Some Exempt Organizations No Longer Required to Report Donors' Names and Addresses to the IRS

(Parker Tax Publishing July 2018)

The IRS issued a revenue procedure which modifies the information to be reported to the IRS by organizations that are exempt from tax under Code Sec. 501(a), other than Code Sec. 501(c)(3) organizations, and that are required to file Form 990, Return of Organization Exempt From Income Tax. Such organizations are no longer required to report the names and addresses of their contributors on Form 990 or 990-EZ, but must continue to collect and keep this information in their records and to make it available to the IRS upon request. Rev. Proc. 2018-38.

Background

Under Code Sec. 6033(a), certain tax exempt organizations are required to file annual information returns on Forms 990, Return of Organization Exempt from income Tax, 990-EZ, Short Form Return of Organization Exempt from Income Tax, 990-PF, Return of Private Foundation, and 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons. These returns are required to include gross income, receipts and disbursements, and other information.

Code Sec. 6033(b) provides that Code Sec. 501(c)(3) tax exempt organizations must annually report their total contributions and gifts received and the names and addresses of all substantial contributors. Contributor reporting is not addressed in Code Sec. 6033(a). However, Reg. Sec. 1.6033-2(a)(2)(ii)(f) generally requires all types of tax exempt organizations to report the names and addresses of donors who contribute $5,000 or more in a year. The regulations also require organizations described in Code Sec. 501(c)(7), (8) and (10) (social clubs, fraternal beneficiary societies, and domestic fraternal societies, respectively) to report the name of each person who contributed more than $1,000 during the year to be used exclusively for exempt purposes. Contributor information is generally reported on Schedule B, Schedule of Contributors, and filed with the Forms 990, 990-EZ, 990-PF, or Part IV of Form 990-BL.

Exempt organizations are also subject to disclosure requirements under Code Sec. 6104. Code Sec. 6104(b) provides that the IRS must make the returns of exempt organizations available to the public. However, the IRS may not disclose the name or address of any contributor to any exempt organization other than a private foundation or Code Sec. 527 political organization. Further, the regulations under Code Sec. 6104(b) require the amounts of contributions to be made available to the public unless doing so would identify a contributor. Under Code Sec. 6104(d), some exempt organizations must provide their returns on request by a member of the public, subject to restrictions similar to those under Code Sec. 6104(b).

The IRS is authorized under Reg. Sec. 1.6033-2(g)(6) to grant relief from the return filing requirements in Reg. Sec. 1.6033-2(a)(2)(ii)(f) if it determines that such returns are not necessary for the efficient administration of the Code. In exercising its discretion under Reg. Sec. 1.6033-2(g)(6), the IRS must balance its need for the information against the costs and risks associated with reporting the information.

Modified Procedures

The IRS issued Rev. Proc. 2018-38 to provide procedures modifying the information required to be reported by organizations that are exempt under Code Sec. 501(a), other than Code Sec. 501(c)(3) organizations. Such organizations that are required to file the Form 990 or Form 990 E-Z are no longer required to provide names and addresses of contributors, and thus will not need to fill out those portions of their Schedules B (or the similar portions of Part IV of the Form 990-BL). Similarly, social clubs, fraternal beneficiary societies, and domestic fraternal societies are no longer required to provide on Forms 990 or 990-EZ the names and addresses of contributors of more than $1,000 during the year to be used for exclusively charitable purposes.

The IRS explained that the requirement to report such information increases compliance costs for some private parties, consumes IRS resources in connection with redacting the information, and poses a risk of inadvertent disclosure of the information.

Observation: Among the types of organizations that will be relieved of the requirement to report the names and addresses of contributors to the IRS under the proposed regulations are Code Sec. 501(c)(4) social welfare organizations.

The modified procedures do not affect the information required to be reported on Forms 990, 990-EZ, or 990-PF by Code Sec. 501(c)(3) organizations (which, for purposes of Code Sec. 6033, include nonexempt charitable trusts and foundations and Code Sec. 527 political organizations). The reporting of contribution information other than names and addresses required to be reported on Schedule B of Forms 990 and 990-EZ and Part IV of Form 990-BL is unchanged by the modified procedure. The disclosure requirements under Code Sec. 6104(b) and (d) are also unaffected and therefore, Rev. Proc. 2018-38 does not affect the reporting of Schedule B information that is currently open to public inspection.

Organizations that are relieved of the obligation to report contributors' names and addresses must continue to keep this information in their records in order to permit the IRS to efficiently administer the Code through examinations of specific taxpayers.

Effective Date

Rev. Proc. 2018-38 applies to returns for years ending on or after December 31, 2018. Thus, for calendar year organizations, the revised reporting requirements generally apply to returns due on or after May 15, 2019.

For a discussion of the annual reporting requirements applicable to exempt organizations, see Parker Tax ¶65,510.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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