Fact check: Would North Carolina bill 'allow' 501(c)(4) nonprofits to hide their donors?
State Sen. Natasha Marcus, a Democrat, says Senate Bill 636 "would allow politically active 501(c)(4) organizations to hide major donors while using their money to support or oppose candidates and political issues." She leaves out a lot of context.
Posted — UpdatedA new bill aims to offer more protection to North Carolinians who donate to nonprofits.
However, conservatives claimed that some Senators went too far with their criticisms.
“This bill would allow politically active 501(c)(4) organizations to hide major donors while using their money to support or oppose candidates and political issues,” tweeted state Sen. Natasha Marcus, a Democrat.
“In short, the bill says that non-profits can now conceal who their donors are,” state Sen. Jeff Jackson tweeted as part of a thread.
The tweet by Marcus is more specific. So PolitiFact wondered:
- What, exactly, would the bill do?
- And would it change access to 501(c)(4) donor lists?
It’s fair to say the bill would make dark money darker. Bill supporters have said it’s their intent to provide nonprofit donors more protection.
However, it’s wrong for Marcus to suggest that the bill itself would move 501(c)(4) donor lists out of the public eye or outside the reach of the government. These lists are mostly concealed from the public already. And the bill specifically says its new rules would “not apply to disclosures required by State or federal law, criminal investigations, or orders of the court.”
About the bill
As WRAL reported, it comes as part of a wave of bills being filed in states across the country that seek to protect donor privacy against what Republicans see as “cancel culture,” or being publicly criticized for giving to causes that may not be popular with some.
Experts who spoke with PolitiFact NC hypothesized that the move might be preemptive in nature.
- Lists of nonprofit donor names can’t be released publicly “for any purpose unrelated to a member's interest as a member” without consent of the nonprofit’s board of directors.
- A nonprofit donor’s identity must remain private “if the person has notified the nonprofit corporation, in writing prior to or at the time of the donation, not to disclose the (donor's) identity.”
- Government officials who abuse their access to nonprofit donor lists could be subject to a Class 1 misdemeanor (punishable by up to 120 days in jail).
It should be noted that the bill has been amended multiple times. The most recent version of the bill puts the onus on donors to say they want their privacy protected.
“If the donor, you know, in providing their donation to the nonprofit, says ‘I want to keep my name confidential.’ Now under this bill that nonprofit would be legally obligated to keep it confidential with whatever penalties are applied in the bill,” Hauss said.
Nonprofit disclosures
501(c)(4) nonprofits -- the type Marcus singled out -- are considered “social welfare” groups and are allowed to engage in some political activities. Examples included the NRA and Planned Parenthood.
Would SB 636 change any of these disclosure requirements? No.
“Nothing in S.636 would affect these disclosures. Nonprofits would still provide Schedule B to the IRS but not to the public,” David Heinen, a Vice President for the North Carolina Center for Nonprofits.
The tweet
Marcus specifically cited 501(c)(4)s in her tweet, and her phrasing could give the impression that the bill would change the public’s access to the identities of 501(c)(4) donors. In reality, most donor lists are already concealed. Experts told PolitiFact the bill would mostly affect nonprofits who release the identities voluntarily.
This issue can be confusing. So let’s review the facts in a question-and-answer format.
“Previously, these (donor lists) would be reported to the IRS in the Schedule B (form) then redacted before the Form 990 was made available to the public,” said Anna Massoglia, an editor and researcher for the Center for Responsive Politics.
“Organizations are still supposed to keep donor names and addresses in their own records in case they are requested as part of a court order or IRS examination,” she said.
As for North Carolina, the Tar Heel state doesn’t require the disclosure of donors for public non-profits either, said Schorr Johnson, spokesperson for the Department of Revenue.
“The NC Department of Revenue does not have any form or requirement for the disclosure of donors to nonprofits similar to the IRS 990 form. The NCDOR does not receive information from those IRS forms and if we did, it would be treated as protected taxpayer information under the existing taxpayer secrecy statute,” Johnson said.
Massoglia says some donor identities may occasionally appear on the North Carolina Secretary of State website. However, that’s only if a nonprofit has voluntarily disclosed the names. And “instances like that are rare.”
The Secretary of State’s office told us the bill “would not stop any non-profit information that we receive now,” spokeswoman Liz Proctor said.
“To me, it seems like this doesn't really change much,” Levine said. “They're just being very clear about wanting to come out front and say, ‘We will not require disclosure of this information.”
Pat Ryan, a spokesman for Republican state Senate leader Phil Berger, says someone “could make a case that the bill isn’t technically necessary, but there’s enough grey area” that Republicans feel legislation may be needed.
“A hypothetical would be if the NC Department of Justice were investigating, say, Planned Parenthood for some reason, and as part of that investigation they obtained Planned Parenthood’s donor list,” Ryan said.
“Some people really do not like Planned Parenthood and may use a published donor list to harass or intimidate their private donors,” he said, adding: “If this bill were law, it would make it explicit that the Planned Parenthood’s donor list is private, and DOJ can’t just put it on a website somewhere.”
Marcus mentioned that 501(c)(4) organizations can use their money in political ways, which is true. These nonprofits are often referred to as “dark money” groups because, while they might spend money on political ads or events, they are not required to publicly disclose the identity of their donors.
And the North Carolina State Elections Board doesn’t see anything that would change campaign finance disclosures, spokesman Patrick Gannon told PolitiFact.
We reached out to Marcus about her tweet and received a lengthy email response. She said while SB 636 “will not necessarily create new loopholes, it would make existing loopholes more problematic.”
Marcus speculated that the bill could “make it even harder” for state agencies, such as the elections board, to investigate 501(c)(4)s for campaign spending violations.
“Under the current law, a whistleblower could prompt an investigation by the State Board of Elections, and the board could demand this donor information,” her email says. “If this bill passes, the nonprofits could argue that they do not have to disclose their donors, and perhaps are forbidden from doing so, based on the intent of the law and the donor’s expectation of privacy.”
The bill specifically says the changes don’t apply to disclosures required by law, criminal investigations, or orders of the court. We also asked the state elections board whether they believe the bill would make investigations more difficult, and they said no.
Marcus added that, outside the campaign finance context, the bill could make it easier for government officials to solicit contributions to their favored 501(c)(4) in exchange for certain government actions, “but the prohibition on disclosing donor information would make it even harder for anyone to learn of the transactions.”
And in the U.S. Supreme Court case, opponents of California’s law include nonprofits from across the political spectrum, including the NAACP, the libertarian Cato Institute, and the conservative Institution for Justice.
The ACLU believes releasing the names of nonprofit supporters could scare people away from donating to nonprofits, said Hauss, the ACLU attorney. He says the group sees a “major distinction” between disclosure to the government versus disclosure to the public.
“In either scenario there's a threat of chill. If you're the NAACP in Alabama in the 50s, you know you're worried that disclosing even to the government can lead to all sorts of shenanigans. But in general, the idea is that if you disclose the government, the government does not have a history of retaliation,” he said. “Whereas if it's publicly disclosed either inadvertently or, or by law, the chilling effect goes way up. And in the age of social media, that’s especially true.”
Our ruling
Marcus said the bill would “allow politically active 501(c)(4) organizations to hide major donors while using their money to support or oppose candidates and political issues.”
Unless disclosed voluntarily, 501c4 donor lists are not collected or publicized by the IRS or state of North Carolina.
And multiple experts -- including legislative staff, the N.C. Department of Revenue, the N.C. State Elections Board, the N.C. Secretary of State, the N.C. Center for Nonprofits, the ACLU, the Center for Responsive Politics, the Alliance for Justice and others -- say the bill wouldn’t change what the government requires those nonprofits to disclose.
It’s fair for Marcus to say the bill may push donor information further into the darkness. Outside of government-required disclosures, the bill would allow donors to pick and choose when they want their identities known.
However, from a private citizen’s perspective, very little is changing.
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