NTUF’s Taxpayer Defense Center continues its fight for donor privacy, this time by filing an important amici curiae (“friends of the court”) brief in Buckeye Institute v. IRS on behalf of NTUF, the Pelican Institute, and the Defense of Freedom Institute. At the center of the Buckeye case is IRS Form 990 Schedule B, which lists all substantial donors to nonprofit organizations. This data collection exposes a citizen’s associations and political, religious, and cultural beliefs to IRS surveillance.
In our brief, we point out that such a mandatory disclosure requirement is subject to close review by the courts, under the First Amendment and what is known as the “exacting scrutiny” standard. This high standard, recently reaffirmed by the Supreme Court in Americans for Prosperity Foundation v. Bonta, requires “a substantial relation between the disclosure requirement and a sufficiently important governmental interest” and that “the disclosure requirement be narrowly tailored to the interest it promotes.”
The government is instead arguing for a lower, more permissive standard, saying that this information is useful to the IRS. In our brief, we explain why that is the incorrect standard to apply and that the IRS neither uses nor needs this donor data and has had difficulty protecting it from leaks and thefts.
We cite previous cases about donor privacy, all of which involved seemingly mere financial disclosures. In NAACP v. Alabama, the state used a foreign corporation registration statute to try to get a civil rights group’s donor list. In Bates v. Little Rock, the city used a business license tax registration. In Shelton v. Tucker, the case involved paperwork to be employed as a schoolteacher. And Americans for Prosperity Foundation v. Bonta, decided just a few years ago, centered on routine charitable registrations with the Attorney General of California. All of these cases applied “exacting scrutiny” to the disclosure requirements.
We therefore argue that the IRS must prove that Form 990 Schedule B is actually used to enforce tax laws and is narrowly tailored to gather only the information it needs. But the IRS does not use Schedule B regularly in its enforcement or litigation efforts surrounding nonprofits. Less than 10% of IRS examinations even touch on Form 990 generally, and only 9 cases in active litigation nationwide touch on nonprofit contributions. And most of those cases are focused on non-monetary contributions of real estate (like conservation easements), not cash donations to nonprofits like the Buckeye Institute or NTUF.
The government also argues that it wants the data to monitor private inurement, or self-dealing, where charitable foundations are misused for personal spending. But Schedule B is not the best or most tailored means for detecting private inurement; Schedule L is designed precisely for that purpose. While Schedule B is a long list of an organization’s supporters, Schedule L focuses on financial transactions between the nonprofit and interested persons—current or former officers, directors, trustees, key employees, and substantial donors. It is Schedule L’s focused purpose that will help the IRS, not Schedule B’s general list of donors.
More troubling is that the IRS cannot keep this donor data secure. The IRS is woefully inept at keeping tax records out of the hands of hackers, foreign governments, and political actors. The Government Accountability Office, the Treasury Inspector General for Tax Administration, and watchdog groups like NTUF have all pointed out that the IRS is vulnerable and needs to better secure taxpayer data and nonprofit donor data. When a breach does happen, as in the case of Charles Littlejohn, the government only minimally pursues the leaker of donor information. Littlejohn, though he accessed and disclosed 78,761 tax returns and nonprofit donor data comprising information from 406,000 taxpayers, was charged with only a single count of disclosing information without authorization. Even so, Littlejohn is currently appealing his sentence, claiming it was too harsh.
Schedule B cannot survive exacting scrutiny. The IRS does not use the information it collects. There are better, targeted ways to enforce the tax laws already. And the IRS cannot keep the donor data secure on its own computers. It is time the IRS stops warehousing this information.
The case is Buckeye Institute v. Internal Revenue Service, et al. (6th Cir. No. 25-3170).