Significant Rule Change for Tax-Exempt Organizations Reporting Donor Information

Nonprofit organizations have historically been required by the IRS to report information on donors whose charitable gifts exceed the threshold for “substantial contributors.”

This article by Marc Berger explains the recent IRS Revenue Procedure 2018-38, specifically that “affected organizations will no longer be required to report the names and addresses of their reportable contributors on the Schedule B of their Forms 990 or 990-EZ.”

The change is specific to 'all organizations that are tax-exempt under Section 501(c), other than charitable organizations described under Section 501(c)(3).'

The author cites a few of the IRS’ reasons for the new rule, including:

Decreased compliance costs
Reduced consumption of IRS resources
Reduced risk of inadvertent disclosure of non-public information

The article goes on to mention “reactions to the new rules from those affected are strong.” For those in favor, the author cites data privacy and free speech as major victories for the new rule. For those against, the author cites concerns that it could hamper fraud detection and reduce fiscal transparency.

The author concludes the article by noting, “regardless of the new guidance, all tax-exempt organizations should still diligently collect information about their donors to prepare for a potential audit or change of course by the IRS down the road.” While the guidance removes the reporting requirement for affected organizations, it specifically includes a mention that details such as names and addresses must still be kept in the nonprofits’ books for audit purposes.

Our View

It is important to note that this change does not apply to organizations described under Section 501(c)(3).

In an age of cybersecurity, data, and identity privacy concerns, it is understandable that donors would be concerned by the information that nonprofit organizations are required to report publicly.

We believe that this could be a positive step in helping to reduce that concern for donors. Protecting donor data is crucial to long-term fundraising in our opinion.

As the author mentioned, rules like this can be subject to change under different administrations. Given nonprofit organizations are still required to keep this information, this might not seem as much of an issue – but for as long as the rule lasts, this could be a chance to market this change in rules to prospective donors as increased incentive to give now.

This article by Marc Berger discusses the new IRS Revenue Procedure 2018-38, which applies to “all organizations that are tax-exempt under Section 501(c), other than charitable organizations described under Section 501(c)(3).”
The new procedure specifies that affected organizations will no longer be required to report the names and addresses of reportable contributors on Schedule B of their Forms 990 or 990-EZ.

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To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

What this means for you: When you open an account, we are required by Federal law to ask for your name, street address, date of birth (for natural persons) and other information as required to identify you. This may include a request or requests for confirmatory information such as presentation of your driver’s license and/or other document(s).