In response to the Supreme Court’s recent ruling in Citizens United,
new legislation has been introduced that may directly affect the disclosure
requirements of tax-exempt 501 (c) organizations. The decision struck down the
long-standing prohibition on corporations using general treasury funds to make
independent expenditures. See
United Changed Landscape: May Produce Some Landmines for Nonprofit Organizations
Citizens United Alerts Landscape for Corporate Political Spending: Issues to
Various bills and joint resolutions have been introduced in the House of
Representatives and the U.S. Senate  that would require increased disclosure
for tax-exempt organizations. Under these proposals, the identity of certain
donors to section 501(c) organizations would have to be publicly disclosed
through traditional mechanisms or the current disclaimer provisions of the
Federal Election Campaign Act (FECA). FECA requires disclosure of any donations
that exceed the threshold independent expenditure of $200 made to further
The Supreme Court upheld the current disclosure rules, because they did not
burden the ability to speak unless there was “reasonable probability that donor
would be subject to harassments or reprisals.”
However, several of the proposals go beyond present law by requiring that
public disclosure of certain donors be made regardless of the purpose for which
the money was donated or used. The possibility has been raised that there is a
constitutional limitation on the ability of Congress to require disclosure when
there is no mechanism by which the organization could limit such disclosure.
For example, a constitutional issue may arise for donors who make
non-earmarked contributions. They are in effect supporting the entirety of the
organization’s activities, but whether the government could require disclosure
simply because the organization happens to be engaged in limited campaign
activity, remains in question.
Another proposal is to enact an excise tax on corporate campaign-related
expenditures permitted under Citizens United under section 501(c). Congress has
constitutional broad powers to tax, having enacted similar excise taxes on
political activities of 501(c)(3) public charities under section 4955, private
foundations under section 4945, and other 501(c) organizations under section
In fact, the Supreme Court has also upheld provisions that provide
disfavorable tax treatment to campaign accounts under the rationale that there
is no requirement for the federal government to subsidize the constitutional
rights of taxpayers. See Cammerano v. United States, 358 U.S. 498 (1959).
However, there is a constitutional argument that the tax might be a restriction
on speech, similar to the prohibitions struck down in Citizens United.
If these proposed excise taxes are viewed as an over broad restriction on
political speech, they would be subject to a higher standard of strict scrutiny.
In other words, they would need to serve a compelling government interest and be
drafted narrowly enough to achieve that end. We will have to await further
congressional action and potential litigation, if necessary, before such
judgment can be made. For a detailed discussion of the constitutional issues
surrounding this controversial decision, see CRS Report,
After Citizens United v. FEC. Constitutional and Legal Issues dated March 8, 2010.
McGuireWoods’ nonprofit lawyers are available to address any of your
questions and to keep you informed as developments occur in this important area.
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1. Legislation introduced in the 111th Congress, H.Con.Res.
13, H.J.Res. 13, H.J.Res. 68, H.J.Res. 74, H.R. 158, H.R. 1095, H.R. 1826, H.R.
2038, H.R. 2056, H.R. 3574, H.R. 3859, H.R. 4431, H.R. 4432, H.R. 4433, H.R.
4434, H.R. 4435, H.R. 4487, H.R. 4510, H.R. 4511, H.R. 4517, H.R. 4522, H.R.
4523, H.R. 4527, H.R. 4537, H.R. 4540, H.R. 4550, H.R. 4583, H.R. 4617, H.R.
4630, H.R. 4644, S.J.Res. 28, S. 133, S. 752, S. 2954, S. 2959, and S. 3004.