Nonprofit Accounting Basics

Tax Alert: IRS Issues Guidance Eliminating Schedule B for Many Organizations

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Jul 26, 2018

The Treasury Department has issued new guidance which eliminates the requirement to disclose the names and addresses of donors for a large swath of exempt organizations. Revenue Procedure 2018-38 provides that organizations exempt from tax under Section 501(a), other than 501(c)(3) organizations, are no longer required to disclose the names and addresses of contributors on Schedule B of Form 990 or Form 990-EZ. This provision is effective for tax years ending on or after December 31, 2018, and comes in the wake of legal battles with the Attorneys General in California and New York, which sought to require organizations to include Schedule B with state charitable registrations.

Organizations impacted by this provision include 501(c)(4) social welfare organizations, 501(c)(5) labor unions, and 501(c)(6) trade associations, among others. These organizations must still maintain books and records sufficient to identify their largest contributors, and must disclose that information to the IRS under certain circumstances, such as during an examination.

This is not the first time that the requirement for exempt organizations to disclose the identity of certain large contributors has been challenged. Representative Peter Roskam (R-IL) introduced a bill in 2016 that would have eliminated Schedule B for all exempt organizations, including 501(c)(3) organizations, citing privacy concerns and a presumed decrease in compliance costs. Roskam’s bill never made it to a full floor vote in either the House or the Senate.

Organizations exempt under 501(c)(3) must continue to provide information about certain donors. In general, organizations must disclose to the IRS the name and address of donors who gave more than $5,000 during the year. Certain organizations described in Section 170(b)(1)(A)(iv) and (vi) may apply a larger 2% threshold, potentially significantly reducing the number of contributors who must be identified. This information is not required to be made publicly available, either before the effective date of Rev. Proc. 2018-38 or after. Schedule B is removed by the IRS from copies of organizations’ Forms 990 made available for public inspection, such as through GuideStar or Charity Navigator. Organizations are also at liberty to remove identifying information from Schedule B from copies of Form 990 made available for public inspection.