What’s the Latest on 501(c)(4) Donor Disclosure?

The rules regarding donor disclosure by 501(c)(4) nonprofits have been in flux, and might be about to change again.  Here’s a quick update on what this means for these nonprofits and the public.

A little more than a year ago, the IRS issued a ruling (Rev. Proc. 2018-38) that eliminated a requirement that some tax-exempt organizations, including 501(c)(4) organizations, disclose the names of donors who contribute more than $5,000. These names previously had to be listed on Schedule B of the nonprofits’ annual 990 information return. While the ruling eliminated the requirement that nonprofits disclose the names of donors, nonprofits were still required to maintain this information and provide it to the IRS upon request.

Prior to this ruling all nonprofit organizations, including 501(c)(3)s, 501(c)(4)s, and other 501(c) organizations, were required to disclose the names of donors contributing more than $5,000 on their 990. 501(c)(3)s were not affected by the ruling and were still required to file the names of donors over $5,000 with the IRS. It’s important to note that this information was never made publicly available (except for the names of donors to private foundations), although the amounts that donors contributed was publicly available both before and after the rule change.

The new rule subsequently hit a bump, however, in the form of a lawsuit filed in Montana by the state of Montana and the state of New Jersey. The states claim that the change should be invalidated, because the Trump administration failed to adhere to the Administrative Procedure Act (APA) rulemaking requirements that call for public notice and comment.

On July 30, 2019, a Montana District Court agreed with the plaintiffs and struck down Rev. Proc. 2018-38. The court ordered the IRS to follow the proper rulemaking procedures, which call for public notice and comment, prior to the adoption of a new rule.

What does this mean? At this point it is not clear whether the IRS will appeal or whether it will propose the same rule through established notice and comment processes. It’s also not clear what this means for 501(c)(4) organizations that did not disclose the names of donors in their most recent 990 filings.

One thing is clear, however: The public will continue to have the same information about donors to 501(c)(4) organizations that it always had. While the names of c4 donors were never publicly available, the public always was able to see the amounts given and the number of donors who contributed more than $5,000. This offers an important insight into whether a c4 is supported by a wide array of individuals or a limited number of wealthy donors. While this ruling may affect the information that 501(c)(4)s must file with the IRS, it has no impact on what is publicly available.

Upcoming Events