Certain tax-exempt organizations are no longer required to report to the IRS the names and addresses of donors on IRS Form 990, Schedule B, according to final regulations published on May 28, 2020. Noncharitable organizations, such as 501(c)(4) social welfare organizations and 501(c)(6) trade associations, may report only the amounts received from each substantial contributor on Schedule B. An organization must keep the donors’ names and addresses in its records and make them available to the IRS in the event of an examination.
Only 501(c)(3) charitable organizations and 527 political organizations will still have to report names and addresses of substantial contributors during a taxable year. Private foundations and 527 organizations must continue to make Schedule B available to the public, without redaction.
The final regulations largely mirror proposed regulations that were issued in September 2019 following litigation we described in a prior post that invalidated the IRS’s previous attempt to issue these rules through Revenue Procedure 2018-38.
According to the preamble, the IRS does not need the names and addresses of substantial contributors in order to administer the Internal Revenue Code. Addressing numerous commenters who expressed concern about the change in policy, the IRS claimed that it can obtain sufficient information from other elements of the Form 990 to evaluate possible private benefit or inurement. Additionally, due to the IRS’s duty to protect confidential information, removing the requirement to report names and addresses will reduce the risk of inadvertent disclosure. Finally, in response to the concern that the new rules would lead to an increased flow of money into U.S. elections by making it difficult to detect foreign spending, the IRS explained that it is not authorized to enforce campaign finance laws, and that Schedule B reflects enforcement purely with respect to the Internal Revenue Code.
The final regulations are effective May 28, 2020 but may be applied to returns filed after September 6, 2019.