Schedule B 990 Updates

Late last month, a Montana Federal District Court knocked down recently enacted IRS rules that had allowed 501(c)(4) organizations to avoid disclosing their donors on their annual 990 tax returns. The case, brought by the Governor of Montana against the IRS, is Bullock v. IRS (USDC D.MT CV-18-103 GF BMM).

Last year, the IRS enacted rules allowing tax exempt organizations (other than charities) exempt under Section 501(c)(3) to cease providing names and addresses of their donors on their 990 Schedule B. These organizations were still required to maintain that data in the event it would be needed and available upon IRS request. The Governors of Montana and New Jersey sued the IRS in an effort to reverse those rules, and prevailed when the Court held that the IRS’ rules promulgation process violated required notice and comment procedures under the Administrative Procedure Act (APA). The fact that the IRS promulgated rules without those requirements proved fatal. The Court did not reach the substance or merits of the rule. The IRS may now either drop the matter, appeal, or engage on the required rulemaking procedure.

We hope to monitor developments on this case and look forward to being in touch on future non-profit organizations matters.