On May 26, 2020, the IRS released final regulations on donor disclosure requirements that exempt many nonprofits — except 501(c)(3) nonprofits and 527 political organizations — from having to disclose the identities of significant donors ($5,000+) on Schedule B of their annual Form 990 returns.
The IRS attempted to implement these regulations in 2018 via a revenue procedure notice but that guidance was vacated by a Montana federal district court that ruled the IRS had failed to follow the rulemaking requirements of the Administrative Procedure Act.
As of May 28, 2020, eligible nonprofits — 501(c)(4) advocacy and social welfare organizations, 501(c)(5) labor and agricultural organizations, and 501(c)(6) trade organizations — are not required to disclose donor names to the IRS for donations in excess of $5,000.
Prior to 2018, all nonprofits were required to report the names and addresses of significant donors to the IRS. The final regulations allow nonprofits except 501(c)(3) nonprofits and 527 political organizations to forego disclosing donor names for donations over $5,000 to the IRS. However, eligible nonprofits are required to maintain these donor records and disclose them to the IRS on a case-by-case basis in the event of an audit or other compliance action.
In making these final regulations, the IRS determined there was no benefit to the agency from collecting the donor information and the burdens of collecting the information — including the potential for inadvertent disclosure and the possible threat of harassment significant donors may face through a disclosure — were sufficiently significant to outweigh the zero benefit the IRS perceives from collecting the donor information.
It should be noted that the final regulations do not require “qualified state and local political organizations” to file a Form 990. The final regulations also do not change the filing threshold of $50,000 in gross receipts for exempt organizations to use Form 990-N.
In addition, some small nonprofits — including 501(c)(7) social clubs, 501(c)(8) fraternal beneficiary societies, and 501(c)(10) domestic fraternal societies — are still required to disclose donors of more than $1,000 to the IRS.
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