New Guidance Available on Certain Annual Reporting Requirements for Exempt Organizations
Treasury and the IRS recently issued final regulations on the reporting requirements of organizations exempt from tax under section 501(a).
The new regulations reflect both statutory amendments that had been made and certain grants of reporting relief that had become available in recent years. The changes in the regulations generally apply to tax-exempt organizations required to file an annual Form 990 or 990-EZ information return.
Changes made to conform to the statute (i.e. not a new reporting requirement) include the requirement to disclose information relating to taxes imposed:
- On certain lobbying and political expenditures by organizations described in section 501(c)(3).
- With respect to an organization, an organization manager, or any disqualified person under section 4958 (i.e. excess benefit transactions).
Changes made to be consistent with current practice (i.e. not a change to existing requirements) include:
- Amending the gross receipts threshold that triggers a filing requirement under section 6033 for tax-exempt organizations (other than private foundations and supporting organizations) from $5,000 to $50,000.
- Incorporating previously granted relief from the filing requirement under section 6033(a) for foreign organizations and organizations formed in a United States possession (other than private foundations and supporting organizations) that is reflected in Revenue Procedure 2011-15.
- Clarifying that section 527 organizations with gross receipts greater than $25,000 generally are subject to the reporting requirements under section 6033(a)(1) as if they were exempt from tax under section 501(a).
Interestingly, the IRS declined to incorporate existing relief from filing annual returns into the final regulations for the following:
- Governmental units and affiliates of governmental units provided for in Revenue Procedure 95-48.
- Certain organizations that are operated, controlled, or supervised by one or more churches, integrated auxiliaries, or conventions or associations of churches provided for in Revenue Procedure 96-10.
The Treasury Department and the IRS plan to continue to study the applicability of these Revenue Procedures and for now, they are still applicable even though they were not incorporated into the final regulations.
The most significant change in the final regulations provides relief from reporting the names and addresses of contributors on Schedule B of the annual return for organizations other than those described in sections 501(c)(3) and 527. The change in this reporting requirement was initiated with the issuance of Revenue Procedure 2018-38, which was then invalidated by a Montana District Court in 2019 on procedural grounds resulting in the issuance of proposed regulations to provide this relief.
The IRS received many comments from the public both for and against the change but ultimately decided to retain the proposed relief in the final regulations. Tax-exempt organizations must continue to report the amounts of contributions from each substantial contributor as well as maintain the names and addresses of their substantial contributors in their books and records in order to permit the IRS to efficiently administer the internal revenue laws through examinations of specific taxpayers.