N.Y. Proposes To Amend Its Donation Disclosure Rules
N.Y. Proposes To Amend Its Donation Disclosure Rules

Barely six months after the nation’s highest court ruled on a donor disclosure case, New York State Attorney General’s Office has proposed regulations that would require nonprofits to submit a redacted Schedule B as part of their annual filings with state charity regulators.

Under the proposed rule, published in the New York State Register, public charities required to make annual filings of the CHAR500 form would have to provide either a copy of Schedule B with the names and addresses of contributors redacted, or a statement of the gross amount of contributions received during the reporting period from individuals and entities residing or domiciled in New York.

Public comment on the proposed rulemaking is open until Jan. 30.

Following a Supreme Court decision last summer, New York was among three states to discontinue collecting Schedule B of the federal nonprofit tax Form 990, which lists donors who contribute more than $5,000, or 2% of total gifts, to a nonprofit. The other two states were California and New Jersey. The nation’s highest court struck down a California requirement that nonprofits fundraising in the state submit Schedule B to the Attorney General’s Office.

The New York AG’s Office, however, was the only one of the three states that “suspended” collection while it “reviews any amendments that might be necessary to policies, procedures and forms” to comply with decision in Americans for Prosperity Foundation v. Bonta.

The Attorney General’s Office amended the regulation to eliminate the requirement to file names and addresses in Schedule B, in compliance with the Supreme Court decision, according to a source familiar with the proposal.

The California Registry of Charitable Trusts no longer required the filing of Schedule B, effective July 1, 2021, as part of registration and annual reporting requirements for nonprofits. The New Jersey Division of Consumer Affairs Charities Registration Section posted a statement on its website after the Supreme Court decision that the requirement to submit Schedule B “upfront as part of their initial and yearly registrations can no longer be enforced.”

The IRS requires that tax-exempt entities file a Schedule B but specific donor information is redacted from the publicly available document. State charities regulators can still request or subpoena the documents in the course of an investigation but cannot collect it as a matter of routine, which is what California demanded, leading to the litigation.

Lloyd Hitoshi Mayer, a professor at Notre Dame Law School, said the regulation makes it easy for a charity to avoid sharing any information that could identify donors. “If the only option to comply with them was to file a redacted Schedule B, I could imagine a possible legal challenge based on alleged issues rising from some charities failing to redact their schedules adequately or the non-redacted information in rare cases somehow revealing a donor’s identity,” he said via email. “By simply reporting the aggregate amount of contributions from New York sources, which creates no risk of revealing donor identities, the regulations appear to be fully insulated from any constitutional challenge” based on the Supreme Court decision.