United States

Donor information requirements revised, penalty relief granted

TAX ALERT  | 

On Sept. 6, 2019, the U.S. Treasury Department and the IRS issued proposed regulations (REG-102508-16) clarifying information reporting requirements generally applicable for most tax-exempt organizations, including changes to donor disclosure requirements issued last year in Rev. Proc. 2018-38. 

Also issued on Sept. 6, 2019, Notice 2019-47 grants penalty relief to certain tax-exempt organizations that relied on Rev. Proc. 2018-38 and did not disclose the names and addresses of donors on annual returns for tax years ending on or after Dec. 31, 2018, and on or prior to July 30, 2019.

Donor disclosure requirements

Published on July 30, 2018, Rev Proc. 2018-38 (IRB 2018-31) modified the information to be reported to the IRS by organizations exempt from tax under section 501(a), other than those described in section 501(c)(3) and section 527. For tax years ending on or after Dec. 31, 2018, these organization generally were no longer required to report the names and addresses of their substantial contributors on Schedule B, Schedule of Contributors of Form 990, Return of Organization Exempt form Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. 

On July 30, 2019, the U.S. District Court for the district of Montana set aside Rev. Proc. 2018-38, holding that the Treasury Department and the IRS did not follow the notice and comment procedures of the Administrative Procedure Act in providing the reporting relief with respect to contributors’ names and addresses set forth in the revenue procedure. Bullock et al. v. IRS, No. 4:18-cv-00103-BMM (D. Mont. July 30, 2019).

In a partial response to the court decision, the proposed regulations include changes previously set forth in Rev. Proc. 2018-38: organizations required to file Form 990 or Form 990-EZ would not be required to provide the name and address of their substantial contributors, unless such organizations are described in section 501(c)(3) or section 527. As also set forth in the revenue procedure, the proposed regulations would require all organizations to continue to maintain the names and addresses of their substantial contributors in their books and records in order to permit the IRS to efficiently administer the internal revenue laws through examinations of specific taxpayers.

The effective date of these proposed regulations is the date of publication of final regulations in the Federal Register. However, organizations generally may choose to apply the final rules to returns filed after Sept. 6, 2019.

Other proposed amendments

The proposed regulations would also update existing regulations to reflect statutory amendments to section 6033 and certain instances where the IRS has exercised its discretion to relieve organizations of certain filing requirements set forth in section 6033 since the adoption of current regulations.

These changes include the following:

  • Adding items listed in section 6033(b)(10) and (11), relating to certain excise taxes imposed on tax-exempt organizations, managers and disqualified persons, to the list of items generally required to be reported;
  • Adding other statutory reporting requirements for controlling organizations, sponsoring organizations, and supporting organizations;
  • Increasing the gross receipts threshold that triggers a filing requirements under sections 6033 for organizations exempt under section 501(a) (other than private foundations and supporting organizations) to $50,000;
  • Clarifying that section 527 political organizations with gross receipts greater than $25,000 are generally subject to the reporting requirements under section 6033(a)(1) as if they were exempt from taxes under 501(a); and
  • Specifying that only organizations described in section 501(c)(3) and section 527 political organizations generally would continue to be required to provide names and addresses of substantial contributors on Forms 990, 990-EZ, and 990-PF

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