BILL ANALYSIS Ó
AB 2219
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Date of Hearing: March 29, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 2219
(Wagner) - As Introduced February 18, 2016
As Proposed to be Amended
SUBJECT: ATTORNEY GENERAL: SCHEDULE OF DONORS: CONFIDENTIALITY
KEY ISSUES:
1)SHOULD THE ATTORNEY GENERAL BE PROHIBITED FROM RELEASING TO
THE PUBLIC INFORMATION ABOUT CHARITABLE DONORS THAT IS
REPORTED TO THE ATTORNEY GENERAL PURSUANT TO HER AUTHORITY TO
REGULATE CHARITABLE ORGANIZATIONS, IN LIGHT OF THE FEDERAL LAW
THAT EXEMPTS SUCH DOCUMENTS FROM PUBLIC DISCLOSURE BY THE IRS?
2)SHOULD THE RULES ABOUT THE ATTORNEY GENERAL'S DISCLOSURE OF
INFORMATION COLLECTED AND RETAINED ABOUT CHARITABLE
ORGANIZATIONS BE UPDATED AND CLARIFIED?
SYNOPSIS
This bill is inspired by an ongoing legal dispute between
California's Attorney General (AG), Kamala Harris, and the
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charitable organizations she regulates. As originally
introduced, this was a sweeping bill that sought to not only
prohibit the AG from disclosing donor information that is
reported to the AG pursuant to her authority to regulate
charitable organizations, but also to impose civil liability on
the AG, her agents, her employees, and anyone who received the
information from the AG. The original language was unreasonable
and unworkable for many reasons. It applied large monetary
penalties for disclosure of the donor information, even when
such disclosure was unintentional or authorized by other laws.
Also, it failed to acknowledge the mandatory "presentation"
requirement for claims brought against the state, which would
apply to any civil action against the AG and the fact that a
state employee cannot be held personally liable for an act or
omission while exercising the discretion vested in them as
public employees. (Government Code Section 820.2.) Also, among
other issues, the proposal could not be harmonized with the
Information Practices Act (IPA), which prohibits, subject to
certain exceptions, state agencies from disclosing an
individual's personal information and provides remedies to the
individual adversely affected by an agency's failure to comply
with the provisions of the IPA, but protects state employees
from liability so long as they are acting in their official
capacity. (Civil Code Section 1798.53.)
As proposed to be amended, this bill is far more limited. It
merely clarifies what is likely already implied in state law:
that although all records retained by the AG are presumed to be
public and open, some records, including Forms 990, are
confidential because they are protected from public disclosure
by other state or federal law. Proposed amendments also update
Section 12590 of the Government Code, the statute governing
records that the AG retains about charitable organizations and
whether those records are public, to account for revisions to
the Uniform Supervision of Trustees for Charitable Purposes Act,
upon which Section 12590 was modeled, which was revised in 2010.
This author-sponsored bill has no registered support or
opposition on file.
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SUMMARY: Prohibits the public disclosure of confidential
information, including donor information reported by charitable
organizations to the AG. Specifically, this bill clarifies that
although all records reported by charitable organizations to the
AG are generally public, the following records are not public
and must be withheld from public inspection:
1)Any report filed with any other governmental agency of this
state, another state, the United States, or any government
subdivision thereof which is required by law to be kept
confidential.
2)Upon request of a charity or charitable fiduciary, any part of
a document filed with the Attorney General which does not
relate to charitable purposes or charitable assets and that is
not otherwise a public record.
3)Donor information that is exempt from public inspection
pursuant to subparagraph (A) of paragraph (3) of subdivision
(d) of Section 6104 of the Internal Revenue Code, except for
one of the following reasons:
a) In a court or administrative proceeding brought pursuant
to the Attorney General's charitable trust enforcement
responsibilities.
b) In response to a search warrant.
EXISTING LAW:
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1)Requires the Attorney General to establish and maintain a
register of charitable corporations, unincorporated
associations, and trustees subject to this article and of the
particular trust or other relationship under which they hold
property for charitable purposes and to obtain from public
records, court officers, taxing authorities, trustees, and
other sources, whatever information, copies of instruments,
reports, and records are needed for the establishment and
maintenance of the register. (Government Code Section 12584.
All further statutory references are to this code, unless
otherwise indicated.)
2)Requires every charitable corporation, unincorporated
association, and trustee subject to this article to file with
the Attorney General an initial registration form, under oath,
within 30 days after the corporation, unincorporated
association, or trustee initially receives property. (Section
12585 (a).)
3)Requires the Attorney General to adopt rules and regulations
as to the contents of the initial registration form and the
manner of executing and filing that document or documents.
(Section 12585 (b).)
4)By regulation, requires every charitable corporation to file
with the Attorney General periodic written reports, under
oath, setting forth information as to the nature of the assets
held for charitable purposes and the administration thereof by
such corporation, including the following:
a) The Annual Registration Renewal Fee Report must be filed
with the Registry of Charitable Trusts annually by all
registered charities.
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b) Internal Revenue Service Form 990 must be filed on an
annual basis with the Registry of Charitable Trusts, as
well as with the Internal Revenue Service. (11 CCR § 301.)
1)Provides, except as otherwise provided by statute, that a
public entity is not liable for an injury, whether such injury
arises of an act or omission of the public entity or a public
employee or any other person. (Section 815.)
2)Provides that public employees are not liable for any damages
caused by an act or omission exercised in the discretion
vested in them. (Section 820.2.)
3)Provides, under the Public Records Act (PRA), that all public
agency records are open to public inspection upon request,
unless the records are otherwise exempt from public
disclosure. (Section 6250 et seq.)
4)Exempts from disclosure in response to a PRA request "Records,
the disclosure of which is exempted or prohibited pursuant to
federal or state law." (Section 6254 (k).)
5)Allows any agency to open its records concerning the
administration of the agency to public inspection, unless
disclosure is otherwise prohibited by law. (Section 6254
(f).)
6)Exempts, under federal law, the name or address of any
contributor to a charitable organization, from the general
rule that tax information filed by charitable organizations is
required to be disclosed by the IRS to the public upon
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request. (Internal Revenue Code Section 6104 (d)(3)(A).)
FISCAL EFFECT: As currently in print this bill is keyed fiscal.
COMMENTS: State law, including the Supervision of Trustees and
Fundraisers for Charitable Purposes Act, set forth in Sections
12580 et seq., vests the Attorney General (AG) with broad
authority to monitor and regulate charitable organizations and
public benefit corporations, including the power to require such
organizations to furnish information and reports. (Sections
12598 (a), 12581, 12584, 12586.) Pursuant to state regulations,
charitable organizations must file, among other things, a
complete copy of the IRS Form 990 they are required to file with
the IRS, including a Schedule B that identifies their major
donors. (See, e.g., Cal. Code Regs. tit. 11, Section 301
(2014).)
Pursuant to the authority cited above, the AG's Office sent
letters to charitable organizations registered with the State of
California in 2014, instructing them to submit to the AG
complete and un-redacted copies of their Form 990s, including
Schedule B information about their donors. Two of the
organizations that received the letters, Americans for
Prosperity (AFP) and the Center for Competitive Politics (CCP),
refused to comply with the AG's request and sued in federal
court to enjoin enforcement of her demand.
(According to media reports, AFP is a conservative 501(c)(4)
organization that spends money in support of Republicans and
against Democrats. The group, like its forerunner organization
Citizens for a Sound Economy, was founded with the financial
support of libertarian billionaire businessmen David and Charles
Koch.
( https://www.opensecrets.org/orgs/summary.php?id=D000024046 .)
The Center for Competitive Politics claims to be "America's
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largest nonprofit working to promote and defend First Amendment
rights to free political speech, assembly, and petition."
( http://www.campaignfreedom.org/ ) "With financial support that
came largely from individuals he declines to name, [Bradley]
Smith opened the Center for Competitive Politics a year later to
begin challenging the current campaign finance system in both
federal court and the court of public opinion. His first target
is rules applying to independent, outside groups, not those
imposed on candidates and political party committees."
http://www.politico.com/story/2008/08/conservatives-plot-on-campa
ign-finance-012460#ixzz43mM36ToT )
AFP's complaint alleged that the AG's request for the Form 990
with complete donor information violated the Supremacy Clause,
the First Amendment, and 42 U.S.C. Section 1983 (which provides
the right for a civil action based upon deprivation of any
rights, privileges, or immunities secured by the Constitution).
The federal district court ruled against AFP on the merits of
all of its claims. Among other things, the district court
rejected its Supremacy Clause arguments, noting that there is no
evidence that Congress intended to "prevent state agencies from
making requests for tax information such as Defendant's directly
from 501(c)(3) organizations in the language of Section 6104, or
any other section of the [Internal Revenue Code]." The court
also rejected AFP's field and conflict preemption arguments on
the basis that the Internal Revenue Code applies only to the
disclosure of tax information filed with the IRS that could be
disclosed to the public by the IRS, not to documents that state
attorneys general seek from taxpayers or tax-exempt
organizations, citing Stokwitz v. United States (9th Cir. 1987)
831 F.2d 893, 895-896. The AFP case, argued and submitted to
the 9th Circuit in December 2015, is pending decision by the
Court of Appeal. (See Americans for Prosperity Foundation v.
Harris, 809 F.3d 536.)
In Center for Competitive Politics v. Harris, CCP argued that
federal tax law preempted the Attorney General from obtaining
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the Form 990 with complete donor information. CCP argued that
Congress intended to protect the privacy of information about
donors to non-profit organizations from all public disclosure
when it added 26 U.S.C. Section 6104, part of the Pension
Protection Act of 2006, to the Internal Revenue Code and that
allowing state attorneys general to require non-profit
organizations to provide the information would conflict with
that purpose. The 9th Circuit found CCP's argument to be
"unavailing." (Ctr. for Competitive Politics v. Harris (9th Cir.
2015) 784 F.3d 1307, 1318.) Instead, the court found that
Section 6104 "may support an argument that Congress sought to
regulate the disclosures that the IRS may make, but they do not
broadly prohibit other government entities from seeking that
information directly from the organization." (Id., at p. 1319
[emphasis added].)
Nor do they create a pervasive scheme of privacy
protections. Rather, these subsections represent exceptions
to a general rule of disclosure. Thus, these subsections do
not so clearly manifest the purpose of Congress that we
could infer from them that Congress intended to bar state
attorneys general from requesting the information contained
in Form 990 Schedule B from entities like CCP. (Ibid.)
California is not alone in its requirement for charitable
organizations to file unredacted Forms 990. At least three
other states - Hawaii, Mississippi, and Kentucky - and possibly
five according to one source, including Florida and New York,
also require unredacted versions of donor lists submitted with
the Form 990 Schedule B to be filed with state regulators.
(Ctr. for Competitive Politics v. Harris, supra, 784 F.3d at p.
1310, fn 1.)
The Public Records Act Prohibits Public Disclosure by a
Government Agency of Documents Confidential Under the PRA, or
Any Other Law, Likely Including Forms 990. California's Public
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Records Act (PRA) requires that the documents and "writings" of
a public agency be open and available for public inspection,
unless they are exempt from disclosure. (Sections 6250-6270.)
The PRA is premised on the principle that "access to information
concerning the conduct of the people's business is a fundamental
and necessary right of every person in this state." A "public
record" is defined to mean "any writing containing information
relating to the conduct of the public's business prepared,
owned, used, or retained by any state or local agency regardless
of physical form or characteristics." (Section 6252 (e).)
However, not all public records are required to be disclosed by
a government agency upon request. The PRA does not "require the
disclosure of any of the following records" (Section 6254) and
lists a number of specific documents and types of documents,
including "Records, the disclosure of which is exempted or
prohibited pursuant to federal or state law, including but not
limited to, provisions of the Evidence Code relating to
privilege." (Section 6254 (k).)
The exemption from public disclosure under subdivision (k) of
Section 6254 is permissive, not mandatory. (Marken v. Santa
Monica Malibu Unified Sch. Dist. (2012) 202 Cal.App.4th 1250,
1270.) However, where public disclosure is prohibited under
state or federal law, the responsible California agency is also
prohibited from publicly disclosing the records. Subdivision (f)
of Section 6254 provides that "[t]his section shall not prevent
any agency from opening its records concerning the
administration of the agency to public inspection, unless
disclosure is otherwise prohibited by law." If public
disclosure (distinct from disclosure to the Attorney General) of
significant donor information is not authorized by federal law,
it is likely not authorized by the Attorney General (or any
other government agency) to the public under California law,
either.
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While it is not entirely clear that federal law makes the Form
990 with complete donor information confidential and therefore
exempts it from public disclosure by any government entities
other than the IRS, it appears, based upon her briefs in the
cases discussed above, that the AG agrees that the forms are not
public records. Furthermore, the AG proposed regulations
(notice published December 11, 2015) to clarify that any Form
990 reported to her pursuant to her authority to regulate
charitable organizations is not a public record. The AG's
office states that the proposed regulations "codify the Attorney
General's practice to exempt donor information from public
disclosure" but allow the information to be disclosed under the
following very limited circumstances:
(1) In a court or administrative proceeding brought
pursuant to the Attorney General's charitable trust
enforcement responsibilities.
(2) In response to a search warrant.
( http://oag.ca.gov/sites/all/files/agweb/pdfs/charities/pdf/
notice-mod-proposed-text-regs-schedule-b.pdf )
While it seems reasonable to codify that Form 990 information
received by the AG is exempt from public disclosure in response
to a PRA request, the exemption does not need to be placed in
Section 6254, as originally proposed by this bill. Subdivision
(k) of Section 6254 incorporates the exemption for all
"[r]ecords, the disclosure of which is exempted or prohibited
pursuant to federal or state law" into the PRA. A more
appropriate place to codify the non-public nature of Form 990 is
Section 12590, as done by the proposed amendments, because it
specifically addresses the subject of records collected and
retained by the AG pursuant to her authority to regulate
charitable organizations.
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Revisions to Section 12590 to Conform with Revised Uniform Act.
Section 12590 currently provides as follows:
12590. (a) Subject to reasonable rules and regulations
adopted by the Attorney General and except as provided in
subdivision (b), the register, copies of instruments, and
the reports filed with the Attorney General shall be open
to public inspection. The Attorney General shall withhold
from public inspection any instrument so filed whose
content is not exclusively for charitable purposes.
Section 12590 was drafted in 1959, modeled on the 1954 Uniform
Supervision of Trustees for Charitable Purposes Act. It has not
been revised since 1959 and there is no case law interpreting
its meaning. The second sentence of this section seems
problematic. Information submitted to the AG should not be
withheld from public disclosure just because it is "not
exclusively for charitable purposes." Considering the strong
preference in California law for government records to be open,
records about charitable organizations that are retained by the
AG should not be withheld because the "content is not
exclusively for charitable purposes." If the record is in the
AG's possession, it's a government record that is presumed to be
public and open, regardless of the purpose for which it is
retained by the AG or for which it was submitted or used by the
charity. Records should be withheld from the public because
they are confidential, or not withheld at all.
Fortunately, the model act that was the template for Section
12590 has been updated. Now called the Supervision of Trustees
and Fundraisers for Charitable Purposes Act, it was revised in
2010. Section 5 of the revised model act is entitled "Public
Inspection of Register." It is clearly very similar to Section
12590. At the same time, it has been significantly altered and
updated. The comments to the revised section explain the
reasons for the revisions:
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Charity regulators involved in the drafting process noted
that availability of information to the public serves an
important function. The Act opens the registration and
supporting documents to the public, with the exception of
documents made confidential by any other law and, upon
request of a charity or charity fiduciary, any part of a
document that does not relate to charitable assets and is
not otherwise a public record.
As updated by the revised model act, the provision similar to
the problematic second sentence of Section 12590 is far more
specific and limited, applying only to records that are
confidential. In order to incorporate the revised model act's
revisions into Section 12590, the author has agreed to delete
the problematic second sentence of Section 12590 and add the
following exceptions to the general rule in Section 12590 that
documents submitted to the AG are confidential:
(1) Any report filed with any other governmental agency of
this state, another state, the United States, or any
government subdivision thereof which is required by law to
be kept confidential.
(2) Upon request of a charity or charitable fiduciary, any
part of a document filed with the Attorney General which
does not relate to charitable purposes or charitable assets
and that is not otherwise a public record.
Findings About Legislative Intent to Limit Public Access to
Donor Information. The people of California have the right,
protected by our state constitution, "of access to information
concerning the conduct of the people's business." (Cal. Const.,
art. I, sec. 3.) Whenever a statute limits the right of the
public to access government information, the statute must be
"adopted with findings demonstrating the interest protected by
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the limitation and the need for protecting that interest."
(Ibid.)
Because the bill, as proposed to be amended by the author, will
limit the ability of the public to access donor information
submitted to the AG on Forms 990, these findings are still
necessary. Because of the proposed amendments to the bill,
including amendments to remove Section 6254 from the bill, the
findings need to be modified.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
Analysis Prepared by:Alison Merrilees / JUD. / (916) 319-2334
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