It seems the IRS controversy has spilled into the states. Late last week Governor Rick Perry vetoed legislation that would have required the disclosure of high-level donors by many politically active organizations, including those exempt under Section 501(c)(4) of the Internal Revenue Code. After a Republican legislature passed the bill, there was a fevered internet grassroots campaign urging him to veto it. Ultimately, Governor Perry rejected the bill, citing the recent IRS controversy as one of his reasons.

In reality, the two seem to have very little to do with one another – state disclosure obligations and federal income tax status involve different bureaucracies, different tests, and different legal interests. But, perhaps the fear of bureaucratic meddling into core First Amendment activities and the disclosure and harassment of donors could be a sign of a more hands-off approach to politics.

The veto bucks the recent the trend of state legislatures imposing new disclosure requirements on tax-exempt organizations that engage in political activities. The bill would have required persons or organizations (excluding labor organizations) that make political expenditures (e.g.,independent expenditures) exceeding $25,000 during the calendar to disclose donors who contribute over $1,000 and file regular reports. Current law requires these organizations to disclose only their political expenditures over $100. 

It remains to be seen whether other states will feel similar legislative effects of the IRS controversy, or whether donor-disclosure laws will continue to be the new norm.