Illinois' General Not-For-Profit Corporation Act (Act) was amended to begin requiring certain Illinois not-for-profits to annually report on the demographics of their governing bodies as of January 1, 2025. But just as the amended Act took effect, a complaint challenging the legality of the measure was filed in federal court. The same group that forced the shuttering of the Fearless Foundation's race-conscious grantmaking program last year has brought a constitutional challenge against the amendment to the Act, arguing that its new disclosure requirements violate equal protection and free speech rights. Although this measure, and the lawsuit against it, affects only Illinois-formed not-for-profit corporations directly, the case signals continued activist efforts against diversity, equity, and inclusion measures.
The changes to the Act brought on by Illinois Senate Bill 2930 require an Illinois-formed not-for-profit corporation that grants $1,000,000 or more to other nonprofits annually to post aggregated demographic data about its directors and officers on the not-for-profit's website, if a publicly available site exists.[1] The reportable data includes information about the race, ethnicity, gender, disability status, veteran status, sexual orientation, and gender identity information of covered directors and officers. Notably, Illinois not-for-profits subject to the new requirement must allow individuals to decline to disclose any of their personal demographic information to the corporation.
The American Alliance for Equal Rights (AAER) is a 501(c)(3) membership organization that, according to its complaint, is "dedicated to ending racial and other unlawful preferences nationwide." The group has challenged S.B. 2930 on behalf of two of its members on two constitutional grounds. First, the AAER alleges that S.B. 2930 violates the Equal Protection Clause of the Fourteenth Amendment "because it encourages charitable organizations . . . to discriminate based on race." Second, and notwithstanding the Act's directive that individuals be permitted to decline disclosure, the lawsuit also alleges that S.B. 2930 infringes on individuals' First Amendment rights because it "compels" discussion between qualifying not-for-profits corporations and their officers and directors about "sensitive demographic issues." This, the AAER argues, violates the Free Speech Clause of the First Amendment. Accordingly, the AAER seeks a declaratory judgment that S.B. 2930 violates the First and Fourteenth Amendments, as well as a permanent injunction against the implementation and enforcement of the law.
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Venable's Nonprofit Organizations Practice Group will continue to monitor developments in this case, as well as other efforts in legislatures and courts affecting various diversity, equity, and inclusion programs of nonprofit organizations.
[1] The measure requires "a corporation" that reports grants of $1,000,000 or more to other charitable organizations to report on its demographics in the manner described. 805 ILCS 105/114.15. The Act defines a "corporation" as a domestic not-for-profit, and specifically excludes foreign corporations, which are separately defined. Id. at 101.80(f), (h); see also id. at 101.70(a), (b).