03 May 2016 House bill would lift requirement for 501(c) organizations to disclose major donors The House Ways and Means Committee has approved a bill (HR 5053, "Preventing IRS Abuse and Protecting Free Speech Act") that would prohibit the Treasury and IRS from requiring Section 501(c) organizations to disclose information on contributors in their annual Form 990-series returns. The current Schedule B (IRS Form 990, 990-EZ or 990-PF), Schedule of Contributors, generally requires Section 501(c) organizations to disclose certain information regarding donors who contribute $5,000 or more to the organization during a tax year. Disclosure of the donors' names and addresses, as well as the type and value of their contributions, is typically required. Schedule B is open to public inspection for an organization that files Form 990-PF as well as Section 527 political organizations that file Form 990 or Form 990-EZ. All other organizations that file Form 990 or 990-EZ can redact the names and addresses of contributors from the copy of the form they provide to the public under public inspection and disclosure laws. Federal law prohibits the federal government from disclosing those donors' names and addresses, and any other information that could identify the donors, to the public. HR 5053, introduced by House Ways and Means Oversight Subcommittee Chairman Peter Roskam (R-Ill.), would significantly curtail the information that the IRS could request on Form 990, Schedule B. Specifically, it would amend Code Section 6033 (Returns by exempt organizations) to explicitly prohibit the Treasury and IRS from requiring Section 501(c) organizations to disclose the name, address or any other identifying information of any contributor to the organization, regardless of the amount of the donor's contribution. Exceptions would apply (1) in the case of certain reportable transactions, and (2) with respect to contributions in excess of $5,000 from an officer, director or "covered employee" of the organization. A covered employee generally would include any employee (including any former employee) of the organization if the employee is one of the five highest compensated employees of the organization for the tax year (for these purposes, compensation would include compensation from certain related organizations). Bill HR 5053 still requires the approval of both houses of Congress and the President prior to becoming law. However, while passage of the proposed bill is uncertain, tax-exempt organizations required to complete Form 990-series Schedule B should continue to monitor the bill's progress. If passed, this bill would not eliminate Schedule B, but would decrease Schedule B reporting requirements for many tax-exempt organizations. Specifically, Schedule B filers would no longer be required to collect and report names, addresses or other identifying information of donors, except for officers, directors and covered employees who made contributions of $5,000 or more during the tax year, and contributors involved in certain reportable transactions described in Code Section 4965. HR 5053 is intended to protect donor confidentiality and preclude unauthorized disclosure of donor information to the public, in the wake of unauthorized disclosures at both the federal and state level. Critics of the bill contend that it would allow foreign governments and other donors to secretly influence political campaigns, and would hamper the ability of states and the IRS to oversee exempt organizations and confirm they are not operated primarily for the benefit of private parties. — For more information about EY's Exempt Organization Tax Services group, visit us at www.ey.com/ExemptOrg.
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