Some nonprofit organizations will no longer be required to report certain information about contributors on their annual Form 990 or Form 990-EZ returns. The Internal Revenue Service (IRS) recently released Revenue Procedure 2018-38, which changes some aspects of donor disclosure and lessens the burden for nonprofits by no longer requiring contributors’ names and addresses on these forms.
Background:
Code Section 6033(a) requires nonprofit entities to file one of the following annual information returns:
- Form 990, Return of Organization Exempt from Income Tax
- Form 990-EZ, Short Form Return of Organization Exempt from Income Tax
- Form 990-PF, Return of a Private Foundation
Annual returns are available to the public and are primarily informational only. They contain financial information such as: 1) the source of revenue; and 2) the breakdown of expenditures between program services, administrative costs, and fundraising efforts. Depending on the tax-exempt activity, the organization may be required to complete supporting schedules disclosing certain activities such as lobbying, fundraising events, and hospital facility operations.
Schedule B, Schedule of Contributors, is generally required if a nonprofit receives $5,000 or more from any one donor during the tax year. In such instances, a nonprofit must report donor names, addresses, and contribution amounts. Historically, this schedule was used to allow the IRS to confirm tax-deductible contributions claimed by donors, who were also reported by the nonprofits. In addition, this disclosure requirement was extended to all other tax-exempt organizations such as labor unions, homeowners associations, and other organizations that do not generally receive tax-deductible contributions. The information reported on Schedule B is filed as part of the annual information return. However, with the exception of private foundations and political organizations, this schedule is not subject to public disclosure.
Changes:
The changes made to donor disclosure requirements directly impact Schedule B, removing the donor reporting requirement for tax years ending on or after December 31, 2018, except for the following:
- Section 501(c)(3) Organizations
- Section 4947(a)(1) Non-Exempt Charitable Trusts
- Section 6033(d) Non-Exempt Private Foundations
- Section 527 Political Organizations
Citing several reasons for the change, the IRS stated this information is not necessary for monitoring tax deductions and is not used by the IRS in tax code enforcement. The organizations that are no longer required to file a Schedule B are still required to maintain donor information in their records, and, in the event of an examination, furnish it upon IRS request. Also, this change will result in cost reductions. Organizations to which this applies will no longer need to prepare, review, and redact the schedule’s information, thereby reducing compliance costs. And, by eliminating the need to redact the information from copies published to its website, the IRS will cut expenses as well. Finally, this procedure reduces the likelihood that either the nonprofit or IRS improperly discloses information through failure to redact the schedule prior to releasing the information return to the public.
If you would like more information about reporting requirements in light of tax reform, or would like to request a speaker for your organization or event, contact one of our PYA executives below at (800) 270-9629.
© 2018 PYA
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