On Monday, July 16, 2018, the Treasury Department and Internal Revenue Service (IRS) announced that 501(c)(4) and 501(c)(6) tax-exempt organizations, among others, will no longer be required to disclose their large donors on their annual Form 990 filings.
The issue of disclosing donors of $5,000 or more on Schedule B of the Form 990 series filings submitted by nonprofit organizations each year has long been a sensitive one. Nonprofits worry about other organizations poaching their donors. And many donors, when giving to a sensitive or controversial cause, do not want their names publicly known. This latter issue has been exacerbated by the greatly increased use of section 501(c)(4) by organizations that want to make independent expenditures in political campaigns since the Citizens United Supreme Court case in 2010 made that possible.1 Much debate about the IRS's need for donor information has ensued. In making Form 990 filings available to the public, the IRS has redacted (and permitted nonprofits themselves to redact) the names and addresses of contributors. Nonetheless, information has been mistakenly released by the IRS from time to time, and pressure for change has been building.
The IRS released a new Revenue Procedure, Rev. Proc. 2018-38, which provides that Form 990 filers other than section 501(c)(3) organizations and section 527 organizations (which are political organizations, including political action committees) will no longer have to release the names and addresses of their donors. The requirement that section 501(c)(3) and section 527 organizations list their donors cannot be waived by the IRS, because it is statutory.2
The accompanying press release notes that public transparency is unaffected, since the IRS was already not releasing donor information when it published Form 990 filings. Nonprofits will still be required to collect this information and make it available to the IRS on request (for example, as part of an IRS examination of the nonprofit). According to the press release, the change is intended to better protect donor information and to simplify tax administration both for nonprofit organizations, which will not have to enter names and addresses into their Form 990 filings, and for the IRS, which will no longer have to redact information from Form 990 filings before publishing them.
This new rule applies beginning with Form 990 filings for years ending on or after December 31, 2018. Many organizations have not yet filed their Form 990 for 2017, and those filings will have to include donor names and addresses on Schedule B, as will those for 2018 fiscal years that end before December 31, 2018. Thereafter, Form 990 filings will have to list the amounts of contributions to an organization, but not the identity of the donor.
Several states require that nonprofit organizations provide them with a completed, unredacted Form 990 Schedule B showing names and addresses of donors as part of their charitable solicitation registration process. How those states will respond to the IRS's action remains to be seen.
[1] Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).
[2] Internal Revenue Code sections 6033(b) (for 501(c)(3) organizations), 6104(b) (for section 527 organizations).