Donor Disclosure Form 990: A Hot Nonprofit Issue

A debate over whether nonprofits should have to disclose their donors has been getting a lot of attention lately. The IRS requires that donor information, subject to certain thresholds, be disclosed for tax-exempt organizations on Form 990. This information is supposed to be kept confidential by the IRS and not subject to public disclosure; however some people have expressed concern that such information may not be safe in the hands of the IRS. In addition, the State of California recently tried to require that charities provide this information to the state but a federal judge blocked that attempt by calling it unconstitutional. See Americans for Prosperity Foundation v. Kamala Harris in her capacity as Attorney General for of California.

USA Today recently reported that “The House’s powerful tax-writing committee approved a bill (April 29, 2016) that would ban the IRS from collecting the names of donors to tax-exempt groups…” Of course that is just the beginning of a long process before the bill becomes law.

Apparently this issue is another political football with the right claiming that the IRS cannot maintain the confidentiality of information and using the recent IRS Tea Party scandal as another reason the IRS should have no access to this type of information. The left is claiming that eliminating such disclosure requirements will limit the federal government from knowing if drug trafficking or foreign funds are being used to influence US elections. The real issue, in my opinion, is that Republicans are trying to eliminate disclosures of how much money they pump into 501c (4) organizations to impact elections. The democrats do the same thing so I am not sure why they are in favor of disclosure but I can only surmise they have more to gain with the current system.

What I haven’t seen yet is the reaction from the philanthropic community. I would think they would like to see less disclosure rules because 1) compliance with the rules can be cumbersome and 2) there is or could be a chilling effect on contribution revenue because potential donors may not want want their name, address and giving information provided to the government.

I would love feedback on this issue to help better understand the issue from both positions.