The IRS took a step closer to rolling back donor disclosure requirements for certain tax-exempt organizations after hearing from witnesses at an agency hearing Feb. 7.
The IRS has proposed removing the requirement that trade associations and other tax-exempt groups provide the names and addresses of donors who contribute $5,000 or more on Schedule B of their Form 990 return. Charities and other 501(c)(3) organizations, as well as 527 political groups, would still need to disclose donors under the new rules. Tax-exempt groups would still need to keep the names and addresses of donors on file in case the IRS requests them on a case-by-case basis.
The IRS proposed the change because it said it doesn’t need the information to enforce the tax code and it protects donors’ information from inadvertently being disclosed for public inspection. The agency’s first attempt to roll back donor disclosure requirements was struck down last year by the U.S. District Court for the District of Montana because the IRS did not go through a notice and comment period before making the change. This time, the agency received roughly 8,400 comments on the new rules and 16 witnesses testified at the hearing last week, mostly conservative groups in support of the proposal.
Critics of the change say it could lead to more anonymous “dark money” donations to groups that engage in political activity. Sen. Ron Wyden (D-OR), ranking member on the Senate Finance Committee, has been a notable voice against the weakening of donor disclosure rules. Some state attorneys general have also fought the change, saying they need IRS-supplied information to oversee nonprofits in their jurisdiction.