Free Speech/Privacy Advocates Score Significant Victory with Changes to Form 990 Schedule B Disclosure Requirements

Advocates of free speech and personal privacy scored a significant victory with the Service's recent release of Revenue Procedure 2018-38. Effective for tax years ending December 31, 2018, the new procedure exempts all tax-exempt organizations, other than public charities and private foundations  exempt from federal income tax under IRC Section 501(c)(3), and political organizations  described in IRC Section 527, from having to file a Schedule B with their annual Form 990 disclosure. 

Beginning in 1998, Schedule B generally required that a tax-exempt organization provide to the Service a list of donors who contributed at least $5,000 to the exempt organization, as well as the donor's addresses and aggregate contribution amount.  However, while the Form 990 is a public document, the names and addresses of donors on Schedule B donors were both confidential by law and exempt from public disclosure.  But what happens in theory is not always what happens in practice, and since 1998, the IRS has, in some instances, inadvertently disclosed private Schedule B information.  In addition, state attorneys general have sought to force disclosure under a variety of circumstances, eroding anonymity protections.  Concerned with the disclosures, and the chilling effect that a lack of anonymity might bring to exempt organization contributions, Congress asked the IRS to reconsider its Schedule B disclosure requirements. 

In essence, Rev. Proc. 2018-38 says that certain exempt organizations, such as associations, labor unions, and social welfare organizations, no longer need to file Schedule B.  These organizations will still be required to maintain donor records, and the IRS may still request this information for tax administration and compliance matters, but these organizations no longer will be required to submit this information to the Service.  IRC 501(c)(3) organizations, because of the tax-deductible nature of their contributions, and IRC 527 organizations, because of their political nature, will still be governed by the same rules for Schedule B disclosure that existed prior to the Rev. Proc.

However, not all members of Congress have been thrilled with the Service's recent decision to eliminate Schedule B disclosures.  Various senators, including Sen. Ron Wyden, the Senate Finance Committee's ranking member, have expressed concern that eliminating Schedule B requirements for 501(c)(4) organizations that are permitted to engage in political activity would lead to an additional influx of "dark money" into politics.  Sen. Wyden has even gone so far as to suggest that he would oppose Charles Rettig's nomination as the next IRS Commissioner unless the new procedure was repealed.

If your exempt organization needs help in determining whether you still have a filing requirement following the new Rev. Proc., or if you would like to better understand the new Schedule B requirements, feel free to contact the Not-for-Profit Team at Schneider Downs.  We are always here to assist!