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Nonprofits Await IRS Guidance on Donor Disclosure

This comes after the vacating of the administration’s rollback of donor disclosure requirements

Nonprofits are waiting for instructions from the Internal Revenue Service (IRS) on whether they need to file amended tax returns for 2018 after a federal court vacated the administration’s rollback of donor disclosure requirements. The Treasury Department has not yet said whether it will appeal the July 30 ruling that invalidated the agency’s 2018 guidance, which ended a requirement that trade associations and other 501(c) tax-exempt organizations report the names and addresses of major donors on their Form 990 returns to the IRS. Under the guidance, organizations were still required to collect donor information and provide it upon request to the IRS.

Montana Gov. Steve Bullock and the state of New Jersey filed a lawsuit challenging the IRS guidance and District Court Judge Brian Morris ruled that the states did have standing to pursue their claim and that the IRS should have provided a notice-and-comment period before issuing the guidance. Morris said the states may need donor information to enforce limits on nonprofit political activity.

“The Court agrees that these purposes support the need for the IRS to comply with the [Administrative Procedure Act’s] notice-and-comment provision when it amends a long-standing regulation that implicates the collection and sharing of this information,” Morris said.

The ruling was applauded by Democrats in Congress who claimed the IRS guidance would lead to more “dark money” flowing through tax-exempt organizations to influence elections.

“Our courts are the backstop against this administration’s lawless actions, and the Montana district court’s ruling to block dark money is welcome news,” said Senate Finance Committee Ranking Member Ron Wyden (D-OR).

Attorneys Jeffrey Altman and James Kahl of Whiteford Taylor Preston advised in an article on the firm’s website that “the obligation to report donor names and addresses to the IRS is revived for returns relating to tax years 2018 and later. What this means to organizations that have already filed their 2018 returns is unclear.”

This article was provided to OSAE by the Power of A and ASAE's Inroads.

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