Federal Rules Mandating Public Disclosure

NOTE: The material provided here must not be considered or used as legal advice. You should read the applicable law and regulations yourself, and/or consult with a qualified advisor regarding your organization's specific legal obligations.

• Summary of the Public Disclosure Requirements
• Extract from the IRS Form 990 and 990-EZ General Instructions, December 1998
• Federal Law: United States Code, Title 26, Section 6104(d)
• Federal Regulations Issued by the IRS
• Other Resources

Federally tax-exempt organizations classified under IRC sections 501(c) or 501(d) must comply with the recently revised law and regulations addressing public disclosure of certain forms and associated materials they've submitted to the IRS. These include any annual information returns whose required or actual filing date was within the last three years, which generally means the three most recent returns. These annual returns use Form 990 and its variants for 501(c) organizations, and Form 1065 for 501(d) organizations. If the organization filed its application for tax-exempt status (e.g. Form 1023 or 1024) after July 15, 1987 or possessed a copy of its application materials on that date, it must also make copies of that application available to the public. All schedules, attachments and other supporting material submitted with the annual return and application must also be disclosed, with exceptions noted below.

Public access must be provided promptly on request by allowing inspection of the documents at the organization's office or offices, and by providing copies of the documents promptly in response to any in-person request or within 30 days for a written request. However, organizations don't have to provide copies if they make these materials widely available through publication on the Internet, or if the IRS determines that the organization is being subject to a harassment campaign. The organization is permitted to require a payment in advance for actual postage costs incurred, and a copying fee of up to $1 for the first page and $0.15 for each page thereafter. The request may be for only certain documents, or only certain portions of documents, in which case the charges must be for only those pages. NPO staff members who fail to comply with the new law and regulations are personally subject to fines and other penalties (i.e. the person refusing to provide public access gets fined, not the organization).

The law allows certain information to be excepted from public disclosure. However, other than this specifically excepted material, all schedules, attachments and other material associated with the annual information returns and application for tax-exempt status submitted to the IRS must also be disclosed, as must any letter or other document issued by the IRS with respect to the application. The rules for excepted material may be summarized as follows:

All 501(c) and 501(d) Organizations

No organization covered by the disclosure law and regulations is required to make public any information in their application for tax-exempt status that "relates to any trade secret, patent, process, style of work, or apparatus, of the organization, if [the Secretary of the IRS] determines that public disclosure of such information would adversely affect the organization." Also, material should not be disclosed if the Secretary has determined that it "would adversely affect the national defense." [both quoted from IRC section 6104(a)(1)(D)] These exceptions probably apply to only a tiny minority of organizations.

Some Organizations as Applicable

Organizations that have submitted any of the following forms need not include them in the publicly disclosed materials:

• Form 990-T (Exempt Organization Business Income Tax Return)
• Form 1120-POL (U.S. Income Tax Return For Certain Political Organizations)

501(c)(3) Public Charities Only

501(c)(3) organizations not classified as private foundations are not required to publicly disclose the list of names and addresses of contributors (those making a tax-deductible donation in support of the organization's charitable mission) that is otherwise part of their annual information return.

501(d) Organizations Only (Religious and Apostolic Associations)

501(d) organizations use Form 1065 instead of a Form 990 for their annual information return. Organizations that use this form are required to provide "partners" in the organization with "a copy of such information required to be shown on such return as may be required by regulations." [quoted from IRC section 6031(b)] The public access law and regulations exempt from disclosure the materials specifically provided to partners. This includes Schedule K-1 of Form 1065.

Black Lung Benefit Trusts Only

These organizations need not disclose Schedule A of Form 990-BL.

Note: Private foundations have been specifically excluded from the regulations (although not from the law, which very specifically removed previously existing exemptions). Since the law doesn't take effect for those organizations until the regulations are released, private foundations need only adhere to the earlier and far weaker public accessibility law already in effect. Since the only difference under the law between private foundations and any other 501(c) organizations are that they must release the names and addresses of donors, it is not obvious why the IRS excepted them, or how long it will take for the applicable regulations to be released.

Other summaries of the law and regulations are available at these sites:

• IRS
• KPMG "Exotax" memo (posted at the Internet Nonprofit Center)

EDITOR'S NOTE: Although this material refers to provisions of the TBOR2 that never took effect, they were also included and expanded in a later law that takes effect June 8, 1999 for all but private foundations, and will take effect for private foundations probably later this year.

Annual Return

Caution: Note the discussion below for the potential effect of the Taxpayer Bill of Rights 2 (TBOR2) on these instructions.

An organization must, during the 3-year period beginning with the due date (including extensions, if any), of the Form 990, or Form 990-EZ, make its return available for public inspection upon request. All parts of the return and all required schedules and attachments, other than the schedule of contributors to the organization, must be made available. Inspection must be permitted during regular business hours at the organization's principal office and at each of its regional or district offices having three or more employees.

This provision applies to any organization that files Form 990, or Form 990-EZ, regardless of the size of the organization and whether or not it has any paid employees.

If an organization furnishes additional information to the IRS to be made part of its return, as a result of an examination or correspondence from the service center, it must also make that information part of the return it provides for public inspection. interest.

If the organization does not maintain a permanent office, it must provide a reasonable location for a requester to inspect the organization's annual returns. The organization may mail the information to a requester. However, the organization can charge for copying and postage only if the requester gives up the right to a free inspection (Notice 88-120, 1988-2 C.B. 454).

Any person who does not comply with the public inspection requirement will be assessed a penalty of $20 for each day that inspection was not permitted, up to a maximum of $10,000 for each return. No penalty will be imposed if the failure is due to reasonable cause. Any person who willfully fails to comply will be subject to an additional penalty of $1,000 (sections 6652(c) and 6685).

Exemption application

Caution: Note the discussion below for the potential effect of the Taxpayer Bill of Rights 2 (TBOR2) on these instructions.

Any section 501(c) organization that submitted an application for recognition of exemption to the Internal Revenue Service after July 15, 1987, must make available for public inspection a copy of its application (together with a copy of any papers submitted in support of its application) and any letter or other document issued by the Internal Revenue Service in response to the application. An organization that submitted its exemption application on or before July 15, 1987, must also comply with this requirement if it had a copy of its application on July 15, 1987. As in the case of annual returns, the copy of the application and related documents must be made available for inspection during regular business hours at the organization's principal office and at each of its regional or district offices having at least three employees.

If the organization does not have a permanent office, it must provide a reasonable location for the inspection of both its annual returns and exemption application. The information may be mailed. See the reference to Notice 88-120 above, under Annual return. The organization need not disclose any portion of an application relating to trade secrets, etc., that would not also be disclosable by the IRS.

The penalties for failure to comply with this provision are the same as those under Annual return above, except that the $10,000 limitation does not apply.

Furnishing copies of documents under TBOR2. An organization must furnish a copy of its Form 990, Form 990-EZ, or exemption application, and certain related documents, if a request is made in writing or in person. For a request made in person, the organization must make an immediate response. For a response to a written request, the organization must provide the requested copies within 30 days. The organization must furnish copies of its Forms 990, or Forms 990-EZ, for any of its 3 most recent taxable years. No charge is to be made other than charging a reasonable fee for reproduction and actual postage costs. An organization need not provide copies if

(1) the organization has made the requested documents widely available in a manner provided in Treasury regulations, or

(2) the Secretary of the Treasury determined, upon application by the organization, that the organization was subject to a harassment campaign such that a waiver of the obligation to provide copies would be in the public interest.

Penalty for failure to allow public inspection or provide copies. The section 6685 penalty for willful failure to allow public inspections or provide copies was increased from the present-law level of $1,000 to $5,000 by TBOR2.

Effective date of TBOR2. These public inspection provisions governing tax-exempt organizations under TBOR2 generally apply to requests made no earlier than 60 days after the date on which the Treasury Department publishes the regulations required under the provisions. However, Congress, in the legislative history of TBOR2, indicated that organizations would comply voluntarily with the public inspection provisions prior to the issuance of such regulations.

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Federal Law: United States Code, Title 26, Section 6104(d)

The current federal law addressing public disclosure of and access to certain tax-exempt organization records was established by the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (Public Law 105-277; H.R. 4328). The text given below was derived from that Act as published online.

This law will take effect for public charities on June 8, 1999, in accordance with the regulations issued by the Internal Revenue Service (IRS) on April 8, 1999, and for private foundations later in the year when the IRS issues corresponding regulations. Note that not all types of tax-exempt organization are held to the disclosure and public access requirements given by this law, but only those described by IRC 501(c) and 501(d). Note: The Internal Revenue Code (IRC) is Title 26 of the United States Code (USC), e.g. 26 USC 501(c) is IRC 501(c).

The United States Code may also be accessed online through the U.S. House of Representatives Web site or the Cornell Legal Information Institute, but note that these sources may not include the most recent updates to the law as given here.

26 USC 6104(d). Public Inspection of Certain Annual Returns and Applications for Exemption.

(1) In general.--In the case of an organization described in subsection (c) or (d) of section 501 and exempt from taxation under section 501(a)--

(A) a copy of--

(i) the annual return filed under section 6033 (relating to returns by exempt organizations) by such organization, and

(ii) if the organization filed an application for recognition of exemption under section 501, the exempt status application materials of such organization, shall be made available by such organization for inspection during regular business hours by any individual at the principal office of such organization and, if such organization regularly maintains 1 or more regional or district offices having 3 or more employees, at each such regional or district office, and

(B) upon request of an individual made at such principal office or such a regional or district office, a copy of such annual return and exempt status application materials shall be provided to such individual without charge other than a reasonable fee for any reproduction and mailing costs.

The request described in subparagraph (B) must be made in person or in writing. If such request is made in person, such copy shall be provided immediately and, if made in writing, shall be provided within 30 days.

(2) 3-year limitation on inspection of returns.--Paragraph (1) shall apply to an annual return filed under section 6033 only during the 3-year period beginning on the last day prescribed for filing such return (determined with regard to any extension of time for filing).

(3) Exceptions from disclosure requirement.--

(A) Nondisclosure of contributors, etc.--In the case of an organization which is not a private foundation (within the meaning of section 509(a)), paragraph (1) shall not require the disclosure of the name or address of any contributor to the organization. In the case of an organization described in section 501(d), paragraph (1) shall not require the disclosure of the copies referred to in section 6031(b) with respect to such organization.

(B) Nondisclosure of certain other information.--Paragraph (1) shall not require the disclosure of any information if the Secretary withheld such information from public inspection under subsection (a)(1)(D).

(4) Limitation on providing copies.--Paragraph (1)(B) shall not apply to any request if, in accordance with regulations promulgated by the Secretary, the organization has made the requested documents widely available, or the Secretary determines, upon application by an organization, that such request is part of a harassment campaign and that compliance with such request is not in the public interest.

(5) Exempt status application materials.--For purposes of paragraph (1), the term `exempt status application materials' means the application for recognition of exemption under section 501 and any papers submitted in support of such application and any letter or other document issued by the Internal Revenue Service with respect to such application.

NOTES

These notes were added by this page's author to provide clarification. The links below to U.S. federal law lead to the Cornell Legal Information Institute Web site, which may not, however, be completely up to date.

Section 501 of the Internal Revenue Code (IRC 501, which is 26 USC 501) addresses a major class of organizations that are exempt from federal corporate income tax. It grants this exempt status to organizations that qualify under this section, describes what sorts of organizations those are, how they can apply for exempt status, and what they must do to maintain it.

IRC section 501(a) grants tax-exempt status to various organizations described in subsequent subsections, including 501(c) and 501(d).

IRC section 501(c) describes most types of tax-exempt organizations generally referred to as charitable, associations, and societies, as well as several others. Most tax-exempt organizations are exempt under section 501(c), apply for tax-exempt status using either IRS Form 1023 or 1024, and submit annual informational returns from the IRS Form 990 series.

IRC section 501(d) describes "Religious and Apostolic Associations," which submit IRS Form 1065 as their annual return.

IRC section 509(a) defines a "private foundation" as any 501(c)(3) organization that doesn't fit one of several classes. Subsections 509(a)(1)-(4) describe the several classes of what are termed "public charities." A public charity must be either a publicly-supported charity [509(a)(1)], an exempt purpose activities-supported charity [509(a)(2)], an organization that supports one of those [509(a)(3)], or a public safety organization [509(a)(4)].

IRC section 6031(b) refers to certain copies of the 501(d) organization's annual tax return that must be provided to partners in the organization.

IRC section 6033 describes the annual informational returns that must be submitted by most tax-exempt organizations (e.g. Form 990).

IRC section 6104(a)(1)(D) allows the Secretary of the IRS to withhold from public inspection any part of an organization's application for tax-exempt status that "relates to any trade secret, patent, process, style of work, or apparatus, of the organization, if he determines that public disclosure of such information would adversely affect the organization." It requires the Secretary to withhold from public inspection any part that "he determines would adversely affect the national defense."

The final regulations implementing IRC 6104(d) for 501(d) and 501(c) organizations other than private foundations were issued by the IRS on April 8th, 1999, and published in the Federal Register the next day. These regulations were issued as modifications to the Code of Federal Regulations (CFR) Title 26, Part 301, Section 6104(d), and will take effect June 8, 1999. They supersede previous public disclosure regulations, including IRS Notice 88-120.

A copy of the final regulations is available elsewhere in Web/HTML format. A PDF-format version of the Federal Register pages from which that copy was derived is also available.

A copy of the originally proposed IRS regulations as published in the Federal Register on September 26, 1997 is available in PDF format.

• From the IRS
• From Other Sources

From the IRS

Note that not all the IRS material has been updated yet for the new law and regulations. Much of it refers to "TBOR2," which is the 1997 law replaced by and expanded upon by a 1998 law. However, almost everything referring to TBOR2 still applies.

• IRS Tax-Exempt Organizations FAQ
  • "How do I obtain a copy of the organization's exemption letter [,annual informational returns, and application for exempt status]?"
  • "What happens if the Form 990 is incomplete?"
  • "What should I do if a § 501(c) organization will not let me see its Form 990 returns?"
• IRS Web text, "Filing Requirements for Tax-Exempt Organizations."
• Regulations as described in the Form 990 and Form 1023 Instructions
  • Information about the public disclosure requirements can also be found in the IRS's "Instructions for Form 990 and Form 990-EZ," General Instructions section M ("Public Inspection of Completed Exempt Organization Returns and Approved Exemption Applications").
  • Further information about the public disclosure requirements can be found in the IRS's "Publication 557: Tax-Exempt Status for Your Organization," in Chapter 2, under "Public Inspection of Exemption Applications and Annual Returns"
• IRS Form 4506-A - Request for Public Inspection or Copy of Exempt Organization IRS Form. Before 1988, this was the only way to obtain copies of the materials filed with the IRS by exempt organizations. This mechanism is still supported.

Information From Other Sources

• About the Final Regulations
  • Nancy J. Carter: April 1999 final regulations address documents required to be available to the public
  • Federal NPO disclosure and public access laws (from 990online.com)
• About the Originally Proposed Regulations
  • Independent Sector: IRS issues proposed regulations on disclosure of Forms 990 and exemption applications
  • A new age for 990s
  • Disclosure of documents and returns - Is your tax-exempt organization ready for the new requirements?
  • Return of the Future: Disclosure law and Internet access spur new focus on charity tax forms
  • Impact of the Taxpayer Bill of Rights 2 on exempt organizations
  • AFSCME: Publicity and disclosure of Form 990
  • National committee for responsive philanthropy: Form 990 disclosure requirements
  • NCRFP quarterly: 990PF disclosure legislation
• Other Resources
  • 990online.com - A low-cost service that posts NPO documents online to satisfy the regulations
  • History of the public disclosure requirements for tax-exempt organizations
  • Student Press Law Center booklet, "Access to the IRS Form 990: A public record for private school journalists" (printed form only)
  • Table of tax-exempt organizations and the form they each must use for their annual information return
  • Nonprofit Issues: Form 990 offers a public relations opportunity
  • Online compendium of fderal and state regulations for U.S. nonprofit organizations
  • Publicity and disclosure of Form 990

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