonopartner.org/wp-content/uploads/2016/05/AffiliationPrimer-Unabridged.pdf (“To the extent sister entities or a taxexempt entity and a joint venture in which it participates have
a landlord-tenant relationship, detailed record keeping and
appropriate allocation of fair value costs remain best
practices.”); Gene Takagi, Affiliated Organizations: Sharing
Resources (Apr. 21, 2018), http://www.nonprofitlawblog.com/
affiliated-organizations-sharing-resources (“[T]he 501(c)(3)
organization should generally make sure that it pays only its
fair share for shared resources if such resources may be used by
its affiliate to engage in or support political intervention
activities.”); Hurwit & Assocs., Nonprofit Lobbying & 501(c)(4)
Primer (last visited Sept. 29, 2019), https://
www.hurwitassociates.com/lobbying-advocacy/lobbying-amp-501-c-4primer (“[F]unds given to the 501(c)(3) for its charitable
purposes may not be used by or commingled with the 501(c)(4).”).
8
9
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 10 of 67
IRS has not articulated a bright line beyond which a 501(c)(3)’s
support of a 501(c)(4) indicates a “substantial” lobbying
purpose sufficient to jeopardize the 501(c)(3)’s tax exemption.
See All. for Justice, 501(c)(3) and 501(c)(4) Collaboration 9
(last visited Sept. 29, 2019), https://bolderadvocacy.org/wpcontent/uploads/2019/08/BA-Power-of-Collaboration.pdf (“While
there are lines that (c)(3)s may not cross, many of the issues
that arise do not have bright-line answers.”). 9
In short, a 501(c)(3) may not freely transfer funds to a
501(c)(4), but it may provide some financial support to a
501(c)(4) without losing its 501(c)(3) status.
Lobbying cannot
constitute a “substantial part” of a 501(c)(3)’s activities, but
there is no restriction on a 501(c)(4)’s ability to engage in
lobbying.
campaigns.
A 501(c)(3) may not participate in political
A 501(c)(4) may participate in political activities
so long as such work is not the entity’s “primary” activity.
If a 501(c)(3) has chosen to have its lobbying activity
measured using the expenditure test and is part of an
“affiliated group of organizations,” the lobbying expenditures
of any member of the group count against the lobbying ceiling.
26 U.S.C. § 4911(f)(1); see also id. § 4911(f)(2) (defining
“affiliation” in this context).
9
10
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 11 of 67
II.
The Challenged Provisions
A.
Legislative History
Sections 172-e and 172-f were enacted as part of a larger
ethics bill that was introduced on June 17, 2016 and passed in
the early morning hours of the following day (the “Ethics Law”).
The entire bill contained eleven sections, which made a variety
of statutory changes, such as adding a new definition of
“coordination” to New York election law that narrowed the scope
of “independent expenditures,” establishing rules for the
disposition of campaign funds after the death of a candidate,
increasing the possible fine to be imposed against a lobbyist
who accepts a contingent fee, creating a registration
requirement for political consultants, and adding certain
procedural requirements for investigations by New York’s
Commission on Public Ethics.
See 2016 N.Y. Laws ch. 286; see
also 2016 Sess. Law News of N.Y., Legis. Memo ch. 286
(McKinney’s).
Only two sections of the Ethics Law are
challenged here; the following legislative history focuses on
those portions of the record that may shed light on the state’s
interest in these two provisions.
New York Governor Andrew Cuomo first announced proposed
ethics-reform legislation on June 8, 2016 through a press
release and a speech at Fordham University.
11
The press release
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 12 of 67
described the legislation as “first-in-the-nation action to curb
the power of independent expenditure campaigns unleashed by the
2010 Supreme Court case Citizens United vs. Federal Election
Commission.”
Citizens United, of course, had held that a
federal statute prohibiting corporations from using their
general treasury funds to make independent electoral
expenditures advocating for or against candidates, violated the
First Amendment.
Citizens United v. Fed. Election Comm’n
(Citizens United I), 558 U.S. 310, 365 (2010).
The press
release described a number of policy goals for the legislation:
“limit[ing] the ‘quid pro quo’ danger posed by colossal
corporate donations,” “ensur[ing] that independent expenditure
groups remain autonomous from the entities they support,” and
“strengthen[ing] disclosure requirements.”
According to the
press release, Citizens United “ignited the equivalent of a
campaign nuclear arms race and created a shadow industry in New
York -- maligning the integrity of the electoral process and
drowning out the voice of the people.”
The press release listed
specific steps that the legislation would take, including
“[r]equir[ing] additional disclosures for individuals and
entities making independent expenditures.”
On June 17, the Governor’s office and legislative leaders
from the New York Senate and Assembly released a statement
12
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 13 of 67
announcing their “agreement on a 5 Point Ethics Reform Plan to
toughen election, lobbying, and ethics enforcement laws.”
The
announcement included a statement from Governor Cuomo, saying
that Citizens United “decimates the right to free speech by
allowing it to be eclipsed by paid speech” and that under the
new legislation “independent expenditure groups and PACs will be
required to adhere to unprecedented disclosure requirements.”
New York Senate Majority Leader John J. Flanagan said the
legislation would “strengthen[] our campaign finance laws to
crack down on coordination between candidates and Independent
Expenditure groups, who all too often operate in the shadows
while enjoying an outsized influence on our politics.”
Assembly
Speaker Carl Heastie said that the legislation would “close the
gaps that have allowed lobbying organizations and outside groups
to gain undue influence on state government.”
Senate
Independent Democratic Conference Leader Jeffrey Klein said that
the legislation would “require[] disclosure of political
relationships and behaviors widely recognized to be influential,
but which operate in the shadows.”
The announcement also described the specific provisions
challenged in this legislation.
The first would “[r]equire
501(c)(4) organizations, which are entities that can engage in
unlimited lobbying, to disclose financial support and in-kind
13
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 14 of 67
donations from 501(c)(3) organizations, which are organizations
that are not permitted to engage in political activity.”
The
announcement described the purpose of this provision as
“prevent[ing] organizations from corrupting the political
process and utilizing funds that are not intended for political
purposes.”
The second provision would “[r]equire 501(c)(4)
organizations to disclose their sources of funding if they
engage in activities to influence electoral politics using
‘issue advocacy.’”
Governor Cuomo submitted to the legislature a memorandum in
support of the Ethics Law.
The memorandum described the purpose
of the bill as “provid[ing] New York State with comprehensive
ethics, lobbying, campaign finance, and public officer’s law
reform.”
As relevant to the provisions challenged here, the
memorandum said that “[d]isclosure of political relationships
and funding behaviors widely recognized to be influential, but
which operate in the shadows, is essential to restoring the
public’s faith and trust in our political process.”
The Governor also submitted a message of necessity 10 that
said the Ethics Law would “require disclosures of political
The New York Constitution requires that a bill be “printed and
upon the desks of the members [of the legislature], in its final
form, at least three calendar legislative days prior to its
final passage, unless the governor . . . shall have certified .
. . the facts which in his or her opinion necessitate an
10
14
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 15 of 67
relationships and behaviors widely recognized to be influential
but which operate in the shadows.”
The message continued, “As
passage of this bill would enact the strongest reforms in the
country to combat the outsized influence of dark money in
politics, it is imperative that New York pass this bill.”
The Ethics Law was passed by the New York Senate around
3:00 a.m., after approximately fifteen minutes of discussion.
In the New York Assembly, the bill was passed around 4:50 a.m.,
after approximately ten minutes of discussion.
Assemblymember
Charles D. Lavine began that discussion with a brief overview of
the bill, describing it as providing “the most powerful
protections in the nation, to date, against the corrosive effect
of the misguided Citizens United case.”
He said that New York
would “lead the nation in safeguarding our citizens from the
corrupting influence of money and special interests in
government.”
He noted that the bill was “composed of 11
separate components” and said that he would “describe very
briefly what they are.”
Regarding the challenged provisions,
Assemblymember Lavine said, “[The Ethics Law] deals with sources
of funding disclosures, or 501(c)3s and 4s in certain
immediate vote thereon.” N.Y. Const. art. III, § 14. Because
the ethics bill was introduced on the last day of the
legislative section, Governor Cuomo was required to submit such
a message of necessity.
15
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 16 of 67
circumstances. . . .
It deals with in-kind disclosures.
It
deals with issue advocacy disclosures.”
Governor Cuomo signed the bill on August 24, 2016.
In his
approval message, Governor Cuomo wrote,
I am proud to sign this bill, which is a critical step
toward restoring the public’s faith and trust in our
political process. First, this bill provides muchneeded reform to New York’s campaign finance system.
It takes the strongest stand in the nation to reverse
the indisputably unfair protections afforded to
corporate interests by the Citizens United v. Federal
Election Commission decision. . . . Second, the bill
enacts sweeping ethics reform. . . . It will also
implement various measures to shed light on the dark
money that runs rampant through our political process.
B.
Section 172-e
Section 172-e requires any 501(c)(3) that makes an in-kind
donation in excess of $2,500 to a 501(c)(4) engaged in lobbying
activity to file a funding disclosure report.
172-e(2).
N.Y. Exec. Law §
The funding disclosure report must include, among
other things, any donation in excess of $2,500 to the 501(c)(3)
and the identities of any donors who made such a donation.
The full text of § 172-e provides:
1. Definitions.
For the purposes of this section:
(a) “Covered entity” shall mean any corporation or
entity that is qualified as an exempt organization or
entity by the United States Department of the Treasury
under I.R.C. 501(c)(3) that is required to report to
the department of law pursuant to this section.
(b) “In-kind donation” shall mean donations of staff,
staff time, personnel, offices, office supplies,
financial support of any kind or any other resources.
16
Id.
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 17 of 67
(c) “Donation” shall mean any contribution, including
a gift, loan, in-kind donation, advance or deposit of
money or anything of value.
(d) “Recipient entity” shall mean any corporation or
entity that is qualified as an exempt organization or
entity by the United States Department of the Treasury
under I.R.C. 501(c)(4) that is required to file a
source of funding report with the joint commission on
public ethics pursuant to sections one-h and one-j of
the legislative law.
(e) “Reporting period” shall mean the six month period
within a calendar year starting January first and
ending June thirtieth or the six month period within a
calendar year starting July first and ending December
thirty-first.
2. Funding disclosure reports to be filed by covered
entities. (a) Any covered entity that makes an in-kind
donation in excess of two thousand five hundred
dollars to a recipient entity during a relevant
reporting period shall file a funding disclosure
report with the department of law. The funding
disclosure report shall include:
(i) the name and address of the covered entity
that made the in-kind donation;
(ii) the name and address of the recipient entity
that received or benefitted from the in-kind
donation;
(iii) the names of any persons who exert
operational or managerial control over the
covered entity. The disclosures required by this
paragraph shall include the name of at least one
natural person;
(iv) the date the in-kind donation was made by
the covered entity;
(v) any donation in excess of two thousand five
hundred dollars to the covered entity during the
relevant reporting period including the identity
of the donor of any such donation; and
17
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 18 of 67
(vi) the date of any such donation to a covered
entity.
(b) The covered entity shall file a funding disclosure
report with the department of law within thirty days
of the close of a reporting period.
3. Public disclosure of funding disclosure reports.
The department of law shall promulgate any regulations
necessary to implement these requirements and shall
forward the disclosure reports to the joint commission
on public ethics for the purpose of publishing such
reports on the commission’s website, within thirty
days of the close of each reporting period; provided
however that the attorney general, or his or her
designee, may determine that disclosure of donations
to the covered entity shall not be made public if,
based upon a review of the relevant facts presented by
the covered entity, such disclosure may cause harm,
threats, harassment, or reprisals to the source of the
donation or to individuals or property affiliated with
the source of the donation. The covered entity may
appeal the attorney general’s determination and such
appeal shall be heard by a judicial hearing officer
who is independent and not affiliated with or employed
by the department of law, pursuant to regulations
promulgated by the department of law. The covered
entity’s sources of donations that are the subject of
such appeal shall not be made public pending final
judgment on appeal.
N.Y. Exec. Law §172-e (emphasis added).
A “recipient entity” is defined as any 501(c)(4) “that is
required to file a source of funding report with the joint
commission on public ethics” pursuant to N.Y. Legislative Law
section 1-h or 1-j.
Id. § 172-e(1)(d).
Sections 1-h and 1-j
are provisions of a separate statute, the New York Lobbying Act,
which defines “lobbyist” as “every person or organization
retained, employed or designated by any client to engage in
18
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 19 of 67
lobbying.”
N.Y. Legis. Law § 1-c(a).
“Lobbying” is defined as
an “attempt to influence” any of ten categories of official
action, such as “the passage or defeat of any legislation or
resolution by either house of the state legislature including
but not limited to the introduction or intended introduction of
such legislation or resolution or approval or disapproval of any
legislation by the governor.”
Id. § 1-c(c). 11
N.Y. Legislative Law § 1-h requires any lobbyist that
performs lobbying on its own behalf, rather than on behalf of a
client, to file a source of funding report if it has spent over
$15,000 on lobbying during the twelve months prior to the
reporting date and at least 3% of its total expenditures were
devoted to lobbying in New York.
Id. § 1-h(c)(4).
Section 1-j
requires any client that retains or employs a lobbyist to file a
source of funding report if the client has spent over $15,000 on
lobbying in the twelve months prior to the reporting date and at
See also N.Y. Comp. Codes R. & Regs. tit. 19, §§ 943.1, 943.5943.7 (defining types of lobbying that trigger disclosures under
the New York Lobbying Act); November Team, Inc. v. N.Y. State
Joint Comm’n on Pub. Ethics, 233 F. Supp. 3d 366, 368 (S.D.N.Y.
2017) (“The Act regulates both direct lobbying, which involves
direct contact with a public official, and grassroots lobbying,
which seeks to influence a public official indirectly through
the intermediary of the public.”); N.Y. State Joint Comm’n on
Public Ethics, Am I Lobbying? (Jan. 2019), https://jcope.ny.gov/
system/files/documents/2019/01/am-i-lobbying-1232019.pdf
(describing types of lobbying and required disclosures).
11
19
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 20 of 67
least 3% of the client’s total expenditures were devoted to
lobbying in New York.
Id. § 1-j(c)(4).
Under either provision,
a source of funding report must include the names of each source
of funding that contributed over $2,500 that was used to fund
the lobbying activities.
To summarize:
Id. §§ 1-h(c)(4)(ii), 1-j(c)(4)(ii).
Section 172-e requires a 501(c)(3) to
disclose all donors who contributed over $2,500 in the following
circumstance.
The disclosure of such donors must be made if the
501(c)(3) itself makes an in-kind donation to a 501(c)(4) that
engages in lobbying in New York, either on its own behalf or
through a retained lobbyist.
C.
Section 172-f
Section 172-f requires a 501(c)(4) that expends more than
$10,000 in a calendar year on “covered communications” to file a
financial disclosure report.
N.Y. Exec. Law § 172(f)(2).
A
“covered communication” is a published statement that is
“conveyed to five hundred or more members of a general public
audience” and
refers to and advocates for or against a clearly
identified elected official or the position of any
elected official or administrative or legislative body
relating to the outcome of any vote or substance of
any legislation, potential legislation, pending
legislation, rule, regulation, hearing, or decision by
any legislative, executive or administrative body.
Id. § 172-f(1)(b).
20
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 21 of 67
In pertinent part, § 172-f provides:
1. Definitions. (a) “Covered Entity” means any
corporation or entity that is qualified as an exempt
organization or entity by the United States Department
of the Treasury under I.R.C. 501(c)(4).
(b) “Covered communication” means a
communication, that does not require a report
pursuant to article one-A of the legislative law
or article fourteen of the election law, by a
covered entity conveyed to five hundred or more
members of a general public audience in the form
of: (i) an audio or video communication via
broadcast, cable or satellite; (ii) a written
communication via advertisements, pamphlets,
circulars, flyers, brochures, letterheads; or
(iii) other published statement which: refers to
and advocates for or against a clearly identified
elected official or the position of any elected
official or administrative or legislative body
relating to the outcome of any vote or substance
of any legislation, potential legislation,
pending legislation, rule, regulation, hearing,
or decision by any legislative, executive or
administrative body.
* * *
(c) “Expenditures for covered communications”
shall mean: (i) any expenditure made, liability
incurred, or contribution provided for covered
communications; or (ii) any other transfer of
funds, assets, services or any other thing of
value to any individual, group, association,
corporation whether organized for profit or notfor-profit, labor union, political committee,
political action committee, or any other entity
for the purpose of supporting or engaging in
covered communications by the recipient or a
third party.
(d) “Donation” shall mean any contribution,
including in-kind, gift, loan, advance or deposit
of money or anything of value made to a covered
entity unless such donation is deposited into an
21
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 22 of 67
account the funds of which are not used for
making expenditures for covered communications.
(e) “Reporting period” shall mean the six month
period within a calendar year starting January
first and ending June thirtieth or the six month
period within a calendar year starting July first
and ending December thirty-first.
2. Disclosure of expenditures for covered
communications. (a) Any covered entity that makes
expenditures for covered communications in an
aggregate amount or fair market value exceeding ten
thousand dollars in a calendar year shall file a
financial disclosure report with the department of
law. The financial disclosure report shall include:
(i) the name and address of the covered
entity that made the expenditure for covered
communications;
(ii) the name or names of any individuals
who exert operational or managerial control
over the covered entity. The disclosures
required by this paragraph shall include the
name of at least one natural person;
(iii) a description of the covered
communication;
(iv) the dollar amount paid for each covered
communication, the name and address of the
person or entity receiving the payment, and
the date the payment was made; and
[(v)] the name and address of any
individual, corporation, association, or
group that made a donation of one thousand
dollars or more to the covered entity and
the date of such donation.
(b) The covered entity shall file a financial
disclosure report with the department of law
within thirty days of the close of a reporting
period.
22
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 23 of 67
(c) If a covered entity keeps one or more
segregated bank accounts containing funds used
solely for covered communications and makes all
of its expenditures for covered communications
from such accounts, then with respect to
donations included in subparagraph (iv) of
paragraph (a) of this subdivision, the financial
report need only include donations deposited into
such accounts.
3. The department of law shall make the financial
disclosure reports available to the public on the
department of law website within thirty days of the
close of each reporting period, provided however that
the attorney general, or his or her designee, may
determine that disclosure of donations shall not be
made public if, based upon a review of the relevant
facts presented by the covered entity, such disclosure
may cause harm, threats, harassment, or reprisals to
the source of the donation or to individuals or
property affiliated with the source of the donation.
The covered entity may appeal the attorney general’s
determination and such appeal shall be heard by a
judicial hearing officer who is independent and not
affiliated with or employed by the department of law,
pursuant to regulations promulgated by the department
of law. The covered entity shall not be required to
disclose the sources of donations that are the subject
of such appeal pending final judgment on appeal.
N.Y. Exec. Law § 172-f (emphasis added).
Several provisions of § 172-f bear emphasis.
Communications that already “require a report” under the New
York Lobbying Act are carved out from § 172-f.
f(1)(b).
Id. at § 172-
Similarly carved out are communications that are
already subject to reporting requirements under New York
election law, id., such as communications that “call for the
election or defeat of [a] clearly identified candidate” or that
23
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 24 of 67
“refer[] to and advocate[] for or against a clearly identified
candidate . . . on or after January first of the year of the
election in which such candidate is seeking office.”
N.Y. Elec.
Law §§ 14-107.
A financial disclosure report required under § 172-f must
include, among other things, “a description of the covered
communication,” “the dollar amount paid for each covered
communication, the name and address of the person or entity
receiving the payment, and the date the payment was made,” and - the item most vigorously challenged by plaintiffs -- “the name
and address of any individual, corporation, association, or
group that made a donation of one thousand dollars or more to
the covered entity and the date of such donation.”
Law § 172-f(2).
N.Y. Exec.
“If a covered entity keeps one or more
segregated bank accounts containing funds used solely for
covered communications and makes all of its expenditures for
covered communications from such accounts, then . . . the
financial report need only include donations deposited into such
accounts.”
Id. § 172-f(2)(c); see also id. § 172-f(1)(d)
(excluding from the definition of “donation” one that is
“deposited into an account the funds of which are not used for
making expenditures for covered communications”).
24
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 25 of 67
To summarize:
Section 172-f requires a 501(c)(4) to
disclose donors who contributed $1,000 or more, in the following
circumstance.
Disclosure of such donors must be made if the
501(c)(4) expends more than ten thousand dollars in a calendar
year on communications made to at least 500 members of the
public concerning the position of any elected official relating
to any “potential” or pending legislation, unless the donors
made contributions only into a segregated account not used to
support such communications.
D.
Public Disclosure Requirements and Exemptions
As reflected in the statutory provisions recited above, the
Ethics Law requires that a funding disclosure report filed under
§ 172-e be made available on the New York Joint Commission on
Public Ethics website, and that a financial disclosure report
filed under § 172-f be made available on the New York Department
of Law website.
N.Y. Exec. Law §§ 172-e(3), 172-f(3).
The New
York Attorney General may determine, however, that disclosure
should not occur if disclosure may cause “harm, threats,
harassment, or reprisals to the source of the donation or to
individuals or property affiliated with the source of the
donation.”
Id. § 172-e(3); see also id. § 172-f(3) (containing
a parallel exemption).
An entity denied an exemption from the
25
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 26 of 67
disclosure requirements may appeal the attorney general’s
determination.
Id. §§ 172-e(3), 172-f(3).
III. Procedural History
Citizens Union brought this suit on December 12, 2016,
which was originally assigned to the Honorable Richard M.
Berman. 12
On December 28, 2016, the Attorney General stipulated
to a stay of enforcement of §§ 172-e and 172-f, until resolution
of plaintiffs’ then-pending application for a preliminary
injunction.
The Attorney General ultimately agreed to extend
the stay of enforcement pending disposition of any summary
judgment motion.
At a January 4, 2017 hearing, counsel for the
Attorney General represented that “necessary regulations”
concerning implementation of the challenged provisions were in
the process of being promulgated and that such regulations would
be “enacted in a timely manner.”
No such regulations have yet
been promulgated. 13
On March 6, 2017, Judge Berman consolidated the cases pending
before him which challenge §§ 172-e and 172-f.
12
The Attorney General represents in its motion papers that it
met with the plaintiffs in March 2017 to “solicit their input
regarding how regulations could be designed in such a way as to
mitigate any concerns,” that plaintiffs took the position that
“no regulation could positively impact their constitutional
concerns,” and that the Attorney General put the rule-making
process “on hold” because of plaintiffs’ position.
13
26
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 27 of 67
On January 11, 2017, Judge Berman issued an order
authorizing “limited expedited discovery” in connection with
plaintiffs’ then-pending applications for a preliminary
injunction.
On October 18, 2017, Judge Berman granted the
Attorney General’s request to hold this litigation in abeyance
until the Second Circuit’s decision in Citizens United v.
Schneiderman (Citizens United II), which issued on February 15,
2018.
882 F.3d 374, 390 (2d Cir. 2018).
On May 24, 2018, plaintiffs filed a joint motion for
summary judgment.
On June 25, the Attorney General filed a
cross-motion for summary judgment.
submitted on August 2.
Those motions became fully
argument on the motions.
On November 28, Judge Berman held oral
On January 29, 2019, Judge Berman
stayed the motions because the Governor had submitted to the
legislature substantive amendments to the challenged provisions.
The New York legislature did not take up consideration of the
proposed amendments, and on April 1, 2019, Judge Berman granted
the parties’ request to lift the stay.
The consolidated cases were reassigned to this Court on
August 28, 2019, and the parties were invited to submit
supplemental briefing.
The parties filed their supplemental
briefs on September 13.
27
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 28 of 67
Discussion
I.
Summary Judgment Standard
A motion for summary judgment may not be granted unless all
of the submissions taken together “show[] that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”
56(a).
Fed. R. Civ. P.
“A genuine issue of material fact exists if the evidence
is such that a reasonable jury could return a verdict for the
nonmoving party.”
Nick’s Garage, Inc. v. Progressive Cas. Ins.
Co., 875 F.3d 107, 113 (2d Cir. 2017) (citation omitted).
In
evaluating cross-motions for summary judgment, each motion must
be examined “on its own merits,” and “all reasonable inferences
must be drawn against the party whose motion is under
consideration.”
Vugo, Inc. v. City of New York, 931 F.3d 42, 48
(2d Cir. 2019) (citation omitted).
Once the moving party has cited evidence showing that the
non-movant’s claims or affirmative defenses cannot be sustained,
the party opposing summary judgment “must set forth specific
facts demonstrating that there is a genuine issue for trial.”
Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009) (citation
omitted).
“[C]onclusory statements, conjecture, and
inadmissible evidence are insufficient to defeat summary
judgment,” Ridinger v. Dow Jones & Co., 651 F.3d 309, 317 (2d
28
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 29 of 67
Cir. 2011) (citation omitted), as is “mere speculation or
conjecture as to the true nature of the facts.”
Hicks v.
Baines, 593 F.3d 159, 166 (2d Cir. 2010) (citation omitted).
II.
First Amendment Standard
The first issue to be resolved is the standard under which
the constitutionality of the two state law provisions must be
evaluated.
The Supreme Court has held that content-neutral
disclosure requirements challenged under the First Amendment are
subject to “exacting scrutiny.”
See John Doe No. 1 v. Reed, 561
U.S. 186, 196 (2010); Citizens United II, 882 F.3d at 382.
Exacting scrutiny requires a “substantial relation between
the disclosure requirement and a sufficiently important
governmental interest.
To withstand this scrutiny, the strength
of the governmental interest must reflect the seriousness of the
actual burden on First Amendment rights.”
John Doe No. 1, 561
U.S. at 196 (citation omitted); see also Citizens United II, 882
F.3d at 382.
This test is easier for the government to satisfy
than strict scrutiny and is sometimes equated with intermediate
scrutiny.
See Citizens United II, 882 F.3d at 382 (“Content-
neutral speech regulations receive exacting, or ‘intermediate,’
scrutiny.
This includes neutral disclosure requirements.”
(citation omitted)).
29
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 30 of 67
In a facial challenge to a statute under the First
Amendment, “a law may be overturned as impermissibly overbroad
because a ‘substantial number’ of its applications are
unconstitutional, ‘judged in relation to the statute’s plainly
legitimate sweep.’”
Wash. State Grange v. Wash. State
Republican Party, 552 U.S. 442, 449 n.6 (2008) (citation
omitted).
A claim is a facial challenge when it is not limited
to a plaintiff’s particular case, but challenges the application
of the law more broadly.
John Doe No. 1, 561 U.S. at 194.
“[F]acial review thus focuses on whether too many of the
applications interfere with expression for the First Amendment
to tolerate.”
Citizens United II, 882 F.3d at 383.
Applying
exacting scrutiny, “if a substantial number of likely
applications of the statute correspond to an important interest,
a minority of potentially impermissible applications can be
overlooked.
The stronger the government interest and the weaker
the First Amendment interest, the weaker the First Amendment
claim.”
Id.
There is no question that public disclosure of donor
identities burdens the First Amendment rights to free speech and
free association.
Citizens United I, 558 U.S. at 366 (burden on
speech); Buckley v. Valeo, 424 U.S. 1, 64 (1976) (per curiam)
(burden on privacy of association and belief); NAACP v. Alabama
30
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 31 of 67
ex rel. Patterson, 357 U.S. 449, 460 (1958) (noting “close nexus
between the freedoms of speech and assembly”).
The Supreme
Court has recognized three governmental interests that may
justify donor disclosure in the context of election campaigns
despite their burden on First Amendment rights.
The Court
described these interests in 1976 as follows:
First, disclosure provides the electorate with
information as to where political campaign money comes
from and how it is spent by the candidate in order to
aid the voters in evaluating those who seek federal
office. It allows voters to place each candidate in
the political spectrum more precisely than is often
possible solely on the basis of party labels and
campaign speeches. The sources of a candidate’s
financial support also alert the voter to the
interests to which a candidate is most likely to be
responsive and thus facilitate predictions of future
performance in office.
Second, disclosure requirements deter actual
corruption and avoid the appearance of corruption by
exposing large contributions and expenditures to the
light of publicity. . . .
Third, and not least significant, recordkeeping,
reporting, and disclosure requirements are an
essential means of gathering the data necessary to
detect violations of [limits on campaign
contributions].
Buckley, 424 U.S. at 66–67 (citation omitted); see also
McConnell v. Fed. Election Comm’n, 540 U.S. 93, 196 (2003).
These will be referred to as the informational, corruptiondeterrence, and violation-detection interests.
31
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 32 of 67
Both the Supreme Court and Second Circuit have considered
First Amendment challenges to disclosure provisions.
Those
decisions most relevant to this litigation are discussed below
in the following categories: (1) cases striking down disclosure
requirements as facially overbroad, (2) cases upholding
disclosure requirements, and (3) cases finding disclosure
requirements unconstitutional as applied to particular
plaintiffs.
A.
Cases Striking Down Disclosure Requirements as
Facially Overbroad
In Talley v. California, the Court examined a Los Angeles
ordinance that prohibited the distribution of any handbill or
other printed matter unless its cover was printed with the names
and addresses of its author and distributor.
(1960).
362 U.S. 60, 65
The Court opined that “[a]nonymous pamphlets, leaflets,
brochures and even books have played an important role in the
progress of mankind,” noting that “[e]ven the Federalist Papers
. . . were published under fictitious names.”
Id. at 64-65.
The Court had “no doubt” that the ordinance’s “identification
requirement would tend to restrict freedom to distribute
information and thereby freedom of expression.”
Id. at 64.
The
state argued that the ordinance was “aimed at providing a way to
identify those responsible for fraud, false advertising and
libel.”
Id.
But the Court found that the ordinance was “in no
32
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 33 of 67
manner so limited.”
Id.
The Court found that the ordinance’s
identification requirement and resulting “fear of reprisal might
deter perfectly peaceful discussions of public matters of
importance” and thus held that it was facially invalid.
Id. at
65.
In McIntyre v. Ohio Elections Commission, the Court struck
down another statute similar to that at issue in Talley.
U.S. 334, 357 (1995).
514
Ohio’s statute provided:
No person shall write, print, post, or distribute . .
. any . . . form of general publication which is
designed to . . . influence the voters in any
election, or make an expenditure for the purpose of
financing political communications through newspapers
. . . or other similar types of general public
political advertising, or through flyers, handbills,
or other nonperiodical printed matter, unless there
appears on such form of publication in a conspicuous
place or is contained within said statement the name
and residence or business address of the chairman,
treasurer, or secretary of the organization issuing
the same, or the person who issues, makes, or is
responsible therefor.
Id. at 337 n.3 (citation omitted) (emphasis added).
Margaret
McIntyre had distributed handbills signed “CONCERNED PARENTS AND
TAX PAYERS,” expressing her opposition to a proposed school tax
levy.
Id. at 337.
The Court explained that “[a]nonymity . . . provides a way
for a writer who may be personally unpopular to ensure that
readers will not prejudge her message simply because they do not
like its proponent” and characterized Talley as having “embraced
33
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 34 of 67
a respected tradition of anonymity in the advocacy of political
causes.”
Id. at 342-43.
Like California in Talley, Ohio argued
that the challenged provision was designed to prevent
“fraudulent, false, or libelous statements.”
Id. at 343-44.
The Court again rejected this argument, finding that the statute
applied “even when there is no hint of falsity or libel.”
Id.
Ohio argued that its statute was distinguishable from
Talley because it applied only to documents “designed to
influence voters in an election,” while the Los Angeles
ordinance prohibited “all anonymous handbilling in any place
under any circumstances.”
Id. at 344 (citation omitted).
The
Court rejected this argument as well, explaining that “the
category of speech regulated by the Ohio statute occupies the
core of the protection afforded by the First Amendment:
Discussion of public issues and debate on the qualifications of
candidates are integral to the operation of the system of
government established by our Constitution.”
Id. at 346
(citation omitted).
Alongside fraud and libel prevention, Ohio argued that it
had an “interest in providing the electorate with relevant
information.”
Id. at 348.
In response, the Court opined that
“the identity of the speaker is no different from other
components of the document’s content that the author is free to
34
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 35 of 67
include or exclude.”
Id. 14
The Court continued, “The simple
interest in providing voters with additional relevant
information does not justify a state requirement that a writer
make statements or disclosures she would otherwise omit.”
Id.
The Court also distinguished Buckley (which is discussed at
greater length in the following section).
Buckley involved the
mandatory reporting and disclosure of “the amount and use of
money expended in support of a candidate,” which the Court found
“a far cry from compelled self-identification on all electionrelated writings.”
Id. at 355.
The Court elaborated:
A written election-related document -- particularly a
leaflet -- is often a personally crafted statement of
a political viewpoint. Mrs. McIntyre’s handbills
surely fit that description. As such, identification
of the author against her will is particularly
intrusive; it reveals unmistakably the content of her
thoughts on a controversial issue. Disclosure of an
expenditure and its use, without more, reveals far
less information. It may be information that a person
In a footnote, the Court quoted the following passage from a
case that struck down a New York statute similar to Ohio’s:
14
Don’t underestimate the common man. People are
intelligent enough to evaluate the source of an
anonymous writing. They can see it is anonymous.
They know it is anonymous. They can evaluate its
anonymity along with its message, as long as they are
permitted, as they must be, to read that message. And
then, once they have done so, it is for them to decide
what is ‘responsible’, what is valuable, and what is
truth.
McIntyre, 514 U.S. at 348 n.11 (quoting People v. Duryea, 351
N.Y.S.2d 978, 996 (N.Y. Sup. Ct. 1974)).
35
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 36 of 67
prefers to keep secret, and undoubtedly it often gives
away something about the spender’s political views.
Nonetheless, even though money may ‘talk,’ its speech
is less specific, less personal, and less provocative
than a handbill -- and as a result, when money
supports an unpopular viewpoint it is less likely to
precipitate retaliation.
Id.
The Court found that Ohio’s statute rested on “different
and less powerful state interests” than those present in
Buckley.
Id. at 356.
While the Buckley Court upheld financial
disclosures for expenditures that “expressly advocate the
election or defeat of a clearly identified candidate,” such
expenditures create a risk that “individuals will spend money to
support a candidate as a quid pro quo for special treatment
after the candidate is in office.”
Id. (citation omitted).
The
McIntyre Court suggested that Ohio’s statute, which also reached
“issue-based ballot measures,” was not limited to promoting the
anti-corruption interest applicable in candidate elections.
Id.
The Court concluded that “anonymous pamphleteering is not a
pernicious, fraudulent practice, but an honorable tradition of
advocacy and of dissent,” invalidated the Ohio statute, and
reversed the judgment fining McIntyre.
Id. at 357.
In Vermont Right to Life Committee, Inc. v. Sorrell (VRLC
I), the Second Circuit considered a Vermont statute that defined
a “political advertisement” as “any communication . . . which
36
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 37 of 67
expressly or implicitly advocates the success or defeat of a
candidate.”
221 F.3d 376, 380 (2d Cir. 2000) (citation omitted)
(emphasis added).
Any such advertisement was required to
“contain the name and address of the person who paid for the
advertisement.”
Id. (citation omitted).
Drawing heavily on the
teachings in Buckley, 424 U.S. at 1, the panel majority wrote,
“The term ‘implicitly’ . . . extends the reach of [the]
disclosure requirement to advocacy with respect to public
issues.”
VRLC I, 221 F.3d at 387.
The panel held the statute
facially invalid, reasoning that it intruded on “communications
that constitute protected issue advocacy.”
B.
Id. at 386. 15
Cases Upholding Disclosure Requirements
Both the plaintiffs and the government emphasize the
importance of an early Supreme Court decision that upheld a
federal statute requiring disclosure of those financially
supporting lobbyists.
In United States v. Harriss, the Court
evaluated a challenge to the Federal Regulation of Lobbying Act,
Pub. L. No. 79-601, 60 Stat. 812, 839-42 (1946).
613, 617 (1954).
347 U.S. 612,
The statute applied to any person who
“solicits, collects, or receives money or any other thing of
The Court of Appeals declined to adopt a construction of the
statute where the statute was not “readily susceptible” to the
construction. VRLC I, 221 F.3d at 386 (citation omitted).
15
37
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 38 of 67
value to be used principally to aid, or the principal purpose of
which person is to aid, in the accomplishment” of the “passage
or defeat of any legislation by the Congress of the United
States,” or “[t]o influence, directly or indirectly, the passage
or defeat” of such legislation.
Id. at 619 (citation omitted).
A person of such description, if also “‘receiving any
contributions or expending any money’ for the purpose of
influencing the passage or defeat of any legislation by
Congress,” was required to make quarterly disclosures to the
Clerk of the House of Representatives that included the name and
address of any person who had made contributions for lobbying
purposes of $500 or more and of any person who received
expenditures of $10 or more.
Id. at 614 & n.1.
The statute required a distinct set of disclosures from any
person who “engage[d] himself for pay or for any consideration
for the purpose of attempting to influence the passage or defeat
of any legislation.”
Id. at 615 & n.2.
Such a person was
required to make detailed quarterly disclosures to the Clerk of
the House of Representatives and the Secretary of the Senate.
Id.
The statute also required these detailed disclosures,
unlike those discussed in the previous paragraph, to be printed
in the Congressional Record.
Id. at 615 n.2; see also §§ 305,
308, 60 Stat. 840-42.
38
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 39 of 67
The Court began its analysis by construing the statute to
require disclosures only from (1) persons that “solicited,
collected, or received contributions,” (2) where “one of the
main purposes of such person, or one of the main purposes of
such contributions [was] to influence the passage or defeat of
legislation by Congress,” and (3) “the intended method of
accomplishing this purpose [was] through direct communication
with members of Congress.”
(citation omitted).
347 U.S. at 623-24 (emphasis added)
This third limitation was a somewhat
atextual one, based on the Court’s belief that the statute
“should be construed to refer only to lobbying in its commonly
accepted sense,” that is “direct communication with members of
Congress on pending or proposed federal legislation.”
620 (citation omitted).
Id. at
The Court’s examination of legislative
history led it to conclude that Congress “would have intended
the Act to operate on this narrower basis, even if a broader
application to organizations seeking to propagandize the general
public were not permissible.”
Id. at 620-21.
So construed, the Court held that the statute did not
violate the First Amendment, reasoning that Congress had not
sought to prohibit the “myriad pressures” exerted by various
interest groups, but had “merely provided for a modicum of
information from those who for hire attempt to influence
39
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 40 of 67
legislation or who collect or spend funds for that purpose.
It
wants only to know who is being hired, who is putting up the
money, and how much.”
Id. at 625.
Striking down such a statute
“would be to deny Congress in large measure the power of selfprotection.”
Id. at 625-26.
The Court concluded by saying that
the risk that the disclosures would “as a practical matter act
as a deterrent to [the] exercise of First Amendment rights” by
persons other than those encompassed by the Court’s narrowing
construction of the statute was “too remote to require striking
down a statute which on its face is otherwise plainly within the
area of congressional power and is designed to safeguard a vital
national interest.”
Id. at 626.
In Buckley v. Valeo, the Court considered a challenge to
numerous provisions of the Federal Election Campaign Act
(“FECA”), including its contribution limits, expenditure limits,
and disclosure provisions.
424 U.S. at 6.
As particularly
relevant here, the statute required any “individual or group,
other than a political committee or candidate, who makes
contributions or expenditures of over $100 in a calendar year
other than by contribution to a political committee or
candidate” to file quarterly reports with the Federal Election
Commission (“FEC”).
Id. at 63-64 (citation omitted).
Such
reports were “to be made available by the Commission for public
40
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 41 of 67
inspection and copying.”
Id. at 63 (citation omitted); see also
2 U.S.C. §§ 434(e), 438(a)(4) (1970 Supp. IV).
The Court set forth general principles to guide its
analysis of the overbreadth challenge to the disclosure
provisions.
It observed that “[u]nlike . . . overall
limitations on contributions and expenditures . . . disclosure
requirements impose no ceiling on campaign-related activities.”
Buckley, 424 U.S. at 64.
But, the Court continued, “compelled
disclosure, in itself, can seriously infringe on privacy of
association and belief guaranteed by the First Amendment.”
Id.
“Moreover, the invasion of privacy of belief may be as great
when the information sought concerns the giving and spending of
money as when it concerns the joining of organizations, for
financial transactions can reveal much about a person’s
activities, associations, and beliefs.”
omitted).
Id. at 66 (citation
The government argued that the disclosure
requirements at issue in Buckley served the informational,
corruption-deterrence, and violation-detection interests
described above.
The plaintiffs conceded, and the Court agreed,
that “disclosure requirements -- certainly in most applications
-- appear to be the least restrictive means of curbing the evils
of campaign ignorance and corruption that Congress found to
exist.”
Id. at 68.
41
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 42 of 67
The Court described the provision requiring disclosures
from groups that made independent expenditures as “part of
Congress’ effort to achieve ‘total disclosure’ by reaching
‘every kind of political activity’ in order to insure that the
voters are fully informed and to achieve through publicity the
maximum deterrence to corruption and undue influence possible.”
Id. at 76.
Before turning to its First Amendment analysis, the
Court adopted a narrowing construction to avoid regulation of
pure “issue discussion.”
Id. at 78-80.
The Court construed the
disclosure provision “to reach only funds used for
communications that expressly advocate the election or defeat of
a clearly identified candidate.”
Id. at 80.
That is, the
provision applied only to “communications containing express
words of advocacy of election or defeat, such as ‘vote for,’
‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for
Congress,’ ‘vote against,’ ‘defeat,’ [or] ‘reject.’”
80 & nn. 52, 108.
Id. at 44,
The disclosure provision at issue, therefore,
Impose[d] independent reporting requirements on
individuals and groups that are not candidates or
political committees only in the following
circumstances: (1) when they make contributions
earmarked for political purposes or authorized or
requested by a candidate or his agent, to some person
other than a candidate or political committee, and (2)
when they make expenditures for communications that
expressly advocate the election or defeat of a clearly
identified candidate.
Id. at 80.
42
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 43 of 67
Having adopted this narrowing construction, the Court
concluded that the disclosure provision had “a sufficient
relationship to a substantial governmental interest.”
Id.
It
served an “informational interest” and went “beyond the general
disclosure requirements to shed the light of publicity on
spending that is unambiguously campaign related but would not
otherwise be reported because it takes the form of independent
expenditures or of contributions to an individual or group not
itself required to report the names of its contributors.”
at 81.
Id.
Finally, the Court distinguished Talley, reasoning that
while the authorship disclosures there made a poor fit with the
government’s asserted anti-fraud interests, the financial
disclosures were “narrowly limited to those situations where the
information sought has a substantial connection with the
governmental interests sought to be advanced.”
Id.
Thirty-four years later, in Citizens United I, the Court
held that it violates the First Amendment to prohibit
corporations from spending their general treasury funds on
independent election-related expenditures.
558 U.S. at 365.
Citizens United, a nonprofit corporation, desired to pay for
Hillary: The Movie, a film it had produced, to be placed on a
video-on-demand service.
Id. at 319-20.
Citizens United also
sought to promote the film with ten- and thirty-second
43
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 44 of 67
television ads that contained “a short . . . pejorative[]
statement about Senator Clinton, followed by the name of the
movie and the movie’s Web site address.”
Id. at 320.
In addition to the bar on corporate expenditures, Citizens
United also challenged a “disclaimer” provision of the
Bipartisan Campaign Reform Act (“BCRA”), id. at 366, that
requires “electioneering communications” not made by a
candidate’s political committee to “clearly state the name and
permanent street address, telephone number, or World Wide Web
address of the person who paid for the communication.”
52
U.S.C. § 30120(a)(3) (formerly codified at 2 U.S.C. § 441d).
The plaintiff further challenged a BCRA disclosure provision
that requires “any person who spends more than $10,000 on
electioneering communications within a calendar year [to] file a
disclosure statement with the FEC.”
Citizens United I, 558 U.S.
at 366; see also 52 U.S.C. § 30104(f)(1) (formerly codified at 2
U.S.C. § 434(f)(1)).
Such a disclosure statement must include,
among other things, “[t]he amount of each disbursement of more
than $200 during the period covered by the statement and the
identification of the person to whom the disbursement was made”
and the names and addresses of those who contributed $1,000 or
more in support of electioneering communications.
30104(f)(2).
52 U.S.C. §
The FEC is required to make the reported
44
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 45 of 67
information publicly available on the internet.
Id. §
30104(a)(11)(B).
It aids the discussion of Citizens United I that follows to
describe two categories of communication identified in the
Court’s jurisprudence: “express advocacy” and “electioneering.”
The first category encompasses communications that “expressly
advocate the election or defeat of a candidate.”
Citizens
United I, 558 U.S. at 320; see also McConnell, 540 U.S. at 126;
Buckley, 424 U.S. at 44 & n.52.
“Electioneering
communications,” a defined term in BCRA, are those
communications that “refer[] to a clearly identified candidate
for Federal office” and are “made within 30 days of a primary or
60 days of a general election.”
Citizens United I, 558 U.S. at
321 (citation omitted).
The Court held that the communications at issue in Citizens
United I -- ads that “referred to then-Senator Clinton by name
shortly before a primary and contained pejorative references to
her candidacy” -- fell within BCRA’s definition of an
electioneering communication.
Id. at 368.
It also held that
the disclaimers required by BCRA serve “the governmental
interest in providing information to the electorate.”
Id.
“Identification of the source of advertising may be required as
a means of disclosure, so that the people will be able to
45
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 46 of 67
evaluate the arguments to which they are being subjected.”
(citation omitted).
Id.
“At the very least, the disclaimers avoid
confusion by making clear that the ads are not funded by a
candidate or political party.”
Id.
The Court also rejected the argument that BCRA’s disclosure
requirements could only be imposed on “speech that is the
functional equivalent of express advocacy,” noting that
“disclosure is a less restrictive alternative to more
comprehensive regulations of speech.”
Id. at 368-69; see also
McCutcheon v. Fed. Election Comm’n, 572 U.S. 185, 223 (2014)
(“Disclosure requirements burden speech, but . . . do not impose
a ceiling on speech.”).
“Even if the ads only pertain to a
commercial transaction,” i.e. seeking out Hillary: The Movie on
a video-on-demand service, “the public has an interest in
knowing who is speaking about a candidate shortly before an
election.”
Id.
The Court thus concluded that “the
informational interest alone [was] sufficient to justify
application” of disclosure requirements to the ads.
Id.
Following Citizens United I, the Court of Appeals for the
Second Circuit has upheld disclosure statutes in two decisions
of significance to the discussion below.
In Vermont Right to
Life Committee, Inc. v. Sorrell (VRLC II), the Second Circuit
considered a version of the Vermont statute that had been
46
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 47 of 67
revised since VRLC I.
758 F.3d 118, 122 (2d Cir. 2014).
The
new statute contained a definition of “electioneering
communication,” encompassing “any communication that refers to a
clearly identified candidate for office and that promotes or
supports a candidate for that office or attacks or opposes a
candidate for that office, regardless of whether the
communication expressly advocates a vote for or against a
candidate.”
Id. (citation omitted).
Such communications were
required to include the name and address of the person or entity
who funded them.
Id.
The statute also defined “mass media
activity” to include “television commercials, radio commercials,
mass mailings, literature drops, newspaper advertisements,
robotic phone calls, and telephone banks, which include the name
or likeness of a clearly identified candidate for office.”
at 123 (citation omitted).
Id.
A person who made expenditures of at
least $500 on mass media activity was required to file a report
with the Vermont Secretary of State and “send a copy of the
report to each candidate whose name or likeness is included in
the activity without that candidate’s knowledge.”
Vt. Stat.
Ann. tit. 17, § 2971(a); see also VRLC II, 758 F.3d at 133-34.
Finally, the statute defined a “political committee” as:
any formal or informal committee of two or more
individuals or a corporation, labor organization,
public interest group, or other entity, not including
a political party, which accepts contributions of
47
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 48 of 67
$1,000.00 or more and makes expenditures of $1,000.00
or more in any two-year general election cycle for the
purpose of supporting or opposing one or more
candidates, influencing an election, or advocating a
position on a public question in any election, and
includes an independent expenditure-only political
committee.
VRLC II, 758 F.3d at 123 (citation omitted).
Political
committees were required to file certain disclosures with the
Vermont Secretary of State, which then would be made publicly
available.
Id. at 123-24; see also Vt. Stat. Ann. tit. 17 §
2961(a)(2).
The Second Circuit rejected vagueness and First Amendment
challenges to all three disclosure requirements.
The panel
noted that under Citizens United, it was clear that disclosure
requirements need not be limited to express advocacy.
758 F.3d at 132.
VRLC II,
The Court of Appeals found that the
disclosures triggered by electioneering communications and mass
media activity were “within the scope of regulation permitted
under Citizens United.”
Id. at 133.
The former would “only
apply during a campaign for public office” and therefore had “a
substantial relation to the public’s “interest in knowing who is
speaking about a candidate shortly before an election.”
(citation omitted).
Id.
The latter would “identify the source of
election-related information and encourage candidate response.”
Id. at 134.
48
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 49 of 67
The Second Circuit likewise upheld Vermont’s “political
committee” disclosures.
Id. at 139.
Under the statute, such
political committees were only required to “disclose
transactions that have the purpose of supporting or opposing a
candidate.”
Id. at 137.
The panel distinguished Vermont’s
regime from a “Wisconsin regulation struck down by the Seventh
Circuit that imposed a disclosure regime ‘on every independent
group that crosses the very low $300 threshold in expressadvocacy spending,’” id. at 138 (quoting Wis. Right to Life,
Inc. v. Barland, 751 F.3d 804, 841 (7th Cir. 2014)), and from
“perpetual reporting and organizational requirements that raised
concern for the Eighth Circuit,” id. (citing Minn. Citizens
Concerned for Life, Inc. v. Swanson, 692 F.3d 864, 867–69, 872–
73 (8th Cir. 2012) (en banc)).
In short, the disclosures were
“substantially related to the recognized governmental interest
in providing the electorate with information about the sources
of election-related spending.”
Id.
In Citizens United II, the eponymous group challenged New
York’s yearly reporting requirements for 501(c)(3) and (c)(4)
organizations.
882 F.3d at 379-80.
The state requires that
each nonprofit submit to the Attorney General an IRS Form 990,
which includes a Schedule B listing “the organization’s donors,
the donors’ addresses, and the amounts of their donations.”
49
Id.
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 50 of 67
at 379. 16
Citizens United refused to submit the portion of the
Schedule B including its list of donors.
Id. at 379-80.
The
Attorney General was prohibited from publicizing donor lists,
but Citizens United contended that “by collecting lists of names
associated with political preferences that he could release at
any time, the Attorney General holds the unconstitutional power
to intimidate donors from paying for the communication of their
views.”
Id. at 380, 384.
The Second Circuit found that filing the Schedule B with
the Attorney General served “important government interests” of
“preventing fraud and self-dealing in charities,” and that “the
small extent of speech chilling is more than commensurate with
the government’s goals.”
Id. at 384.
Of particular relevance
to the present case, the panel wrote that it “would be dealing
with a more difficult question if these disclosures went beyond
the officials in the Attorney General’s office . . . .
Certainly if that office were to publicize donor lists, it would
raise the stakes . . . .”
Id.
In 2018, the IRS attempted to eliminate the Schedule B
requirement for 501(c) groups except 501(c)(3)s, but that action
was set aside on Administrative Procedure Act grounds. See
Bullock v. Internal Revenue Serv., No. CV-18-103-GF-BMM, 2019 WL
3423485, at *2, *11 (D. Mont. July 30, 2019).
16
50
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 51 of 67
C.
Cases Finding Disclosure Requirements Unconstitutional
As Applied to Particular Plaintiffs
In NAACP v. Alabama ex rel. Patterson, the Court evaluated
a state court order for an organization to produce the names and
addresses of all its members in the state.
357 U.S. at 451.
The Alabama attorney general had sought a state-court injunction
prohibiting the NAACP from operating in Alabama, alleging that
it had failed to comply with a statute that required out-ofstate corporations to register before doing business there.
at 451-52.
Id.
The NAACP admitted that it had engaged in the
activities identified in the attorney general’s complaint, such
as opening a regional office in Alabama and supporting the
Montgomery bus boycott, but the NAACP contended that it was
exempt from the registration statute.
Id. at 452-53.
The
attorney general sought production of various NAACP records,
including membership lists, arguing that they were necessary to
determine whether the organization engaged in activity that
subjected it to the registration statute.
Id. at 453.
The
NAACP produced “substantially all the data called for by the
production order except its membership lists, as to which it
contended that Alabama could not constitutionally compel
disclosure,” but was nonetheless held in contempt by the state
court.
Id. at 454.
51
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 52 of 67
The Court observed that “[e]ffective advocacy of both
public and private points of view, particularly controversial
ones, is undeniably enhanced by group association.”
Id. at 460.
The Court then found that the NAACP had “made an uncontroverted
showing that on past occasions revelation of the identity of its
rank-and-file members has exposed these members to economic
reprisal, loss of employment, threat of physical coercion, and
other manifestations of public hostility.”
Id. at 462.
“Under
these circumstances,” the Court found it “apparent that
compelled disclosure of [the NAACP’s] Alabama membership is
likely to affect adversely the ability of [the NAACP] and its
members to pursue their collective effort to foster beliefs
which they admittedly have the right to advocate.”
63.
Id. at 462-
The Court then turned to “the substantiality of Alabama’s
interest” and found that disclosure of the names of the NAACP’s
members would not have a “substantial bearing” on the merits of
the suit seeking to enjoin the NAACP’s activities, since the
organization had admitted to its complained-of operations in the
state.
Id. at 464-65.
The Court concluded that the government
had “fallen short of showing a controlling justification for the
deterrent effect on the free enjoyment of the right to associate
which disclosure of membership lists is likely to have” and
reversed the contempt judgment.
Id. at 466.
52
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 53 of 67
In Brown v. Socialist Workers ’74 Campaign Committee
(Ohio), the Court confronted an as-applied challenge to a state
statute that required all political parties to report the names
and addresses of campaign contributors and recipients of
campaign disbursements.
459 U.S. 87, 88 (1982).
The Socialist
Workers Party had approximately sixty members in Ohio and had
achieved “little success at the polls.”
Id. at 88-89.
Expressing themes familiar from NAACP and Buckley, the
Court wrote that “[t]he Constitution protects against the
compelled disclosure of political associations and beliefs” and
that “[s]uch disclosures can seriously infringe on privacy of
association and belief guaranteed by the First Amendment.”
at 91 (citation omitted).
Id.
The Court reaffirmed Buckley’s “test
for determining when the First Amendment requires exempting
minor parties from compelled disclosures.”
Id. at 92-93.
is,
That
The evidence offered need show only a reasonable
probability that the compelled disclosure of a party’s
contributors’ names will subject them to threats,
harassment, or reprisals from either Government
officials or private parties. . . . The proof may
include, for example, specific evidence of past or
present harassment of members due to their
associational ties, or of harassment directed against
the organization itself.
Id. at 93-94 (citation omitted).
53
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 54 of 67
The state argued that it had an enhanced interest in
disclosure of the identities of recipients of campaign funds (in
comparison to the identities of those who contribute funds)
because such disclosures were necessary to prevent “corruption”
and “misuse of campaign funds.”
Id. at 94-95.
The Court
rejected this argument, observing that the corruption-prevention
interest was weak as applied to minor parties unlikely to win
elections.
Id. at 95.
Further, the Court found a substantial
First Amendment risk in compelling minor parties to disclose
campaign disbursements, because “individuals who receive
disbursements for ‘merely’ commercial transactions . . . may
well be deterred from providing services by even a small risk of
harassment” and therefore compelled disclosures could “cripple a
minor party’s ability to operate effectively and thereby reduce
the free circulation of ideas both within and without the
political arena.”
Id. at 97-98 (citation omitted).
The Court also affirmed the district court’s application of
Buckley, finding a reasonable probability of reprisals against
the Socialist Workers Party, based on evidence of “numerous
instances of recent harassment” and that hostility towards the
organization resisting disclosure was “ingrained and likely to
continue.”
Id. at 100-01.
Thus the Court held that Ohio’s
54
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 55 of 67
disclosure statute could not constitutionally be applied to the
Socialist Workers Party.
Id. at 102.
III. Section 172-e
The plaintiffs contend that § 172-e violates the First
Amendment because it chills speech and burdens donors’ rights to
free association and privacy.
The challenge to the
constitutionality of § 172-e is evaluated under the exacting
scrutiny standard.
Applying that standard, it must be stricken
as unconstitutional on its face.
If a 501(c)(3) makes an in-kind donation of greater than
$2,500 to a 501(c)(4) engaged in lobbying, § 172-e requires that
the 501(c)(3) file a public funding disclosure report that
includes the identity of all donors who gave it more than
$2,500.
Such disclosures are required whether or not the
501(c)(3) donor intended to support a 501(c)(4) or exercised any
control over the 501(c)(3)’s donation to the 501(c)(4).
The
disclosure is required by § 172-e even though, to obtain or
retain its 501(c)(3) tax exemption, an entity must have an
exempt purpose, which cannot be either campaigning for
candidates for office or lobbying elected officials.
And, any
support the entity provides to a 501(c)(4) must not render
lobbying a “substantial part” of its activities, or the entity
will lose its status as a 501(c)(3).
55
26 U.S.C. § 501(c)(3).
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 56 of 67
Section 172-e places a significant burden on the First
Amendment interest in freedom of association.
“Effective
advocacy of both public and private points of view, particularly
controversial ones, is undeniably enhanced by group
association.”
NAACP, 357 U.S. at 460.
As the Court more
recently observed in Buckley, “The right to join together for
the advancement of beliefs and ideas is diluted if it does not
include the right to pool money through contributions, for funds
are often essential if advocacy is to be truly or optimally
effective.”
424 U.S. at 65-66 (citation omitted).
Donors who
desire anonymity “may be motivated by fear of economic or
official retaliation, by concern about social ostracism, or
merely by a desire to preserve as much of one’s privacy as
possible.”
McIntyre, 514 U.S. at 341–42.
As a result of such
fears, compelled disclosure can place a “substantial restraint”
upon the exercise of the right to freedom of association.
NAACP, 357 U.S. at 462.
The “compelled disclosure of political
associations and beliefs . . . can seriously infringe on privacy
of association and belief guaranteed by the First Amendment.”
Socialist Workers ‘74 Campaign Comm., 459 U.S. at 91 (citation
omitted).
There is no substantial relation between the requirement
that the identity of donors to 501(c)(3)s be publicly disclosed
56
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 57 of 67
and any important government interest.
The government refers
briefly to the three interests identified in Buckley to support
disclosure laws -- the informational, corruption-deterrence, and
violation-detection interests -- but makes no developed argument
connecting those interests to § 172-e.
Cf. Buckley, 424 U.S. at
76 (connecting the disclosure requirement in FECA to the three
interests).
Disclosure laws that have been upheld based on a
showing that the disclosures furthered these interests, as
described above, have been drawn far more narrowly than § 172-e.
They have required disclosure of those contributing to
candidates, to campaigns supporting identified candidates, or to
direct lobbying of legislators or their staffs.
None have
approached the tangential and indirect support of political
advocacy at issue here.
Besides referring generally to the three interests
identified in Buckley, the government justifies the § 172-e
disclosure regime by arguing that it furthers the following
government interest:
Section 172-e
will reveal the funders of issue advocacy
communications and coordination among tax-exempt
organizations (including donors who seek to funnel
money to 501(c)(4)s and then to Super PACs through
501(c)(3)s). This will accomplish the stated goals of
providing the public with much-needed information on
important issues before executive, legislative, and
57
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 58 of 67
administrative bodies, and helping to deter corruption
and avoid the appearance of corruption. 17
This informational goal does not justify the burden on
First Amendment rights created by § 172-e.
The disclosure of
the identity of a 501(c)(3) donor makes a poor fit with this
informational interest.
The link between a 501(c)(3) donor and
the content of lobbying communications by the 501(c)(4) is too
attenuated to effectively advance any informational interest.
Cf. Van Hollen, Jr. v. Fed. Election Comm’n, 811 F.3d 486, 497
(D.C. Cir. 2016) (noting the “intuitive logic” that persons who
contribute to the general treasury of a nonprofit corporation
“do not necessarily support the corporation’s electioneering
communications” (citation omitted)).
It bears emphasis that,
under federal tax law, a 501(c)(3) by definition cannot engage
in substantial lobbying activity.
The government places particular emphasis on Harriss, 347
U.S. 612.
Harriss is of little assistance to the government.
Plaintiffs argue that any justification for the statute that
was not articulated in the legislative history may not be
considered. “The quantum of empirical evidence needed to
satisfy heightened judicial scrutiny of legislative judgments
will vary up or down with the novelty and plausibility of the
justification raised.” Nixon v. Shrink Mo. Gov’t PAC, 528 U.S.
377, 391 (2000). Because consideration of each of the
government’s arguments does not alter the outcome here, it is
unnecessary to further grapple with the issue of whether each of
them may be properly considered.
17
58
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 59 of 67
There, the Court upheld a disclosure statute that it construed
narrowly to encompass “direct” lobbying of legislators.
620-21.
Id. at
The statute upheld in Harriss required public
disclosure of the identities only of those who made
contributions to professional lobbyists for their lobbying work.
See 347 U.S. at 615 n.2; see also §§ 305, 308, 60 Stat. 840-42.
The New York Lobbying Act already requires similar public
disclosure of those providing direct financial support of
lobbying activity.
See N.Y. Legis. Law § 1-c(c) (defining
“lobbying”); id. § 1-h to 1-j (requiring lobbying-related
disclosures). 18
Section 172-e is far broader in its impact than
the statute at issue in Harriss or the disclosures required by
the New York Lobbying Act.
It requires disclosure of the
identities of donors to a 501(c)(3), an entity whose primary
purpose must be something other than lobbying and that by
definition cannot make lobbying a “substantial” part of its
activities.
Finally, the government argues that § 172-e places no
burden on plaintiffs’ First Amendment rights at all because the
Attorney General may provide an exemption from disclosure upon a
showing that such disclosure may cause harassment.
See
See also N.Y. State Joint Comm’n on Public Ethics, supra note
11.
18
59
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 60 of 67
Socialist Workers ’74 Campaign Comm., 459 U.S. at 93-94; NAACP,
357 U.S. at 462.
The exemption mirrors the test adopted by the
Court for as-applied challenges in donor disclosure cases.
This exemption does not remedy the statute’s constitutional
deficiencies.
First, it does nothing to remedy the poor fit
between the statute and the identified government purpose of
providing more information about the funding of lobbying.
Second, an after-the-fact exemption procedure does nothing to
ameliorate the chilling effect on 501(c)(3) donors.
The
possibility that the Attorney General might in the future
approve a disclosure exemption would provide cold comfort to a
potential donor asked to run the risk of threats, harassment, or
reprisals.
Third, the government speculates that the yet-to-be written
exemption regulations may provide a mechanism for exemptions to
be granted prior to the reporting period in which donations
would be collected.
The most natural reading of the statute,
however, is to the contrary.
See N.Y. Exec. Law § 172-e(3)
(describing the exemption after stating a default rule in favor
of publication “within thirty days of the close of each
reporting period” (emphasis added)).
In any event, the chilling
effect will exist for whatever period the exemption application
is under review.
Without a more substantial relation between
60
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 61 of 67
the government purpose and the disclosure, § 172-e is an
unconstitutional burden on First Amendment rights.
In sum, none of the government’s arguments enable § 172-e
to withstand exacting scrutiny.
A “substantial number” of the
applications of § 172-e are likely to result in interference
with the rights to freely associate and speak.
II, 882 F.3d at 383.
Citizens United
Plaintiffs’ facial challenge therefore
succeeds, and § 172-e is invalid.
IV.
Section 172-f
The plaintiffs contend that § 172-f unconstitutionally
intrudes on donors’ First Amendment privacy rights and
associational interests, particularly those related to the right
to express opinions anonymously.
This challenge to the
constitutionality of § 172-f is evaluated under the exacting
scrutiny standard.
Applying that standard, § 172-f must be
stricken as unconstitutional on its face.
Section 172-f requires a 501(c)(4) to publicly disclose its
donors if it makes a public statement that
refers to and advocates for or against a clearly
identified elected official or the position of any
elected official or administrative or legislative body
relating to the outcome of any vote or substance of
any legislation, potential legislation, pending
legislation, rule, regulation, hearing, or decision by
any legislative, executive or administrative body.
61
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 62 of 67
N.Y. Exec. Law § 172(f)(1)(b), (2).
Thus, if the entity’s
public statement refers to the position of an official regarding
any potential legislation, the disclosure of its donors is
required.
The First Amendment rights to publicly discuss and advocate
on issues of public interest, and to do so anonymously, have
long been recognized.
As explained in McIntyre, the “respected
tradition of anonymity in the advocacy of political causes . . .
is perhaps best exemplified by the secret ballot, the hard-won
right to vote one’s conscience without fear of retaliation.”
514 U.S. at 343; see also id. at 357; Talley, 362 U.S. at 65
(“It is plain that anonymity has sometimes been assumed for the
most constructive purposes.”).
Section 172-f sweeps far more broadly than any disclosure
law that has survived judicial scrutiny.
It is not confined to
disclosure where the entity engages in express advocacy for a
candidate or electioneering.
Cf. Buckley, 424 U.S. at 79-80
(construing disclosure statute “to reach only funds used for
communications that expressly advocate the election or defeat of
a clearly identified candidate” to ensure that the statute’s
reach was not “impermissibly broad”), Citizens United I, 558
U.S. at 369 (upholding disclosure requirements that served the
public’s “interest in knowing who is speaking about a candidate
62
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 63 of 67
shortly before an election”).
It is not confined to disclosure
where the entity engages in direct lobbying of elected
officials.
Cf. Harriss, 347 U.S. at 620 (construing statute to
apply only to “direct communication with members of Congress on
pending or proposed federal legislation”); N.Y. Comp. Codes R. &
Regs. tit. 19, § 943.6(a)(1)(i) (reaching “communication or
interaction directed to a Public Official”); id. § 943.7(a)(1)(2) (reaching “attempts to influence a Public Official
indirectly” by “solicit[ing] another to deliver a message to a
Public Official”).
Instead, § 172-f requires disclosure whenever a 501(c)(4)
engages in pure issue advocacy before the public.
As the
government construes the statute, § 172-f applies to
communications that “tak[e] a stance on a position espoused by
an elected official.”
And that position need only “relat[e] to
. . . potential legislation.”
N.Y. Exec. Law § 172-f(1)(b).
Given that any matter of public importance could become the
subject of legislation and given the range of positions taken by
all elected officials, § 172-f reaches a far broader swath of
communications than did the lobbying- and election-related
statutes that the Supreme Court and Second Circuit have upheld.
The government does not shy away from acknowledging the
breadth of the statute.
In opposing the plaintiffs’ motion for
63
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 64 of 67
summary judgment, the government acknowledges that the
government interest at stake is the interest in revealing “the
funders of issue advocacy.”
The government further argues that
its “information interest relates broadly to any undue influence
in politics (not just elections) arising from undisclosed
contributions.” 19
The cases upholding donor disclosure
requirements have never recognized an informational interest of
such breadth.
Indeed, the narrowing constructions adopted in
Harriss and Buckley, combined with the protections for anonymous
speech articulated in Talley and McIntyre, strongly suggest that
compelled identity disclosure is impermissible for issueadvocacy communications.
See Harriss, 347 U.S. at 621
(suggesting that “broader application to organizations seeking
to propagandize the general public” would be impermissible);
Buckley, 424 U.S. at 79 (reading statute to avoid “encompassing
both issue discussion and advocacy of a political result”).
The government argues that it bears only a “slight evidentiary
burden” and need not “provide studies, reports, hearings, or
testimony” to establish the interests served by §§ 172-e and
172-f, because it says the relevant interests have already been
recognized by Buckley and its progeny. As discussed above, New
York asserts a far broader informational interest than that
recognized in any of the relevant precedent. The government has
not provided a “quantum of empirical evidence” sufficient to
justify such a novel form of disclosure requirement. Shrink Mo.
Gov’t PAC, 528 U.S. at 391.
19
64
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 65 of 67
The government argues that the Supreme Court has rejected
any distinction between electioneering communications and issue
advocacy.
cases.
This argument rests on a misreading of the relevant
In McDonnell, the plaintiffs argued that Buckley had
limited disclosure requirements to “express advocacy”
communications.
540 U.S. at 190.
The Court rejected this
argument, finding BCRA’s new definition of “electioneering” was
sufficiently determinate to avoid the vagueness concerns that
drove the interpretation in Buckley and that election-related
interests justified the application of “disclosure requirements
to the entire range of ‘electioneering communications.’”
Id. at
194, 196; see also Citizens United, 558 U.S. at 368-69
(rejecting a similar attempt to narrow the definition of
“electioneering communication”); Indep. Inst. v. Fed. Election
Comm’n, 216 F. Supp. 3d 176, 187 (D.D.C. 2016) (“[I]t is the
tying of an identified candidate to an issue or message that
justifies the Bipartisan Campaign Reform Act’s tailored
disclosure requirement because that linkage gives rise to the
voting public’s informational interest in knowing who is
speaking about a candidate shortly before an election.”
(citation omitted)), aff’d, 137 S. Ct. 1204 (2017).
These cases
hold that issue advocacy need not be carved out of BCRA’s
definition of “electioneering communications.”
65
They do not
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 66 of 67
support New York’s argument that it can regulate issue advocacy
untethered to any electioneering communication.
New York also argues that § 172-f imposes a limited burden
on plaintiffs because the statute allows a 501(c)(4) to maintain
a segregated bank account for covered communications and
disclose only the donors who contribute to such an account.
N.Y. Exec. Law § 172-f(1)(d), (2)(c).
See
But this does nothing to
remedy the central flaw of § 172-f -- that it encompasses issue
advocacy.
Even if a 501(c)(4) structured its activities to
employ a segregated bank account for covered communications, it
would still have to disclose donors who fund communications on
nearly any issue of public concern.
Thus the segregated bank
account provision cannot save § 172-f.
The government’s remaining argument concerning § 172-f -that the possibility of an exemption ameliorates any First
Amendment burden -- has already been rejected.
As with § 172-e,
a “substantial number” of the applications of § 172-f are likely
to result in interference with the rights to freely associate
and speak.
Citizens United II, 882 F.3d at 383.
Plaintiffs’
facial challenge therefore succeeds, and § 172-f is invalid.
Because §§ 172-e and 172-f are facially invalid, the Court need
not reach plaintiffs’ additional as-applied challenges.
66
Case 1:16-cv-09592-DLC-KHP Document 178 Filed 09/30/19 Page 67 of 67
Conclusion
The plaintiffs’ May 24, 2018 motion for summary judgment is
granted, and defendant’s June 25, 2018 cross-motion for summary
judgment is denied.
Dated:
New York, New York
September 30, 2019
____________________________
DENISE COTE
United States District Judge
67
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?