For some time, Internal Revenue Service Form 990, “Return of Organization Exempt From Income Tax” legally required every tax-exempt organization—alongside nonexempt charitable trusts and section 527 political organizations—to report to the IRS the names and addresses of any contributors who over the course of a given year made gifts to that organization in the amount of $5000 or more. Recently, however, the IRS made clear that it intended to do away with this requirement only as it relates to 501(c)(4) tax-exempt organizations. And now it has done exactly this in an issuance of final regulations that went into effect on May 28, 2020.
Organizations falling under section 501(c)(4) come in two different types. One is what the IRS calls “local associations of employees,” which it defines as having a membership “which is limited to the employees of a designated person(s) in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational or recreational purposes.” The other is social welfare organizations—“[c]ivic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.” This latter classification may even include organizations like volunteer fire companies and homeowners associations, provided they meet the other requirements for tax exemption.
According to the new regulations, these types of organizations are no longer required to disclose donor information, including names or addresses, on their tax returns. However, it should be noted that the regulations do still require these 501(c)(4) organizations to maintain in their own records a list of donor information.
When a church, ministry, or other nonprofit organization in Arizona needs advice or legal aid regarding the laws surrounding confidentiality, Provident Law’s church and nonprofit attorneys are here to help. We recognize how essential these organizations are to society, and we provide broad transactional and general counsel services to keep them running smoothly. Contact us to learn more.