California Nonprofit “Warning Label” Proposal Draws Fierce Criticism

Criticism has been fast and fierce to a California legislative proposal that would require any nonprofit engaging in charitable solicitation in the state to post a prominent link to the California Attorney General’s website, ostensibly to alert potential donors to information on charity research and consumer rights. Nonprofits throughout the United States should be aware of this bill, however, and its potential implications.

As originally drafted, the bill would have required nonprofits fundraising in California to post their administrative overhead expenses or a link to such information on each and every one of their web pages and on the first page of each and every fundraising document. This was changed to the requirement to link to the AG’s page, which at first may seem to more palatable.

However, nonprofits have protested that donors will see the mandated link as a warning label, and be scared off from donating. In addition, there are some questions as to whether the required link violates the First Amendment, and whether the government can support the increased regulatory burden that will accompany this requirement.

The bill has been defended as a needed tool to protect worthy organizations from “the shadow cast upon them by bad actors.” This is concerning, because it reflects a viewpoint that the onus is on legitimate charities to show that they are trustworthy and aren’t violating the law—and yet its implementation could very well be confusing and off-putting to donors. Its initial requirement of posting overhead numbers stems from a mindset that overhead expenses are in and of themselves a bad thing—a viewpoint that is losing traction. And while that overhead component is not part of the bill currently, the defensive posture that bills like this place nonprofits in should be concerning to the entire sector—not just those in California.

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