United States

Final regulations governing exempt organizations' donor disclosures

TAX ALERT  | 

On May 28, Treasury and the IRS promulgated final regulations (T.D. 9898) regarding information reporting under section 6033, generally applicable to organizations exempt from tax under section 501(a). The final regulations are consistent with the proposed regulations issued in September 2019 (REG-102508-16), which we discussed in a previous RSM tax alert.

Background

In July 2018, the IRS published Rev. Proc. 2018-38, which modified the information to be reported 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 organizations generally were no longer required to report the names and addresses of their substantial contributors on Schedule B of the Form 990 series. In July 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 set forth in the revenue procedure. Bullock et al. v. IRS, 401 F.Supp.3d 1144 (D. Mont. July 30, 2019). In a partial response to the court decision, Treasury and the IRS issued proposed regulations that included the changes previously set forth in Rev. Proc. 2018-38.

Final regulations

The regulations provide that only section 501(c)(3) charitable and section 527 political organizations must report the names and addresses of their substantial contributors on Schedule B (Form 990, 990-PF and 990-EZ). Therefore, an exempt organization described in any other section of 501(c) is not required to report donor names or addresses. This exception extends to organizations described in section 501(c)(7), (8 and (10) that previously reported donor names and addresses of certain contributions in excess of $1,000.

All organizations generally must continue to report separately the amount of each reportable contribution. In addition, exempt organizations must continue to maintain the names and addresses of their substantial contributors in their books and records. These rules do not alter the public disclosure rules for donor names and information, permitting section 501(c)(3) public charities to redact this information from their public inspection copies.

State attorneys general had expressed concerns over this provision in the proposed regulations, but the final regulations make clear that states are free to enact their own reporting requirements if they feel they need access to this donor information. 

Additionally, the final regulations adopt the previously stated $50,000 gross receipts threshold for an organization exempt under section 501(a) to be required to file a return (promulgated by Rev. Proc. 2011-15).

The effective date of the regulations is May 28, 2020; however, organizations can choose to apply the regulations to returns filed after Sept. 6, 2019.

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