DISCLOSURES FOR EQUITY

DISCLOSURES FOR EQUITY

This Article addresses how to increase funding to nonprofit organizations that are led by minorities or serve communities of color and how to hold corporations and private foundations who make public commitments to fund these organizations accountable for those commitments. The Article makes two policy recommendations to address these problems, while engaging with Supreme Court jurisprudence on mandatory disclosures to ensure that the proposals are narrowly tailored to institutional donors and include an opt-out provision so as not to chill the constitutional protection of the freedom of association. The first is for charities to publicly disclose their institutional donors in Schedule B of Internal Revenue Service (IRS) Form 990. The second is to modify IRS Form 990 to include information on the race and ethnicity of top managers, boards of directors, and the communities an organization serves. These disclosures are crucial for determining organizations that are minority led or that serve communities of color and the institutional donors who donate to them annually. The Article addresses the benefits and tradeoffs of disclosure and how to use nudges—watchdog organizations, certifications, and the public—to implement disclosures to increase funding to minority-led and minority-serving nonprofit charities.

Introduction

Charitable contributions to nonprofit organizations amount to over $400 billion annually. 1 Charitable Giving Statistics, Nat’l Philanthropic Tr., https://www.nptrust.org/‌philanthropic-resources/‌charitable-giving-statistics/ [https://perma.cc/‌6RML-DE23] (last visited Jan. 25, 2022) (noting that Americans donated $471.44 billion in charitable contributions during 2020). In recent years, foundations and corporations have made public commitments to advance racial equity through donations to organizations that are led by racial and ethnic minorities or that serve communities of color (minority led and minority serving). 2 Corporate public commitments to social goals have increased in recent decades. Lisa M. Fairfax, Easier Said Than Done? A Corporate Law Theory for Actualizing Social Responsibility Rhetoric, 59 Fla. L. Rev. 771, 774 (2007). Since June 2020, at least fifty-five companies, from Walmart to Warby Parker, and dozens of private foundations, including Ford and Mellon, have made commitments to financially support nonprofit organizations addressing racial justice. This is distinct from commitments to support minority-owned businesses. See Alex Daniels, California Endowment Doubles Its Support for Asian American Groups to $100 Million, Chron. of Philanthropy (Apr. 12, 2021), https://www.philanthropy.com/article/california-endowment-doubles-its-support-to-asian-american-groups-to-100-million (on file with the Columbia Law Review) (noting that the California Endowment recently doubled its pledge to $100 million to nonprofits led by Asian Americans and Pacific Islanders); Alex Daniels, Foundations Pool $36 Million for Black-Led Organizing Groups, Chron. of Philanthropy (Sept. 17, 2020), https://www.philanthropy.com/‌article/foundations-pool-36-million-for-black-led-organizing-groups (on file with the Columbia Law Review) (noting that a group of grant makers pledged a total of $36 million to Black-led organizing groups); David Hessekiel, Companies Taking a Public Stand in the Wake of George Floyd’s Death, Forbes (June 4, 2020), https://www.forbes.com/sites/davidhessekiel/2020/06/04/companies-taking-a-public-stand-in-the-wake-of-george-floyds-death/ (on file with the Columbia Law Review) (“Numerous companies have made public statements against racism and injustice and announced donations and other displays of support since the death of George Floyd unleashed protests across the United States starting on May 26th.”); Press Release, MacArthur Found., Five Foundations Commit $1.7+ Billion to Nonprofit Organizations in Wake of Pandemic (June 11, 2020), https://www.macfound.org/press/press-releases/five-foundations-commit-18-billion-nonprofit-organizations-wake-pandemic [https://perma.cc/‌T27Y-TCX5] (noting five foundations “announced a joint commitment to increase their payouts to nonprofit organizations with more than $1.7 billion within the next three years to help stabilize and sustain a nonprofit sector facing devastating economic effects due to the global pandemic and the epidemic of social injustice”); Reuters, Factbox: Corporations Pledge $1.7 Billion to Address Racism, Injustice, U.S. News & World Rep. (June 9, 2020), https://www.usnews.com/news/top-news/articles/2020-06-09/factbox-corporations-pledge-17-billion-to-address-racism-injustice (on file with the Columbia Law Review) (noting that corporations have donated more than $1.7 billion to social justice causes in the wake of George Floyd’s murder); 23 Large Brands That Have Pledged More Than $1M to Social Justice Causes, Grant News (June 10, 2020), https://www.grantwatch.com/grantnews/23-large-brands-that-pledge-more-than-1m-to-social-justice-causes/ [https://perma.cc/A5PA-9W7C] (noting an increase in the number of companies donating to social justice causes and organizations); see also Veronica Root Martinez & Gina-Gail S. Fletcher, Equality Metrics, 130 Yale L.J. Forum 869, 873 (2021) (“[C]orporations’ willingness to engage with the [Black Lives Matter] movement during the summer of 2020 was unusually swift . . . .”). For a discussion of the nexus between corporate donations and operations, see, e.g., Einer Elhauge, Sacrificing Corporate Profits in the Public Interest, 80 N.Y.U. L. Rev. 733, 843–47 (2005).

This is an important move, since available research suggests that, in comparison to white-led nonprofit organizations, organizations led by or serving communities of color are chronically underfunded. 3 See, e.g., Cheryl Dorsey, Jeff Bradach & Peter Kim, Echoing Green, Racial Equity and Philanthropy: Disparities in Funding for Leaders of Color Leave Impact on the Table 11 (2020), https://www.bridgespan.org/bridgespan/Images/articles/racial-equity-and-philanthropy/‌racial-equity-and-philanthropy.pdf [https://perma.cc/C8K3-TRLE] [hereinafter Dorsey et al., Racial Equity and Philanthropy] (presenting research findings that “on average the revenues of the Black-led organizations are [24%] smaller than the revenues of their white-led counterparts”); Cheryl Dorsey, Jeff Bradach & Peter Kim, The Racial Funding Gap Can’t Continue in the Pandemic, Chron. of Philanthropy (June 2, 2020), https://www.philanthropy.com/‌article/the-racial-funding-gap-cant-continue-in-the-pandemic (on file with the Columbia Law Review) (noting funding disparities by race); Cheryl Dorsey, Peter Kim, Cora Daniels, Lyell Sakaue & Britt Savage, Overcoming the Racial Bias in Philanthropic Funding, Stan. Soc. Innovation Rev. (May 4, 2020), https://ssir.org/‌articles/‌entry/overcoming_the_racial_bias_in_philanthropic_funding [https://perma.cc/‌Y5XL-GHQJ] (same). Increased funding for minority-led or minority-serving organizations can have a profound positive impact on criminal justice, healthcare, environmental justice, housing, labor, and employment. 4 Inequalities based on race do not only impact nonprofit organizations; they also extend to individual taxation. The collection and analysis of race-based tax data for individuals is currently a live issue that scholars and policymakers are debating as a way to shine some light on who is disproportionately benefiting from tax breaks or bearing the brunt of IRS enforcement. See, e.g., Dorothy A. Brown, The Whiteness of Wealth: How the Tax Code Impoverishes Black Americans—And How We Can Fix It 202–03 (2021) (proposing the IRS publish race-inclusive tax data to better address wealth inequality); Lydia O’Neal & Allyson Versprille, Tax Code Inequities Fuel Call for IRS to Collect Race-Based Data, Bloomberg Tax (Aug. 18, 2020), https://news.bloombergtax.com/daily-tax-report/‌tax-code-inequities-fuel-call-for-irs-to-collect-race-based-data (on file with the Columbia Law Review) (discussing the absence of race-based tax data from the IRS). Indeed, it would be difficult to fight mass incarceration without the work of nonprofit charities like Bryan Stevenson’s preeminent organization, the Equal Justice Initiative (EJI). 5 See About EJI, Equal Just. Initiative, https://eji.org/about/ [https://perma.cc/‌E6VX-9X53] [hereinafter About EJI] (last visited Jan. 24, 2022) (describing the Equal Justice Initiative’s commitment “to ending mass incarceration and excessive punishment in the United States, to challenging racial and economic injustice, and to protecting basic human rights for the most vulnerable people in American society”).

Corporate philanthropists and foundations have been lauded for, and are benefiting from, their responses. 6 See, e.g., Matteo Tonello, Making the Business Case for Corporate Philanthropy, Harv. L. Sch. F. on Corp. Governance (Aug. 20, 2011), https://corpgov.law.harvard.edu/‌2011/‌08/‌20/‌making-the-business-case-for-corporate-philanthropy/ [https://perma.cc/‌QR4H-CALP] (footnote omitted) (“Corporate giving programs can provide a competitive advantage when they are well designed and carefully executed. For example, charitable contributions can increase the name recognition and reputation of a brand or company among consumers.”); Chuck Robbins (@ChuckRobbins), Twitter (June 1, 2020), https://twitter.com/ChuckRobbins/status/1267570257952043008 [https://perma.cc/‌2N7H-TECB] (showing the CEO of Cisco publicly announcing a $5 million corporate commitment to various organizations dedicated to racial justice, which was liked and shared by social media users). A recent survey reveals that people are more likely to use or stop using a brand because of a corporation’s response to calls for racial justice. 7 Edelman, Special Report: Brands and Racial Justice in America 6 (2020), https://www.edelman.com/sites/g/files/aatuss191/files/2020-06/‌2020%20‌Edelman%20‌Trust%20Barometer%20Specl%20Rept%20Brands%20and%20Racial%20Justice%20in%20America.pdf [https://perma.cc/H6AG-K62X] (finding that 60% of the U.S. general population agreed with the statement that how a brand responds to protests against racial injustice will influence their purchase and boycott behaviors); Nat Ives, Consumers Are More Likely to Use or Drop Brands Based on Racial Justice Response, Survey Finds, Wall St. J. (May 6, 2021), https://www.wsj.com/articles/consumers-are-more-likely-to-use-or-drop-brands-based-on-racial-justice-response-survey-finds-11620333257 (on file with the Columbia Law Review) (reporting on the results of a survey by the public relations firm Edelman that found “[p]eople have become more likely to use a new brand or stop using one because of its response to calls for racial justice”); see also Geeta Menon & Tina Kiesler, When a Brand Stands Up for Racial Justice, Do People Buy It?, Harv. Bus. Rev. (July 31, 2020), https://hbr.org/2020/07/when-a-brand-stands-up-for-racial-justice-do-people-buy-it [https://perma.cc/HHC7-FSXJ] (discussing how corporations can act authentically to ensure corporate actions that express solidarity with the Black Lives Matter movement resonate with consumers). This is a form of racial commodification and capitalism that benefits wealthy corporations. 8 See Nancy Leong, Racial Capitalism, 126 Harv. L. Rev. 2151, 2153–54 (2013) (identifying racial capitalism as a systemic phenomenon in which white people and predominantly white institutions derive social and economic value from nonwhiteness). Similar to corporations, private foundations, which are run by wealthy families or institutions, can benefit from public goodwill. 9 See Steven Heydemann & Stefan Toepler, Foundations and the Challenge of Legitimacy in Comparative Perspective, in The Legitimacy of Philanthropic Foundations: United States and European Perspectives 3–4 (Kenneth Prewitt, Mattei Dogan, Steven Heydemann & Stefan Toepler eds., 2006) (explaining the importance of public legitimacy to private foundations); Tanya D. Marsh, A Dubious Distinction: Rethinking Tax Treatment of Private Foundations and Public Charities, 22 Va. Tax Rev. 137, 148 (2002) (noting that private foundations were established by wealthy individuals and families).

Yet corporations and private foundations may benefit from public commitments to advance racial justice without supporting minority-led and minority-serving nonprofits. There are two reasons for this. First, there is currently no systematic data to determine whether a nonprofit organization is minority led or minority serving. 10 See infra notes 15–21 and accompanying text. Not knowing whether a nonprofit is minority led or serving communities of color may prevent financial support from going to underfunded organizations and also may exacerbate existing inequalities, such as when only a few well-known or national organizations receive funding or when some minority groups are unrecognized in philanthropical giving. 11 See, e.g., Glenn Gamboa, Billions Pledged for Racial Equity Giving Not Necessarily Adding Up to Systemic Change, Chron. of Philanthropy (June 2, 2021), https://www.philanthropy.com/article/billions-pledged-for-racial-equity-giving-not-necessarily-adding-up-to-systemic-change? (on file with the Columbia Law Review) (explaining that many organizations have yet to receive funding pledged to them); Julianne McShane, Beyond Crisis Funding: Black-Led Organizations that Saw a Surge in Donations Look for Lasting Impact, NBC News (Dec. 31, 2020), https://www.nbcnews.com/‌news/‌nbcblk/‌beyond-crisis-funding-black-led-organizations-saw-surge-donations-look-n1252539 [https://perma.cc/RYM4-LPWB] (explaining that even as relatively well-known organizations continue to receive funding, funding for organizations that are not well known has begun to dry up). Projects such as the Backing the Fight Fund were established to reach and support Black and Brown communities during the pandemic and the recent racial justice movement. But efforts are focused only on a single city. See Investing in Bold Actions for Black and Brown Lives, Chi. Beyond, https://chicagobeyond.org/‌backingthefightfund/ [https://perma.cc/57RY-B7LL] (last visited Jan. 24, 2022); see also Ctr. for Soc. Innovation, State of Philanthropy Among Asian Americans and Pacific Islanders: Findings and Recommendations to Strengthen Visibility and Impact 2 (2020), https://aapidata.com/wp-content/uploads/2020/09/aapi-state-of-philanthropy-2020-report.pdf [https://perma.cc/J3AT-5C8Y] (observing that Asian Americans and Pacific Islanders are calling for more visibility through timely, accurate, and detailed data on grantmaking and staff diversity, equity, and inclusion). For more information on diversity in the nonprofit realm, see generally Atinuke O. Adediran, Racial Allies, 90 Fordham L. Rev. 2151 (2022) [hereinafter Adediran, Racial Allies] (describing the importance of data on race and ethnicity in public interest law as a starting point towards addressing the lack of diversity among CEOs and board directors). It can also stymie individual giving because individuals may be less likely to have the resources to find minority-led or minority-serving nonprofits to which they wish to donate.

Second, there is no systematic way to determine whether these corporations and foundations that hold themselves out to fund underserved organizations are following through on their commitments, especially over time. 12 There are already early signs that corporations may not be following through on their commitments. See, e.g., Ifeoma Ajunwa, Can We Trust Corporate Commitments to Racial Equity?, Forbes (Feb. 23, 2021), https://www.forbes.com/sites/‌ifeomaajunwa/‌2021/‌02/‌23/can-we-trust-corporate-commitments-to-racial-equity/?sh=564a32424222/ (on file with the Columbia Law Review) (commenting on Google’s claim to have distributed almost all of the $12 million pledged to support “racial justice organizations” by October 2020). For example, the California Endowment has pledged to give $100 million to nonprofits led by Asian Americans and Pacific Islanders over a ten-year period. 13 The California Endowment Commits $100 Million to Asian American and Pacific Islander Communities Across California, The Cal. Endowment, https://www.calendow.org/‌the-california-endowment-commits-100-million-to-asian-american-and-pacific-islander-communities-across-california/ [https://perma.cc/6NHQ-6NPL] (last visited Jan. 25, 2022). The Endowment did not specify how it would actually do so, nor would the public know whether it actually does so. 14 Id. Similarly, Warner Brothers and Sony did not name a single organization they planned to contribute to, and Universal named only a handful. None of them specified when, exactly, the millions of dollars they promised to donate would be awarded. Drew Schwartz, A Year Ago, the ‘Big Three’ Record Companies Pledged $225 Million to Racial Justice. Where Did It Go?, Vice (May 25, 2021), https://www.vice.com/en/‌article/‌88ngp5/‌what-happened-to-the-money-record-companies-universal-sony-and-warner-pledged-to-racial-justice [https://perma.cc/EEC3-AM5C].

To currently determine whether a nonprofit is minority led or minority serving, or who its contributors are, one must wade through a range of data, including individual private foundations’ tax filings; 15 Private foundations are required to disclose their grantees or donees on IRS Form 900-PF. In addition, foundations routinely provide grantee lists on their websites and other avenues. See, e.g., Sixteen Major Donors and Foundations Commit Unprecedented $156 Million to Support Black, Latinx, Asian and Indigenous Arts Organizations, Ford Found. (Sept. 24, 2020), https://www.fordfoundation.org/the-latest/‌news/‌sixteen-major-donors-and-foundations-commit-unprecedented-156-million-to-support-black-latinx-asian-and-indigenous-arts-organizations/ [https://perma.cc/P8E7-SHAZ] (providing a list of twenty grantee organizations). cor­porate or nonprofit organizations’ annual reports that are either selective, unavailable, or not up to date; 16 See, e.g., Financial Disclosures, NAACP, https://naacp.org/resources/financial-disclosures [https://perma.cc/5LWS-2UWG] (last visited Feb. 16, 2022) (listing several reports, none of which disclose donors). studies conducted by individual research­ers or private institutions focused on organizations in some industries, 17 See, e.g., BoardSource, Leading With Intent: BoardSource Index of Nonprofit Board Practices 7 (2021), https://leadingwithintent.org/wp-content/uploads/2021/‌06/‌2021-Leading-with-Intent-Report.pdf?hsCtaTracking=60281ff7-cadf-4b2f-b5a0-94ebff5a2c2‌5%7C428c6485-37ba-40f0-a939-aeda82c02f38 [https://perma.cc/QCF8-WYNC] (examining the composition, practices, performance, and culture of nonprofit boards across more than twelve industries); Rick Cohen, Data Snapshot on Racial Justice Grantmaking, 5 Critical Issues Forum 38, 38–42 (2014), https://racialequity.org/wp-content/uploads/2018/11/‌CIF5Data-Snapshot-.pdf [https://perma.cc/‌MEZ9-CKFE] (reporting on foundation giving to communities of color and to civil rights and social action organizations); Christian González-Rivera, Courtney Donnell, Adam Briones & Sasha Werblin, Greenlining Inst., Funding the New Majority: Philanthropic Investment in Minority-Led Nonprofits 4 (2008), http://greenlining.org/‌wp-content/uploads/2013/02/FundingtheNewMajority.pdf [https://perma.cc/GPG6-U5W6] (studying grants and dollars awarded by the largest foundations to minority-led nonprofit organizations). a particular sector, 18 See, e.g., Adediran, Racial Allies, supra note 11, at 2155–58 (studying the public interest law sector). In contrast to research on specific industries, BoardSource has examined a range of industries. See BoardSource, supra note 17, at 7 (examining more than twenty industries). or a single industry; 19 See, e.g., Shena Ashley & Claire Boyd, Addressing Racial Funding Gaps in the Nonprofit Sector Requires New Data Approaches, Urb. Inst.: Urb. Wire (Mar. 11, 2021), https://www.urban.org/urban-wire/addressing-racial-funding-gaps-nonprofit-sector-requires-new-data-approaches [https://perma.cc/ZW4P-NXJ9] (focusing on arts organizations of color). or information found through social networks 20 See, e.g., Alex Daniels, How One Family Foundation Is Evolving to Refocus on Racial Equity, Chron. of Philanthropy (Mar. 15, 2021), https://www.philanthropy.com/article/the-perils-and-promise-of-transforming-a-family-foundation-to-focus-on-racial-equity (on file with the Columbia Law Review) (noting that the Satterberg Foundation gives its staff members discretion on organizations to fund); Starbucks Coffee (@Starbucks), Twitter (June 4, 2020), https://twitter.com/‌Starbucks/‌status/1268513794172411905 [https://perma.cc/5PRG-KSAP] (stating that Starbucks’s partners would nominate organizations for funding as part of its support for Black Lives Matter); Mark Zuckerberg, Facebook (May 31, 2020), https://www.facebook.com/zuck/posts/10111969612272851 (on file with the Columbia Law Review) (claiming that Mark Zuckerberg and Facebook worked with “civil rights advisors and [Facebook] employees to identify organizations locally and nationally that could most effectively use” Facebook’s financial support for organizations that serve communities of color). or social media. 21 See, e.g., Kalhan Rosenblatt, On Social Media, Donation Matching Raises Millions for George Floyd Protesters, NBC News (June 1, 2020), https://www.nbcnews.com/‌news/‌us-news/social-media-donation-matching-raises-millions-george-floyd-protesters-n1221301 [https://perma.cc/97UW-Y8CD] (discussing the $1.8 million dollars raised by individual donors on Twitter for the Brooklyn Community Bail Fund).

This patchwork system is both surprising and avoidable because tax-exempt nonprofits, including Internal Revenue Code (IRC) section 501(c)(3) nonprofit organizations, are some of the most regulated entities in the United States. 22 See Daniel J. Hemel, Tangled Up in Tax: The Nonprofit Sector and the Federal Tax System, in The Nonprofit Sector: A Research Handbook 144, 144 (Walter W. Powell & Patricia Bromley eds., 3d ed. 2020). Because of their tax-exempt status, 501(c)(3) organizations are required to disclose a barrage of financial and organizational data to the IRS and to the public annually through IRS Form 990, which is intended to help the IRS detect tax abuse. 23 See infra notes 124–131 and accompanying text.

Form 990 contains information such as the full names of top managers and board directors and their compensation. However, it does not include information on race or ethnicity. 24 Hemel, supra note 22, at 156–57. Form 990 also includes a range of attachments called Schedules. Schedule B in particular requires a list of major donors. While Form 990 is made publicly available to the general public, the IRC, motivated by a desire to protect donor privacy, prohibits public disclosure of Schedule B. This prohibition makes donor information unknown. 25 For further discussion about Supreme Court precedent prohibiting the disclosure of donor information to protect their privacy, see infra Part III. The exception to this protection is for private foundations that are required to publicly identify their significant donors on Schedule B to Form 990-PF. About Schedule B (Form 990, 990-EZ, 990-PF), Schedule of Contributors, IRS, https://www.irs.gov/forms-pubs/about-schedule-b-form-990-990-ez-or-990-pf [https://perma.cc/9BG3-EQUV] [hereinafter IRS, About Schedule B] (last updated June 17, 2021).

The lack of information on donors and on the race and ethnicity of top executives and board members is a major flaw that calls for an overhaul in order to address racial disparities in philanthropy and charitable contributions. 26 To address existing wealth inequality among households across racial lines, Professor Dorothy Brown has proposed publishing tax data by race as the IRS already does for gender and age. Brown, supra note 4, at 202–03. Others have argued for mandatory disclosures of philanthropical donations in other contexts. See, e.g., Faith Stevelman Kahn, Pandora’s Box: Managerial Discretion and the Problem of Corporate Philanthropy, 44 UCLA L. Rev. 579, 675–76 (1997) (arguing for disclosures of corporate charitable contributions for the benefit of shareholders); Note, The Political Activity of Think Tanks: The Case for Mandatory Contributor Disclosure, 115 Harv. L. Rev. 1502, 1515–24 (2002) (arguing for mandatory disclosure of contributors for think tanks).

Scholars have been enthusiastic about mandatory disclosures in areas ranging from corporate to employment law. 27 See infra note 96; see also Cynthia Estlund, Just the Facts: The Case for Workplace Transparency, 63 Stan. L. Rev. 351, 355 (2011) (arguing that mandatory disclosures can improve labor markets by better informing employees’ bargaining choices); Merritt B. Fox, Civil Liability and Mandatory Disclosure, 109 Colum. L. Rev. 237, 273–79 (2009) (proposing a civil liability design for mandatory securities disclosures violations); Merritt B. Fox, Randall Morck, Bernard Yeung & Artyom Durnev, Law, Share Price Accuracy, and Economic Performance: The New Evidence, 102 Mich. L. Rev. 331, 368–80 (2003) (examining mandatory disclosures’ impact on the real economy and price share accuracy). There is also extensive scholarship on government regulation of tax-exempt nonprofit organizations. 28 See, e.g. Eric C. Chaffee, Collaboration Theory: A Theory of the Charitable Tax-Exempt Nonprofit Corporation, 49 U.C. Davis L. Rev. 1719, 1734 (2016); Developments in the Law: Nonprofit Corporations, 105 Harv. L. Rev. 1578, 1612–13 (1992); Henry Hansmann, The Rationale for Exempting Nonprofit Organizations From Corporate Income Taxation, 91 Yale L.J. 54, 55 (1981); Henry B. Hansmann, Unfair Competition and the Unrelated Business Income Tax, 75 Va. L. Rev. 605, 606–07 (1989); Richard L. Hasen, The Surprisingly Complex Case for Disclosure of Contributions and Expenditures Funding Sham Issue Advocacy, 48 UCLA L. Rev. 265, 268–69 (2000); Jill R. Horwitz, Why We Need the Independent Sector: The Behavior, Law, and Ethics of Not-for-Profit Hospitals, 50 UCLA L. Rev. 1345, 1347–48 (2003); Oliver A. Houck, With Charity for All, 93 Yale L.J. 1415, 1419–20 (1984); Donald B. Tobin, Political Campaigning by Churches and Charities: Hazardous for 501(c)(3)s, Dangerous for Democracy, 95 Geo. L.J. 1313, 1319 (2007). In the context of nonprofit disclosures, scholars have called for greater publicity and transparency in IRS filings to improve public knowledge and transparency, to monitor nonprofit organizations and the government, to protect the integrity of the electoral process, to help donors make better informed philanthropic choices, and to strengthen innovation in nonprofit charities. 29 See, e.g., Lloyd Hitoshi Mayer, Nonprofits, Politics, and Privacy, 62 Case W. Rsrv. L. Rev. 801, 805 (2012) (arguing for mandatory disclosure of donors in organizations that engage in political activities but are not political organizations already subject to mandatory donor disclosures); David M. Schizer, Enhancing Efficiency at Nonprofits With Analysis and Disclosure, 11 Colum. J. Tax L. 76, 122 (2020) (arguing for nonprofits to disclose a program analysis to the public in order to improve oversight monitoring); George K. Yin, Reforming (and Saving) the IRS by Respecting the Public’s Right to Know, 100 Va. L. Rev. 1115, 1119 (2014) (urging increased publicity for the public to monitor the government). Scholars have also called for the disclosure of race data in individual tax filings. 30 Brown, supra note 4, at 202–03 (discussing the need for race-coded tax data to improve understandings of the code’s impact). See generally Jeremy Bearer-Friend, Should the IRS Know Your Race? The Challenge of Colorblind Tax Data, 73 Tax L. Rev. 1 (2019) (arguing that tax data should include race and ethnicity to meet goals of transparency). It is surprising then that scholars have yet to propose the mandatory disclosure of race and donor data for carefully articulated purposes, such as for social or racial justice purposes in nonprofit law. Supreme Court jurisprudence permits the public disclosure of donor information—against the constitutional protection of the freedom to associate—when the interests served by the disclosure are especially significant, such as to advance transparency and accountability. 31 See, e.g., McCutcheon v. Fed. Election Comm’n, 572 U.S. 185, 205 (2014) (holding that aggregate limits on political contributions restricted an individual’s right to participate in the political process); Doe v. Reed, 561 U.S. 186, 195 (2010) (holding that disclosure of referendum petitions does not violate the First Amendment).

This Article argues for expanding the use of mandatory disclosures in nonprofit law. The mandatory disclosure of donor and race data can play a significant role in increasing funding to underfunded minority-led and minority-serving nonprofit charities. The Article makes two specific proposals. The first is for the IRS to require charities to disclose their institutional donors in Schedule B of IRS Form 990 and make the information publicly available. To prevent a violation of the First Amendment’s right to freedom of association as defined by Supreme Court precedent, particularly the Americans for Prosperity Foundation v. Bonta 32 141 S. Ct. 2373, 2383 (2021). case, the donor disclosure requirement would be narrowly tailored to apply only to institutional donors—corporations, foundations, and the government—rather than individuals. As seen from public disclosures of pledges to donate, corporations and foundations already publicly announce their donees, so it is hardly the case that disclosing these donors on Schedule B would chill the freedom to associate, unless donations are made to organizations that are considered controversial. For organizations that consider themselves to be controversial and believe public disclosure would prevent institutional donors from donating to them, there should be an opt-out option from public disclosure of their Schedule Bs after a showing that disclosure can result in reprimand. Disclosing government donors is like disclosing other institutional donors since government agencies similarly publicly disclose their grantees. 33 See, e.g., Ryan Tarinelli, NY Court System Details Funding to Civil Legal Service Providers, N.Y. L.J. (Sept. 8, 2021), https://www.law.com/newyorklawjournal/‌2021/‌09/08/ny-court-system-details-funding-to-civil-legal-service-providers/‌?slreturn=‌20211015143206 (on file with the Columbia Law Review) (outlining state funding to dozens of civil legal services nonprofit organizations). These proposals ensure that the law, while being protective of the freedom of association, does not impede disclosure for donors that want publicity, such as the many foundations and corporations that already announce or want to announce their contributions and commitments.

The second proposal is a modification of IRS Form 990 to include data on race and ethnicity. Form 990 already requires charities to provide the names of top managers and board directors. This proposal would add the race and ethnicity of each listed top executive or board member as well as information on the race and ethnicity of communities served.

Nevertheless, disclosure alone is not enough to increase funding to minority-led and minority-serving nonprofit charities. The government, through the IRS, can require disclosure but cannot ultimately require donors to fund certain organizations. Private enforcement mechanisms can be created to nudge—preserving freedom of choice but also steering donors—towards funding and sustaining funding to minority-led and minority-serving charities. 34 See Cass R. Sunstein & Lucia A. Reisch, Trusting Nudges: Toward a Bill of Rights for Nudging 1 (2019) (defining nudges as “interventions that steer people in particular directions but that also allow them to go their own way”).

The Article proceeds as follows. Part I defines the scope of the problem; that is, how the lack of donor and race data exacerbates inequalities. It also addresses why the IRS is the favored entity for collecting this information. Part II discusses the literature on mandatory disclosures, the history and purpose of IRS Form 990, and 501(c) regulations. Part III discusses Supreme Court jurisprudence on mandatory disclosures to show how current law would not impede the disclosure man­dates proposed in Part IV. Part IV makes proposals to modify Schedule B to disclose institutional donors and Form 990 to disclose race and ethnicity data. It also addresses the costs and benefits of disclosure, enforcement concerns, and the role of nudges to increase funding through watchdog organizations, certifications, and the general public.