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IRS Issues New Rules to Reduce Donor Disclosure

The DOL has once again issued proposed rules on the topic

The Treasury Department on Sept. 6 issued proposed rules to once again reduce donor disclosure rules for certain tax-exempt groups weeks after a federal judge vacated similar guidance because there had not been a notice and comment period.

Under the proposed rules, trade associations and other 501(c) tax-exempt organizations would no longer be required to report the names and addresses of major donors on their Form 990 returns to the Internal Revenue Service (IRS). Organizations would still be required to collect donor information and provide it upon request to the IRS. Charities and other 501(c)(3) groups and Section 527 political groups would still be required to disclose donors as usual.

Treasury and IRS officials have said the agencies do not need names and addresses of donors to carry out tax enforcement and that there is a danger that donor information could be inadvertently made public. Congressional Democrats have countered that the lack of disclosure could facilitate more “dark money” in politics.

“A key piece of Republicans’ electoral strategy is to allow as much dark money to be pumped into the system as possible,” said Sen. Ron Wyden (D-OR), ranking member on the Senate Finance Committee. Advocates for election security and good governance of tax-exempt organizations must voice their concerns during this comment period.”

The IRS had previously issued a revenue procedure in 2018 eliminating the donor disclosure requirement for most 501(c) groups. That change was challenged by Montana and New Jersey and in July, District Court Judge Brian Morris ruled that the IRS should have provided a notice-and-comment period before issuing the guidance. Morris also said the states may need donor information to enforce limits on nonprofit political activity.

The IRS is abiding by the Administrative Procedure Act and providing the 90-day public comment period. The proposed rules would take effect on the date that final rules are published but tax-exempt groups can safely elect to apply the rules to any Form 990 returns filed after Sept. 6. Additionally, the IRS announced it will waive penalties for tax-exempt groups that did not report donor information on returns filed earlier this year.

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

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