What Social Science Tells Us About Forced Donor Disclosure

Mar 15, 2024 | by
  • Description

In recent years, there have been numerous state and federal efforts to change or create disclosure rules to force the public disclosure of donors to nonprofit organizations, with particular focus on 501(c)(4) social welfare organizations (with some attention also paid to 501(c)(3) charitable organizations). And, as the states and Congress consider, and sometimes enact, changes to disclosure laws, the jurisprudence around disclosure is evolving. This is seen most notably in the major U.S. Supreme Court decision Americans for Prosperity Foundation v. Bonta (AFPF), which struck down a California rule mandating that charities reveal many of their donors to the government. The AFPF decision has spurred subsequent litigation to address questions left unanswered by the decision. 

The rhetoric around forced donor disclosure is heated. For instance, Senator Sheldon Whitehouse, in advocating for broadened disclosure requirements, refers to the "toxic flood of dark money" that has allowed the wealthy and interest groups to "rig the system secretly in their favor." But, given the legislative and legal activity surrounding disclosure, it is important to move beyond such rhetoric and assess donor disclosure from a social scientific perspective, using the lens of cost-benefit analysis. This paper will show the benefits of forced donor disclosure fall far short of what its proponents claim.

The next section lays out the legal rationale for disclosure, with a focus on campaign finance disclosure (which is closely related to nonprofit disclosure). From there, it shows empirical research raises questions about the legal rationale for disclosure, focusing primarily on the purported informational benefits of disclosure. Then, it addresses the more limited empirical research on disclosure costs. Finally, it covers how one can understand disclosure laws through the lens of an economic theory known as public choice.