The IRS recently issued final regulations on donor disclosure specifications that will exempt some nonprofits — other than 501(c)(3) nonprofits as well as 527 political groups — from being required to report the names and addresses of substantial donors (those giving more than $5,000) on Schedule B of their yearly Form 990 returns. Churches are exempt from the requirement to file a yearly Form 990 return.
The IRS tried to apply these regulations in 2018 using a revenue procedure notice. However, that notice was invalidated by a Montana federal district court, which ruled the IRS didn’t follow the rulemaking mandates outlined in the Administrative Procedure Act.
As of May 28, 2020, qualified nonprofits — including 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s — are no longer required to disclose to the IRS the names and addresses of donors giving more than $5,000.
Before 2018, most nonprofits had been obligated to provide the identity of substantial donors to the IRS. The final rules exempt nonprofits other than 501(c)(3) nonprofits as well as 527 political groups from disclosing names of donors giving more than $5,000. Nevertheless, eligible nonprofits are required to retain donor names and addresses and provide them to the IRS if requested in the event of an audit or other compliance measure.
In creating these final rules, the IRS ascertained that it received no benefit from gathering the donor records and also that the burdens of gathering the information — like the possibility for unintentional disclosure and the potential risk of harassment that large donors may experience from a disclosure — had been significant enough to outweigh the zero benefit the IRS said it realizes from gathering donor records.
The IRS stated that the final rules do not require “qualified state and local political organizations” to file a Form 990. The regulations also do not change the submitting threshold of $50,000 in gross receipts for exempt organizations to use Form 990-N.
Additionally, smaller nonprofits like 501(c)(7) social clubs, 501(c)(8) fraternal beneficiary societies, and also 501(c)(10) domestic fraternal societies — are still obligated to disclose donors of over $1,000 to the IRS.
When a church, ministry, or other nonprofit organization in Arizona needs advice about the liability of its Directors, Board Members, or other volunteers, Provident Law’s church and nonprofit attorneys are here to help. We recognize how essential these organizations are to society, and we provide broad transactional and general counsel services to keep them running smoothly. Contact us to learn more.