Saturday, December 17, 2016

Lawsuit Filed Against NY Disclosure Laws Hitting 501c3s and 501c4s

On Dec. 12th, 2016, in the United States District Court Southern District of New York, Citizens Union of The City of New York and Citizens Union Foundation, Inc. of The City of New York, filed Case 1:16-cv-09592 against The Governor Of The State of New York, in his official capacity; The Members of The Joint Commission on Public Ethics, in their official capacities; The Executive Director of The Joint Commission on Public Ethics, in his official capacity; and The Attorney General of The State of New York , in his official capacity.


1. Plaintiffs are affiliated educational and social welfare organizations that promote informed public discourse on matters of public concern in New York State and New York City. They bring this action to vindicate their rights, and the rights of their members and donors, under the First Amendment to the United States Constitution. Specifically, Plaintiffs seek declaratory and injunctive relief from the implementation and enforcement of two newly enacted, unconstitutionally broad provisions of the New York Executive Law, codified at sections 172-e and 172-f (the “Nonprofit Disclosure Provisions”), that will require public disclosure of broad
swaths of donors and donations to nonprofit organizations, even when those donors and donations are supporting speech on matters of public concern but are far removed from elections
or electioneering.

2. The First Amendment guarantees the bedrock constitutional rights to speak on matters of public concern and to associate for that purpose. It is well-settled that disclosure laws burdening these rights—which receive the protection of the First Amendment at its zenith—must be substantially related to a sufficiently important government interest. Although the government possesses significant interests in requiring certain kinds of disclosures in order to prevent quid pro quo corruption and to ensure the integrity of the electoral process, the Nonprofit Disclosure Provisions cannot possibly be justified by these government interests.

3. In particular, the Nonprofit Disclosure Provisions are unconstitutionally overbroad, regulating not only speech for or against candidates for public office but also infringing on core political speech unrelated to corruption or elections. Specifically, the Nonprofit Disclosure Provisions now require, without any nexus to elections or corruption, broad public disclosures of donations and donor identities from (1) certain tax-exempt organizations that contribute money or services to another organization engaging in lobbying, even if the contribution and the lobbying activities are wholly unrelated, and (2) certain tax-exempt organizations that speak out on any matter of public concern, i.e., any issue of civil, social, or political importance, at any time. These sweeping provisions go far beyond electoral transparency and accountability; instead, they impermissibly burden the everyday, citizen-to-citizen dialogue at the heart of First Amendment.

4. The challenged act, Chapter 286, was signed into law on August 24, 2016. Part F of the act, codified at N.Y. Executive Law § 172-e, took effect on November 22, 2016. Part G of the act, codified at N.Y. Executive Law § 172-f, took effect on September 23, 2016. Both sections require organizations like Plaintiffs to file reports, after the close of two semi-annual reporting periods, publicly disclosing information about the organizations’ donors and certain donations or expenditures.

5. The first semi-annual reporting period will end on December 31, 2016. As written, the first reports under the new laws must be filed with the New York State Department of Law within thirty days of the period’s end—by January 30, 2017. Once received by the Departmentof Law, the reports must then be made available to the public on either the Department of Law’s website or the website of the Joint Commission on Public Ethics (the “JCOPE”), depending on the provision at issue, within the same thirty-day period. As a result, New York nonprofit organizations like Plaintiffs will have their disclosures made public by the end of January 2017.

6. The burdens imposed on Plaintiffs and similar organizations by the Nonprofit Disclosure Provisions are significant. First, the provisions impose direct burdens on the organizations by expanding their recordkeeping and compliance costs. More than simply disclosing existing tax forms like an IRS Schedule B, the law requires the filing of new reports with different criteria. The creation and preparation of these reports require significant investigation and ongoing monitoring efforts by covered organizations, particularly because the law requires certain covered entities to monitor even their donees’ activities—over which they may have no control in order to determine whether the covered entities need to file disclosures.

7. Moreover, social welfare organizations covered by section 172-f must track and report all instances of their public speech, as well as that of third parties to whom they contribute, that fall within the broadly defined statute, which in many cases may comprise a substantial amount of
their programming.

8. These burdens chill speech by forcing both donors and the organizations to make choices between exercising speech and association rights and subjecting themselves to burdensome obligations and public disclosures. The Nonprofit Disclosure Provisions require donors to choose between making contributions over the dollar threshold—and thus face public disclosure of their names and addresses on a government website, subjecting them to whatever might result—and limiting or forgoing association with organizations they would otherwise support. The disclosure requirements also chill speech by organizations who may wish to contribute to other organizations but who may not want to undertake the burdens of compliance and reporting, or the risk of liability.

9. Plaintiffs are aware of donors who intend to limit their contributions or will decline to donate altogether, out of a desire to avoid public disclosure of their names and addresses. As Plaintiffs near the end of the calendar year, they face immediate harm in the form of a loss of donations as former or potential donors’ speech is chilled. This in turn directly chills Plaintiffs’ speech by limiting Plaintiffs’ ability to create and disseminate communications.

10. Accordingly, the Nonprofit Disclosure Provisions are facially overbroad and will inflict irreparable harm on Plaintiffs and others similarly situated if they are not stayed prior to the end of January 2017. Plaintiffs therefore bring this action and ask the Court to: (1) declare that the Nonprofit Disclosure Provisions are void because they violate the First Amendment, and (2) enjoin the implementation or enforcement of the unconstitutional provisions.

11. Plaintiff Citizens Union of the City of New York (“Citizens Union”) is a nonprofit corporation organized under the laws of the State of New York and exempt from taxation under 26 U.S.C. § 501(c)(4). Its principal place of business is located at 299 Broadway, New York, New York, 10007. Citizens Union is a nonpartisan organization of citizens dedicated to securing honest and efficient government for the people of the City of New York. Citizens Union brings
New Yorkers together to strengthen our democracy and improve our City. Nonpartisan and independent, it aims to build a political system that is fair and open to all, values each voice, and engages every voter. As New York’s democratic reform organization, it informs, empowers, and organizes citizens to strengthen the integrity of the city and state’s political institutions. It fights against corruption, works to reform the state’s voting and electoral systems, and presses for city and state governments that are transparent, accountable, and effective.

12. Plaintiff Citizens Union Foundation, Inc. of the City of New York (“Citizens Union Foundation”) is a nonprofit corporation organized under the laws of the State of New York and exempt from taxation under 26 U.S.C. § 501(c)(3). Its principal place of business is located at 299 Broadway, New York, New York, 10007. Citizens Union Foundation conducts research, engages in public education, and analyzes public policy proposals, seeking increased civic participation as well as open, transparent, and responsive municipal and state government.

13. Defendants the Members of the Joint Commission on Public Ethics (the “JCOPE Members”) are fourteen individuals, each appointed to serve on the JCOPE. See N.Y. Exec. Law § 94[2]. The JCOPE is an independent agency of the State of New York with jurisdiction over statewide elected officials, members and employees of the legislature, state officers and employees, candidates for statewide elected office and legislature, political party chairmen, lobbyists, and individuals who have formerly held any of these roles. See N.Y. Exec. Law § 94[1]. The JCOPE Members act in their statutory roles to ensure compliance with the State’s ethics and lobbying laws and regulations, in addition to issuing advisory opinions. See N.Y. Exec. Law § 94[9]–[18]. Pursuant to section 172-e[3], the JCOPE Members have the responsibility to publish the financial disclosure reports required by the law on their publicly available website. N.Y. Exec. Law § 172-e[3]. The current JCOPE Members are Marvin E. Jacob; Seymour Knox IV; Eileen Koretz; Gary J. Lavine; J. Gerard McAuliffe, Jr.; David A. Renzi; Renee R. Roth; Michael K. Rozen; Dawn L. Smalls; and George H. Weissman. They aresued in their official capacities only.

14. Defendant the Executive Director of the Joint Commission on Public Ethics (the “JCOPE Executive Director”) is appointed by majority vote of the JCOPE Members; he may be delegated authority to act in the name of the commission between meetings of the JCOPE. See N.Y. Exec. Law § 94[9][a]. The current JCOPE Executive Director is Seth H. Agata. He is sued in his official capacity only.

15. This Court has original jurisdiction pursuant to 28 U.S.C. § 1331.

16. Venue is proper in the Southern District of New York pursuant to 28 U.S.C. § 1391, because the acts triggering disclosure and the monitoring, preparing, and disclosing of the required reports will occur at Plaintiffs’ principal place of business in New York County.

The First Amendment Protects Speech And Association And Bars Laws That Burden Political Speech But Are Not Related To Corruption Or Elections.

17. The First Amendment to the United States Constitution provides that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.

CLICK HERE to read the 74 page (PDF) Lawsuit.

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