September 11, 2019 •
IRS Moves Again to Exempt Certain Tax-Exempt Organizations From Reporting Contributor Info
On September 6, the Internal Revenue Service (IRS) issued a notice of a proposed rulemaking for allowing certain tax-exempt organizations to no longer be required to report the names and addresses of contributors on their annual reports.
Previously, the IRS had issued a guidance to this effect, but on July 30, the IRS guidance limiting these disclosure requirements was set aside by a federal judge.
In Bullock v. IRS, the U.S. District Court District of Montana (Great Falls) found the IRS violated the Administrative Procedure Act by not providing notice and allowing a public comment period before the guidance was issued. It predicated this decision by finding the guidance was a legislative rule.
On July 16, 2018, the U.S. Treasury Department and the IRS had announced certain tax-exempt organizations would no longer be required to report the names and addresses of contributors on their annual reports. This exemption from reporting applies to tax-exempt organizations generally not receiving tax-deductible contributions, such as labor unions, volunteer fire departments, issue-advocacy groups, local chambers of commerce, veterans’ groups, and community service clubs, according to the department’s press release.
These organizations are still required to continue to collect and keep the donor information and to make it available to the IRS upon its request.
This change did not affect the information required to be reported by charities primarily receiving tax-deductible contributions, such as 501(c)(3) organizations, certain nonexempt private foundations, or 527 political organizations. The Treasury Department and IRS had given three primary reasons for the change:
- The IRS makes no systematic use of this information collected by these organizations
- The policy reduces the risk of inadvertent disclosure or misuse of confidential information
- The policy saves both private and government resources
Comments on the proposed rule will be accepted for 90 days after the notice’s publication in the Federal Register.
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