Earlier this month the IRS announced proposed regulations and issued IRS Notice 2019-47 addressing the donor disclosure rules applicable to tax-exempt organizations. These actions by the IRS were brought about when previously provided exemptions to the donor disclosure rules were set aside by a Federal District Court.
Historically, tax-exempt organizations that file IRS Form 990 have been required to disclose the name of the donor and the amount of certain donations on Schedule B of the IRS Form 990. However, in 2018 the IRS issued Revenue Procedure 2018-38 which exempted from the donor disclosure requirements most tax-exempt organizations other than 501(c)(3) charitable organizations. As a result, certain politically oriented tax-exempt organizations including 501(c)(4) social welfare organizations and 501(c)(6) trade associations were exempted from the donor disclosure requirements.
In July of 2019, the U.S. District Court for the District of Montana nullified the IRS’s 2018 action citing the IRS’s failure to comply with the Administrative Procedure Act, the law that the IRS must follow when issuing regulations.
However, on September 10, 2019, the IRS published proposed new regulations to, once again, relieve certain tax-exempt organizations from reporting donor information. The proposed regulations only require 501(c)(3) and 527 organizations to continue to provide donor information on their annual information returns.
In the case of a 501(c)(3) organization, the organization need only provide the name, address, and donation amount of donors who contribute $5,000 or more during the taxable year. However, all organizations must collect and maintain the information of donors should the IRS need this information on a case-by-case basis.
Furthermore, on September 6, 2019 the IRS issued Notice 2019-47 which provides penalty relief for organizations covered by Revenue Procedure 2018-38 that did not report the names and addresses of their donors on Schedule B of their Forms 990 for tax years ending on or after December 31, 2018 and on or before July 30, 2019. However, the penalty relief does not cover the failure to report any information required by law that is unrelated to the donor information described in Revenue Procedure 2018-38.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.