Charities registered in New York will no longer be required to submit Schedule B of IRS Form 990 to the New York Attorney General. Schedule B collection has been suspended as of July 30, 2021.
On July 1, 2021, the US Supreme Court held in Americans for Prosperity Foundation v. Bonta that a California law requiring charities to submit an unredacted copy of Schedule B of Internal Revenue Service (IRS) Form 990 was unconstitutional. In response to this decision, the New York Attorney General has suspended its own requirement for Schedule B donor disclosures in state reporting (CHAR 500) until further notice.
For federal purposes, Section 501(c)(3) organizations must generally provide information on donors who contribute $5,000 or more as part of their annual filing of Form 990 (as well as for Form 990-EZ and Form 990-PF). This information is reported on Schedule B of the applicable form. Several states, including New York, require organizations registered in their jurisdictions to submit a copy of their Form 990, including a complete and unredacted Schedule B, to their state attorney general. In 2018, the IRS withdrew some donor information requirements, announcing in Revenue Procedure 2018-38 that tax-exempt organizations other than Section 501(c)(3) organizations would no longer need to report the names and addresses of donors.
Numerous organizations challenged this requirement in the courts on First Amendment grounds, and the question reached the Supreme Court in Americans for Prosperity Foundation v. Bonta, 141 S.Ct. 2373 (2021). The plaintiffs in the case alleged that California’s Schedule B requirement would violate freedom of association and that it would have a chilling effect on donors. In a 6-3 decision, the Supreme Court held that California’s “blanket demand” for Schedule B was unconstitutional. The Court found that the regulations were not narrowly tailored to any substantial governmental interest and that they placed an undue burden on donors.
In reaction to the Supreme Court decision, the New York Attorney General’s Charities Bureau announced that it has suspended the collection of Form 990 Schedule B. Charities are no longer required to disclose donor information with their annual filings. The announcement further stated that “[a]ny notices that charities have received regarding any deficiency due to missing or incomplete Schedule Bs are no longer operative as to such deficiency, and annual filings will no longer be considered deficient in such regard." The Charities Bureau is reviewing the appropriate amendments to their policies, procedures, and forms. Practically, this means that New York-registered charities can simply file their public disclosure copy of the Form 990 – with a redacted Schedule B.
The suspension is effective as of July 30, 2021.
Other states have also responded to the Supreme Court decision. New Jersey, like New York, announced that the Division of Consumer Affairs would revise its rules regarding Schedule B; in the meantime, there will be no enforcement on Schedule B requirements and entities will not be deemed noncompliant because of a failure to submit Schedule B or any equivalent donor schedule. California also announced that Schedule B will no longer be required.
If you have any questions or would like more information on the issues discussed in this LawFlash please contact any of the following Morgan Lewis attorneys:
Washington, DC
Celia Roady
Caroline Waldner
New York
Tomer J. Inbar
Megan E. Bell
Elizabeth Lauren Simpson
Catherine C. Oetgen
Allison Heimann