The Senate Voted to Overturn an IRS Rule. What Does This Mean?

On Wednesday, December 12, the Senate passed a bill that affects the duty of some nonprofits to report the names and addresses of their donors to the IRS. Some reporting on this bill applauded it as a step forward for transparency, since it would reinstate a requirement for most nonprofits to give this data to the IRS. But it’s important to note that even with the proposed change, the information available to the public would actually remain the same. A quick review of the back-and-forth that led to the latest proposed changes is in order.

For close to fifty years, the tax code has required 501(c)(3) charitable organizations, which can receive tax deductible contributions, to file information about their contributors with the IRS. The IRS extended this requirement to all other types of 501(c) organizations, including 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s. As a result, all 501(c) organizations had to tell the IRS the names, addresses, and amounts given by donors who gave more than $5000.00. But even though the IRS was getting the information, the names and addresses of donors were not publicly available. Organizations could redact this information before making their 990 form public.

That all changed in the summer of 2018, when a new Treasury Department rule ended the donor reporting requirement for all but the 501(c)(3)s. Since that time, other types of 501(c) nonprofits have not been subject to the requirement to report donors to the IRS. But the change didn’t go unchallenged for long; in December, the Senate stepped in using its authority under the Congressional Review Act. That law allows Congress to review and vote to repeal new regulations, and the Senate used its authority to vote to repeal the summertime change in IRS rules.  Effectively, the Senate is calling for the IRS to reinstate the more extensive donor reporting requirements it formerly had.

The bill now goes to the House for action, and there is debate over whether the reporting requirement should be brought back for all 501(c) nonprofits. At the same time, they all must continue to collect this data and to provide it to the IRS on request.

So how could all this affect the public’s knowledge about who is funding various nonprofits?  In reality, it won’t – even if the Senate-passed bill ultimately becomes law. That’s because even if lawmakers bring back the requirement for all 501(c) nonprofits to regularly report donor information to the IRS, that data only goes to the IRS – not to the public.

Have more questions? Bolder Advocacy keeps tabs on the latest developments in legislation and policy-making governing nonprofits and their tax status. Feel free to reach out to us at 1-866-NP-LOBBY or at advocacy@afj.org.