Facts
- North Carolina regulated charitable fundraising through its Charitable Solicitations Act, including requirements directed at “professional fundraisers.”
- The Act used a three-tier percentage schedule to label fundraising fees “reasonable” (≤ 20%), potentially “unreasonable” (20–35% under specified conditions), and “presumed unreasonable” (> 35% subject to rebuttal).
- The Act required professional fundraisers, during solicitations, to disclose to potential donors the average percentage of gross receipts turned over to charities across the fundraiser’s North Carolina campaigns in the prior 12 months.
- The Act required professional fundraisers to obtain an approved license before soliciting, while volunteer fundraisers could solicit immediately upon submitting a license application.
- Charities, professional fundraisers, and potential donors challenged these provisions as burdens on protected charitable solicitation speech.
- A federal district court declared the challenged provisions unconstitutional and enjoined enforcement; the court of appeals affirmed.
Issues
- Whether the Act’s percentage-based “reasonable fee” scheme for professional charitable solicitors violates the First Amendment.
- Whether compelling professional fundraisers to disclose their average percentage remitted to charities during solicitations violates the First Amendment.
- Whether requiring professional (but not volunteer) fundraisers to obtain an approved license before soliciting violates the First Amendment.
Decision
- The Court affirmed the injunction and held all three challenged provisions unconstitutional.
- The percentage-based fee scheme impermissibly burdened protected charitable solicitation and was not narrowly tailored to preventing fraud or protecting charities.
- The compelled disclosure requirement was unconstitutional because it altered the content of solicitations through a government-scripted financial statement and was not justified under applicable First Amendment standards.
- The differential licensing regime imposed an unconstitutional prior restraint and speaker-based burden by delaying professional solicitations without adequate justification or safeguards.
Legal Principles
- Charitable solicitation is fully protected speech because it commonly combines requests for funds with the communication of information and advocacy of ideas.
- Regulations that directly burden charitable solicitation must satisfy heightened First Amendment scrutiny and be narrowly tailored to a sufficiently strong governmental interest.
- Using fundraising cost percentages as proxies for illegality is not narrowly tailored; high fundraising costs can reflect legitimate factors (e.g., new or unpopular causes) rather than fraud.
- Compelled, point-of-solicitation disclosures that dictate the content of a fundraiser’s message are content-based burdens on speech and are suspect absent tight tailoring.
- States may address deception in fundraising through targeted anti-fraud enforcement rather than broad, prophylactic restrictions that suppress or reshape protected expression.
- Licensing regimes that delay speech operate as prior restraints and require strong justification and procedural protections; discriminating between professional and volunteer speakers heightens First Amendment concerns.
Conclusion
The Court held that North Carolina’s percentage-based fee restrictions, mandated financial disclosures during solicitations, and more onerous preapproval licensing requirement for professional fundraisers violated the First Amendment because they burdened protected charitable solicitation speech without narrow tailoring to the State’s anti-fraud interests.