Federal Budget Includes Bipartisan Speech and Privacy Protections for Nonprofits

March 27, 2024 | Alex Baiocco

On March 23, President Joe Biden signed the remaining appropriations bills into law, providing funding for the federal government until October 1. Included in this latest spending package are three policy riders that passed both chambers of Congress with bipartisan support restricting the federal government’s ability to pursue or adopt regulations that police and chill nonprofit advocacy and violate citizen privacy.

These policies were first included in the federal budget following revelations during the Obama administration that the Internal Revenue Service (IRS) had targeted conservative nonprofits for improper scrutiny. In the aftermath of that scandal, the IRS brazenly proposed rules that would have codified the agency’s improper role as the nonprofit speech police and exacerbated the potential for future scandals. Following federal court decisions protecting Americans’ right to associate with likeminded citizens and speak out about government actions, the Securities and Exchange Commission (SEC) and the White House also floated regulations aimed at exposing supporters of nonprofit causes.

In response to a bipartisan outcry, Congress has repeatedly prevented the IRS, SEC, and the president from pursuing rulemakings and executive orders that threaten Americans’ right to associate privately in nine consecutive annual omnibus appropriations bills spanning four Congresses led by both parties. While these riders are no substitute for protections in federal law safeguarding the advocacy rights of nonprofits and the privacy rights of their members and supporters, they are crucial to halting any adverse government action until such proactive protections can be secured.

IRS Nonprofit Disclosure Rulemaking Prohibition

A 2013 report by the Treasury Inspector General for Tax Administration found that “[t]he IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention.” Months after this report was published, the IRS proposed new regulations that would have forced nonprofits to either avoid engaging in a wide range of nonpartisan advocacy or risk being forced to publicly disclose the names and addresses of their supporters. The agency’s proposal received widespread, cross-ideological opposition from the nonprofit community, policy experts, and public officials.

As a result of the agency’s brazen attempt to increase its regulatory power over advocacy organizations and mandate donor disclosure from such groups, Congress adopted language in subsequent budget agreements preventing the IRS from pursuing new regulations to this end. This restriction on the IRS’s authority is essential to preserving nonprofits’ important contributions to public education and debate. While the policy rider has historically been adopted with bipartisan support, some Members of Congress continue to urge the IRS to renew its efforts to limit speech and demand nonprofit donor lists, highlighting the continuing importance of enacting the preventative language into law.

The text of the IRS policy rider, which prevents the agency from writing new regulations to limit political speech and force disclosure from nonprofit groups, appears in Sec. 123 on p. 71 of the spending package as follows:

Sec. 123. During fiscal year 2024—

(1) none of the funds made available in this or any other Act may be used by the Department of the Treasury, including the Internal Revenue Service, to issue, revise, or finalize any regulation, revenue ruling, or other guidance not limited to a particular taxpayer relating to the standard which is used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section 501(c)(4) of the Internal Revenue Code of 1986 (including the proposed regulations published at 78 Fed. Reg. 71535 (November 29, 2013)); and

(2) the standard and definitions as in effect on January 1, 2010, which are used to make such determinations shall apply after the date of the enactment of this Act for purposes of determining status under section 501(c)(4) of such Code of organizations created on, before, or after such date.

SEC Disclosure Rulemaking Prohibition

Much like the partisan pressure campaigns that culminated in the 2013 IRS targeting scandal, efforts to use the SEC to police nonprofit advocacy can be traced back to the aftermath of the U.S. Supreme Court’s landmark decision in Citizens United v. FEC. Immediately following the Court’s 2010 ruling recognizing the First Amendment rights of nonprofits, businesses, and labor unions to participate in public debate about government policy, opponents of the decision began inventing harebrained schemes to undermine those rights.

While federal law already requires businesses and nonprofits to report political expenditures and PAC contributions – and Citizens United did not strike down those disclosure requirements – activists and lawmakers seeking to blunt the advocacy rights freed by Citizens United began focusing on expanding campaign finance disclosure requirements to apply to nonprofit issue speech unrelated to election campaigns. With the continued failure of anti-privacy legislation like the DISCLOSE Act, privacy opponents turned to pressuring non-expert agencies like the SEC and IRS to change the law via regulation. Fortunately, SEC officials took a different path than rogue IRS officials like Lois Lerner, but the Commission did seriously consider adopting regulations being demanded by the anti-Citizens United lobby.

After the IRS demonstrated the massive potential for harm when non-expert agencies attempt to regulate highly sensitive, First Amendment-protected activity, Congress has continually included budget riders barring the SEC from implementing any rule or regulation requiring the disclosure of contributions to tax-exempt organizations or dues paid to trade associations. Still, some in Congress have continued to pressure SEC officials to take up their anti-privacy agenda. Fortunately, with the enactment of the latest appropriations package, the agency will be prevented from doing so – at least until this budget expires.

The text of the SEC policy rider, which prohibits the agency from using funding to require businesses to disclose their giving to political causes, tax-exempt organizations, and trade associations, appears in Sec. 633 on p. 113 of the spending package as follows:

Sec. 633. None of the funds made available by this Act shall be used by the Securities and Exchange Commission to finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.

White House Contractor Disclosure Executive Order Prohibition

Twice during the Obama Administration, in 2011 and 2016, the White House seriously considered issuing an Executive Order requiring government contractors to detail their political and issue advocacy as a condition of bidding on a federal contract. Twice, the effort was abandoned after facing bipartisan opposition in Congress, including from then-House Minority Leader Steny Hoyer (D-MD) and then-Senators Joe Lieberman (D-CT), Claire McCaskill (D-MO), and Rob Portman (R-OH), over fears of politicizing the government-contracting process.

As Congressman Hoyer explained in 2011, “The issue on contracting ought to be on the merits of the contractors’ bid and capabilities… I think there are some serious questions as to what implications there are if somehow we consider political implications in the context of awarding contracts.” For his part, Senate Republican Leader Mitch McConnell (R-KY) characterized the White House’s plans as “an effort to silence or intimidate political adversaries’ speech through the government contracting system.”

Without the budget rider blocking the president from taking executive action to expose the advocacy efforts of potential government contractors, nonprofits could find their supporters exposed simply because they received contributions or membership dues from a business seeking a federal contract. The inclusion of this rider in the latest budget prevents this scheme from rearing its ugly head yet again, at least until the expiration of the current budget agreement.

The text of the White House policy rider, which blocks the president from issuing an Executive Order to require government contractors to detail their political and issue advocacy as a condition of bidding on a government contract, appears in Sec. 735 on pp. 121-122 of the spending package as follows:

Sec. 735. (a) None of the funds made available in this or any other Act may be used to recommend or require any entity submitting an offer for a Federal contract to disclose any of the following information as a condition of submitting the offer:

    1. Any payment consisting of a contribution, expenditure, independent expenditure, or disbursement for an electioneering communication that is made by the entity, its officers or directors, or any of its affiliates or subsidiaries to a candidate for election for Federal office or to a political committee, or that is otherwise made with respect to any election for Federal office.
    2. Any disbursement of funds (other than a payment described in paragraph (1)) made by the entity, its officers or directors, or any of its affiliates or subsidiaries to any person with the intent or the reasonable expectation that the person will use the funds to make a payment described in paragraph (1).

(b) In this section, each of the terms ‘‘contribution’’, ‘‘expenditure’’, ‘‘independent expenditure’’, ‘‘electioneering communication’’, ‘‘candidate’’, ‘‘election’’, and ‘‘Federal office’’ has the meaning given such term in the Federal Election Campaign Act of 1971 (52 U.S.C. 30101 et seq.).

*             *             *

These federal budget riders protect Americans and the nonprofits they support from regulatory and executive actions that bypass majority support in Congress and satisfy shortsighted, partisan goals. Privacy opponents have consistently failed to earn the support of Congress or the courts in pursuit of their draconian objectives. The Federal Election Commission, largely due to its unique bipartisan structure and expertise on the First Amendment sensitivities of disclosure requirements, has also proved to be infertile ground for anti-privacy extremists’ regulatory demands. As a result, non-expert agencies and actors like the White House have become the primary targets of their pressure campaigns.

With attacks on nonprofit advocacy and donor privacy coming from members of both parties, these policies continue to provide essential protections for nonprofits and their supporters.