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Arizona Nonprofit Told It May Need to Reveal Donors

A nonprofit group that contributed $11 million to help defeat a California ballot measure aimed at raising taxes must disclose documents so that state election officials can probe where the money came from, a judge said in a tentative ruling.

In a preliminary finding before a hearing today, state court Judge Shelleyanne W.L. Chang in Sacramento, California, sided with California election officials who said “a review of the documents is needed” before the Nov. 6 general election, or “the people of the state of California will suffer irreparable harm.” The judge didn’t indicate when she will rule before the hearing ended.

The state’s Fair Political Practices Commission sued Phoenix-based Americans for Responsible Leadership to identify the secret source of the donation after the group refused to comply with a commission audit to determine whether it violated laws aimed at letting voters know who is bankrolling ballot initiatives.

The donation, one of the single largest contributions made in California this election, also supports a proposition to prohibit unions from using payroll deductions for political purposes. The funding is part of a wave of secret money flowing through nonprofit groups that are increasingly being used to protect the identities of donors in the aftermath of the U.S. Supreme Court’s 2010 decision in a case called Citizens United v. Federal Election Commission and other court rulings.

Out-of-state-groups spending money on California ballot initiatives must disclose their donors before Election Day if the donors intend for their contributions to be used to back or oppose candidates or measures, Gary Winuk, chief of enforcement at the commission, said in a petition seeking a court order against Americans for Responsible Leadership.

California Voters

“Because the records sought by petitioner may be highly relevant to the upcoming election, it is imperative that respondent be ordered to produce the records immediately in order to avoid irreparable harm to petitioner and the voters of California,” Winuk said in a court filing.

The Phoenix group said in a filing that the Citizens United ruling protects the constitutional rights of people who “associate together in nonprofit corporations.” The ruling gave corporations the same rights as individuals to spend money independently to support candidates.

“What is worth noting here, in light of the political atmosphere that has led to this case, is the undisputable notion that non-profit corporations have constitutional rights,” Alexander Vogel, a Washington attorney representing Americans for Responsible Leadership, said in a court filing.

The group has never solicited “earmarked” donations aimed at specific projects and the California disclosure rule wasn’t triggered because its donors didn’t know the group would be contributing money to the Small Business Action Committee PAC, a California group that opposes Governor Jerry Brown’s Proposition 30, he said.

Sales Tax

The measure would temporarily boost the state sales tax to 7.5 percent from 7.25 percent and raise the levy on income starting at $250,000 to avoid deep education spending cuts.

The committee also backs Proposition 32, a measure that would restrict the use of union dues for political purposes.

Brown, speaking at a rally for Proposition 30 at California State University, Los Angeles, said the opposition is funded largely by “financiers” trying to protect their interests. At the same time, Brown said, more billionaires support Prop. 30 than oppose it.

“There’s $11 billion coming from a few people in Arizona,” Brown said, misspeaking billion for million. “They may be good people, they may be bad, but whoever they are they’re ashamed of their identities. They don’t want to be known.”

Sacramento Judge

Americans for Responsible Leadership seeks to educate the public about “concepts that advance government accountability, transparency, ethics and related public policy issues,” according to its website. The group never made contributions in California before Oct. 15, when it gave $11 million to the Small Business Action Committee PAC, state officials said in a court filing.

The case is Fair Political Practices Commission v, Americans for Responsible Leadership, 34-2012-00131550, California Superior Court, Sacramento County (Sacramento).

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