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Business Tax

IRS removes donor disclosure requirement for many tax-exempt organizations

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

Rev Proc 2018-38, 2018-31 IRB

In a Revenue Procedure, IRS has removed the requirement that exempt organizations other than Code Sec. 501(c)(3) organizations disclose the names and address of their contributors on their exempt organization tax return.

Background. Code Sec. 6033(a) requires certain tax-exempt organizations to file annual information returns that include information required by forms or regs. The annual information returns required under Code Sec. 6033 are Forms 990, “Return of Organization Exempt From Income Tax,” 990-EZ, “Short Form Return of Organization Exempt From Income Tax,” 990-PF, “Return of Private Foundation,” and 990-BL, “Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons.” Code Sec. 6033(b) provides that tax-exempt organizations described in Code Sec. 501(c)(3) that are subject to the requirements of Code Sec. 6033(a) must furnish information annually setting forth certain items including, “the total of the contributions and gifts received by it during the year, and the names and addresses of all substantial contributors.”

Although the statute does not address contributor reporting by tax-exempt organizations other than those described in Code Sec. 501(c)(3), the implementing regs under Code Sec. 6033(a) generally require all types of tax-exempt organizations to report the names and addresses of all persons who contribute $5,000 or more in a year under Reg. § 1.6033-2(a)(2)(ii)(f).Reg. § 1.6033-2(a)(2)(iii)(d) also requires organizations described in Code Sec. 501(c)(7)(generally, social clubs), Code Sec. 501(c)(8) (generally, fraternal beneficiary societies), or Code Sec. 501(c)(10) (generally, domestic fraternal societies) to report the name of each person who contributed more than $1,000 during the tax year to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.

Code Sec. 6033(a)(3)(B) provides a discretionary exception from the annual filing requirement under which IRS may relieve any organization (other than a supporting organization described in Code Sec. 509(a)(3)) otherwise required to file an information return from filing such a return if IRS determines that the filing is not necessary to the efficient administration of the internal revenue laws.Reg. § 1.6033-2(g)(6) authorizes IRS to “relieve any organization or class of organizations (other than an organization described in Code Sec. 509(a)(3)) from filing, in whole or in part the annual return required by this section where [IRS] determines that such returns are not necessary for the efficient administration of the internal revenue laws.” IRS has exercised this authority in the past through Revenue Procedures. See, e.g., Rev Proc 2011-15, 2011-3 IRB 322, and Rev Proc 2003-21, 2003-1 CB 448.

Under existing rules, the names and addresses of contributors for all types of organizations are reported on Schedule B, “Schedule of Contributors,” filed with Forms 990, 990-EZ, and 990-PF, or, with respect to organizations described in Code Sec. 501(c)(21), in Part IV of Form 990-BL.

In general, under Code Sec. 6104(b), IRS must make the annual returns filed under Code Sec. 6033 available to the public. However, IRS is not authorized to disclose the name or address of any contributor to any tax-exempt organization other than a private foundation (as defined in Code Sec. 509(a), including trusts described in Code Sec. 4947(a)(1) that are treated as private foundations) or a Code Sec. 527 organization. Further, Reg. § 301.6104(b)-1(b)(2) provides that even if the names and addresses are not disclosed, the amounts of contributions to an organization must be made available for public inspection unless the disclosure of such information can reasonably be expected to identify any contributor.

In addition to the required disclosure by IRS, Code Sec. 6104(d) and Reg. § 301.6104(d)-1 require certain tax-exempt organizations to provide their annual information returns upon request by a member of the public. Similar to the restrictions on disclosing contributor information placed on IRS by Code Sec. 6104(b), an organization, other than a private foundation or a Code Sec. 527 organization, is not required to disclose the names and addresses of its contributors under Code Sec. 6104(d)(3)(A).

Requirement removed for many tax-exempt organizations.Rev Proc 2018-38 provides that tax-exempt organizations required to file the Form 990 or Form 990-EZ, other than those described in Code Sec. 501(c)(3), will no longer be required to provide names and addresses of contributors on their Forms 990 or Forms 990-EZ and thus will not be required to complete these portions of their Schedules B (or complete the similar portions of Part IV of the Form 990-BL). Similarly, organizations described in Code Sec. 501(c)(7)Code Sec. 501(c)(8), or Code Sec. 501(c)(10) will no longer be required to provide on Forms 990 or Forms 990-EZ the names and addresses of persons who contributed more than $1,000 during the tax year to be used for exclusively charitable purposes.

The Revenue Procedure does not affect:

…the information required to be reported on Forms 990, 990-EZ, or 990-PF by organizations described in Code Sec. 501(c)(3) (which, for purposes of Code Sec. 6033,  include nonexempt charitable trusts described in Code Sec. 4947(a)(1) and nonexempt private foundations described in Code Sec. 6033(d)) or political organizations described in Code Sec. 527.

…the reporting of contribution information, other than the names and addresses of contributors, required to be reported on Schedule B of Forms 990 and 990-EZ and Part IV of the Form 990-BL.

…the disclosure requirements under Code Sec. 6104(b) or Code Sec. 6104(d) of any information reported on the Schedule B of Forms 990 and 990-EZ and Part IV of the Form 990-BL. As a result, this revenue procedure will have no effect on the reporting of Schedule B information that is currently open to public inspection.

And, organizations relieved of the obligation to report contributors’ names and addresses must continue to keep this information in their books and records in order to permit IRS to efficiently administer the internal revenue laws through examinations of specific taxpayers.

IRS explained the changes contained in the Revenue Procedure by noting that IRS does not need personally identifiable information of donors to be reported on Schedule B of Form 990 or Form 990-EZ in order for it to carry out its responsibilities. “The requirement to report such information increases compliance costs for some private parties, consumes IRS resources in connection with the redaction of such information, and poses a risk of inadvertent disclosure of information that is not open to public inspection.”

Effective date. The revised reporting requirements contained in the Revenue Procedure will apply to information returns for tax years ending on or after Dec. 31, 2018. Thus, the revised reporting requirements generally will apply to returns that become due on or after May 15, 2019.

References: For information returns of exempt organizations, see FTC 2d/FIN ¶ S-2800 ; United States Tax Reporter ¶ 60,334.

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