'Daily perpetual subpoena': Conservatives, investors accuse feds of massive privacy violations

Federal agencies are creating pointless cybersecurity risks and violating the First Amendment rights of nonprofits and investors through routine yet sweeping data dragnets that also violate the latter's Fourth and Fifth Amendment rights, according to lawsuits against the IRS and Securities and Exchange Commission.

Young America's Foundation is targeting mandatory disclosure of donor information on Form 990, required of most 501(c)(3) tax-exempt groups, after the IRS told the conservative nonprofit that convicted contractor Charles Littlejohn may have leaked its own information. 

Littlejohn also leaked Donald Trump's tax returns between his presidential terms, prompting the president to sue the IRS for $10 billion in January and the Justice Department to settle the case in May. A federal judge accused President Trump of misusing the court system, referring one of his attorneys for possible discipline and suspending another's court access for a year.

The Form 990 mandate cannot survive the "exacting scrutiny" required by the Supreme Court for "any government demand for membership or donor lists," from Alabama's demands on the NAACP in the 1950s to California's on Americans for Prosperity Foundation in the 2020s, according to the suit, filed on YAF's behalf by the National Taxpayers Union Foundation.

The SEC is still hoovering up sensitive information on "trillions" of trades in U.S. markets in a permanent database it can search "at will," as the agency seeks a third "unprecedented" six-month delay of the New Civil Liberties Alliance lawsuit on behalf of investors against the constitutionality of the Consolidated Audit Trail, NCLA said.

The government's request "defies logic" in light of a recent SCOTUS ruling against "widespread, indiscriminate, and pervasive digital government surveillance," the public interest law firm said, describing CAT as even more intrusive than the "geofence warrant" for Google Location History data around a robbed credit union in the SCOTUS case.

NCLA litigation recently prompted the SEC to abandon more than 50 years of mandatory gag orders on defendants in civil settlements. 

Last month, SCOTUS denied NCLA's petition to review the "no-deny" policy, meaning it could be resurrected at any time by the agency, which critics accused of targeting Trump allies during the Biden administration.

Just the News asked the IRS for its response to the lawsuit and the SEC to explain why it needs a third six-month delay and how its ongoing data collection complies with SCOTUS, which found a reasonable expectation of privacy in cellphone location data. Neither responded.

Students already opt out of mailing list to avoid 'retribution and harassment'

The high court has been chipping away at intrusive demands to identify donors in recent years, unanimously rebuking New Jersey this spring for trying to avoid scrutiny in federal court as it seeks to compel pro-life pregnancy centers to unmask their donors. 

The ruling was quickly cited in litigation against federal election regulations on "conduit platforms" like WinRed and ActBlue to identify donors who give any amount, potentially boosting small-dollar political donations. 

Striking down Form 990 requirements to identify donors who give more than $5,000 to a covered nonprofit, "if such amount is more than 2 percent of the total contribution" the nonprofit receives in that tax year, could also juice charitable giving by donors fearful of leaks or breaches.

The government "has never shown why it needs to collect this information from every charitable organization in the country" absent a specific investigation, since the IRS "rarely uses and has repeatedly failed to protect" donor information, according to YAF. Its lawyers emphasize the IRS dropped the mandate on 501(c)(4) social welfare groups in 2020.

"This dragnet data collection subjects to government disclosure citizens’ associations and political, religious, and cultural beliefs – all for little gain by the government," the NTUF lawsuit says, noting the IRS itself admitted the mandate "poses a risk of inadvertent disclosure" that has come to pass several times.

The agency reported examining less than 9% of Form 990 returns last year and less than 10% in 2024, and its Taxpayer Advocate's 2024 report to Congress found just nine opinions in business cases "on the deductibility of charitable contributions," which were irrelevant to "cash or cash-equivalent donations on Schedule B for public charities like YAF."

Nonprofits and managers face civil and criminal penalties for failure to identify or preserve records of substantial donors, including three years in prison, yet the IRS faced only a scolding from the Government Accountability Office last year for its repeated failure to follow its own recommendations on securing taxpayer data, the suit says.

With its focus on conservative campus activism, YAF already receives requests from supporters to take them off its mailing list so their roommates don't learn "they associate with YAF’s ideas lest they face retribution and harassment even when not in a public setting," and it stands to lose funding and members from "the next Littlejohn-type leak."

It has a First Amendment right of association and assembly by way of donor anonymity, and the IRS has "other, more narrowly tailored alternatives to universal, up-front donor disclosure" to enforce tax laws, the suit says.

Ready-made 'virtual panopticon' with 'no judicial oversight'

U.S. District Judge Alan Albright, nominated by President Trump, approved the SEC's previous motion to keep the case in limbo in February, as it considers possibly rewriting the data collection rules targeted by NCLA and a securities group, proposing "anonymization" among other changes. That "abeyance" expired in mid-July.

Last month's SCOTUS ruling, which found the "government effectuates a Fourth Amendment search when it collects cell phone location information," extends to "all types of widespread surveillance schemes carried out through digital means," NCLA's opposition to the agency's third abeyance request says.

The "virtual panopticon" of CAT reveals "political, professional, religious, and sexual associations" by sucking up investment choices and stock transfers, the filing says. The feds can't claim investors voluntarily gave their information to a third party, since "they have no meaningful choice but to be surveilled when trading on US stock exchanges."

The system "creates an encyclopedic, retrospective database of everyone’s investment information without prior suspicion, probable cause, or a warrant [...] with little effort and no judicial oversight," and the SEC's proposed changes don't fix it, NCLA argues.

"The entire CAT scheme is a daily perpetual subpoena that violates the Fourth Amendment and warrants immediate judicial intervention," yet the SEC wants further delays absent any "timeline demonstrating when the agency will conclude its work" and the authority to decide when the program is "ready for judicial review." 

NCLA mocked the agency's "wholly irrelevant" justification that it has reduced CAT's budget since 2024. "This case is not about monitoring the ups and downs of CAT spending—it is about whether the CAT is authorized at all and funded by any lawful appropriation!"