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Proposed regulations would reinforce donor disclosure rule change; penalty relief provided by Notice 2019-47

Donor disclosure rule change; penalty relief provided

The U.S. Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-102508-16) that would, among other things, amend information reporting regulations to reflect changes to donor disclosure rules made last year in subregulatory guidance.

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Read the proposed regulations [PDF 325 KB]

A related IRS release—IR-2019-150—states that the proposed regulations reflect statutory amendments and certain grants of reporting relief (announced by Treasury and the IRS in prior guidance) to help tax-exempt organizations generally find the reporting requirements in one place. The proposed regulations would become effective upon publication in the Federal Register of the Treasury decision adopting them as final regulations. However, taxpayers may rely on the proposed regulations in the meantime.

Notice 2019-47, also released today, states that the IRS will waive penalties for certain tax-exempt organizations that, consistent with the 2018 guidance, do not report the names and addresses of contributors on annual returns for tax years ending on or after December 31, 2018, but on or before July 30, 2019.

Read Notice 2019-47 [PDF 39 KB]

Donor disclosure

The proposed regulations incorporate the changes made by Rev. Proc. 2018-38 (released in July 2018) to provide that organizations exempt from tax under section 501(a) (other than section 501(c)(3) organizations) are no longer required to report the names and addresses of their contributors on the Schedule B of their Forms 990 or 990-EZ. Read TaxNewsFlash

The U.S. District Court for the District of Montana recently determined that the revenue procedure was “unlawful” and was to be “set aside” because the IRS failed to follow the notice-and-comment procedures of the Administrative Procedure Act before promulgating the guidance. Bullock v. IRS, No. 4:18-CV-00103-BMM (D. Mont. July 30, 2019). Read TaxNewsFlash

The proposed regulations note the Bullock decision and the IRS stated in IR-2019-150 that “these regulations provide the opportunity for notice and comment on that relief as well as on other proposed updates to existing regulations.”

Under the proposed regulations, filing requirements for section 501(c)(3) organizations and section 527 political organizations remain unchanged. All organizations are required to keep contributor information and make it available to the IRS upon request.

Other changes

The proposed regulations would also modify existing regulations to reflect certain statutory amendments to section 6033 and certain instances in which the IRS has previously exercised discretion to relieve organizations, in whole or in part, from the filing requirements set forth in section 6033.

Specifically, these changes include the following:

  • Specifying that only organizations described in section 501(c)(3) and section 527 organizations generally would continue to be required to provide names and addresses of contributors on their Forms 990, Forms 990-EZ, and Forms 990-PF; 
  • Adding statutory reporting requirements for controlling organizations, sponsoring organizations, and supporting organizations;
  • Raising the gross receipts threshold that triggers a filing requirement under section 6033 for organizations exempt under section 501(a) (other than private foundations and supporting organizations) to $50,000;
  • Clarifying that section 527 organizations with gross receipts greater than $25,000 generally are subject to the reporting requirements under section 6033(a)(1) as if they were exempt under section 501(a); and
  • Adding items listed in section 6033(b)(10) and (11) (relating to certain excise taxes imposed on tax-exempt organizations, managers, and disqualified persons) to the list of items generally required to be reported.

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

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