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IRS Finalizes New Information
Disclosure Rules

If donors want to know how much money their favorite ministry took in last year, or how much its top officers made, it hasn’t been easy for them to find out. They must make a written request to the IRS and often wait months for a response or appear at the charity’s office in person. If the organization was an ECFA member, they could obtain a copy of the annual audit from the charity. But audits don’t include salary data.

Now this is all changing. Effective June 8, 1999, anyone with an interest in a nonprofit organization’s finances can obtain Form 990 information with as little effort as sending an e-mail request. The Form 990 is the annual information return which must be filed each year with the IRS by many nonprofits.

Since 1987, tax-exempt organizations have been required to provide a copy of their annual information returns—Form 990s—to anyone who requests them and appears in person at your national, regional, or district office.

The public disclosure rules have now been significantly expanded. A personal appearance at one of your offices is no longer required—although that may still be done. Additionally, copies must be made available based on written requests unless your organization makes the requested documents widely available, you are subject to a harassment campaign or receive certain multiple requests from the same person at the same address.

Forms that must be disclosed. The public disclosure rules require that you provide the three most recent annual information returns (Form 990). This includes all schedules and attachments filed with the IRS, including compensation information and Schedule A.

Also subject to disclosure is the Form 1023 and all the documents filed by your organization in support of the application. It also includes any letter or other document issued by the IRS in connection with the document.

Timeliness of disclosure. If the request for copies is made in writing, you must provide the copies within 30 days from the date you receive the request. However, if you require payment for copying and postage, you may provide the copies within 30 days from the date you receive payment, rather than from the date of the initial request. You have seven days to notify the requestor of any fees.

Internet posting. How does the IRS define "widely available"? Documents are widely available if they are posted on the organization’s Web Site, or if the forms are posted on a Web site established and maintained by another entity as part of a database of similar documents of other nonprofits. The format used must exactly reproduce the image of the original document filed with the IRS.

Harassment campaigns. Organizations that are subject to a harassment campaign may apply to the IRS, within 10 days after suspending compliance, for relief in complying with requests for copies of documents. Additionally, you can disregard requests by the same individual exceeding two requests a month or four requests a year.

Form 1023 exception. If you filed its application for tax exempt status (Form 1023) prior to July 15, 1987, you must provide copies of the Form 1023 only if it had a copy as of that date. Example: Your charity filed for tax-exempt status on January 1, 1973. You cannot locate the copy of your Form 1023. You are exempt from the requirement to provide copies of Form 1023 under these disclosure rules.

Group exemption. Your organization may be a subordinate unit of a central organization. If a subordinate unit does not file its own annual Form 990, but is covered under a group exemption, the subordinate must make the central organization’s group return available. However, any schedules relating to other organizations included in the group return may be excluded.

Written requests. A written request for copies of Forms 1023 and 990 include requests delivered by mail, electronic mail, facsimile, a private delivery service, or in person.

Reasonable fees. No fees may be charged for allowing public inspection, but a reasonable amount for copying and actual postage costs for mailing the documents may be charged. A copying fee is reasonable if it does not exceed that charged by the IRS: $1 for the first page and 15 cents for each page thereafter. You may require prepayment of the fees before providing the copies.

Failure to comply. If you fail to allow public inspection or provide copies of the documents, your organizations can be subject to substantial penalties. For example, the penalties run $20 per day, per document for each day during which there is a failure to allow public inspection of the forms, up to a maximum of $5,000. If you fail to provide copies of the documents, the penalties are $20 per day up to maximum of $10,000. The penalty for willful failure to disclose is $5,000 per instance. Penalties are imposed on individuals responsible for the failure to disclose, not the organization.

    1. Fully comply with the disclosure rules. Commit to comply with both the spirit and the letter of the law. ECFA members should be models for the nonprofit community.

    2. Segregate the documents to be disclosed for easy reference. Have the appropriate documents segregated in a file for disclosure to those who may visit your offices or for copying in response to written requests.

    3. View the disclosure rules as a donor communication opportunity. When you receive a request for documents under the disclosure rules, send the requester your annual report and other information about your ministry. See the article on page 5.

    4. Carefully weigh the Internet posting option. Posting your forms on the Internet may be the most efficient, but you may lose the opportunity to communicate with the requester. The Form 990 is easily susceptible to misinterpretation.

Published in Focus on Accountability, May 1999.
Reprinted with permission of the Evangelical Council For Financial Accountability.

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