Nonprofit Cites Reasons for Supporting Donor Disclosure Regs

November 6, 2019

The Honorable Steven T. Mnuchin
Secretary of the Treasury
c/o Ms. Regina Johnson
CC:PA:LPD:PR (REG-102508-16)
Internal Revenue Service (IRS), Rm. 5203
P.O. Box 7604, Ben Franklin Station
Washington, DC 20044

Dear Mr. Secretary:

RE: Comments on IRS Notice Titled "Guidance Under Section 6033 Regarding the Reporting Requirements of Exempt Organizations," REG-102508-16, 84 Fed. Reg. 47447 (September 10, 2019)

The National Federation of Independent Business (NFIB) submits these comments in response to the Internal Revenue Service (IRS) Notice of Proposed Rulemaking (NPRM) titled "Guidance Under Section 6033 Regarding the Reporting Requirements of Exempt Organizations" and published in the Federal Register of September 10, 2019. NFIB supports the IRS proposal to free organizations that are tax exempt under section 501(c) of the Internal Revenue Code (IRC) (other than under section 501(c)(3)) from the burden to report with their annual returns the names and addresses of contributors.

NFIB is an incorporated nonprofit association with about 300,000 small and independent business members across America. NFIB is recognized as exempt under IRC section 501(c)(6). NFIB protects and advances the ability of Americans to own, operate, and grow their businesses and, in particular, ensures that the governments of the United States and the fifty states hear the voice of small business as they formulate public policies.

IRC section 6033 requires organizations exempt from taxation under IRC section 501(a) to "file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe." A regulation implementing section 6033 (26 CFR 1.6033-2(a)(2)) states:

(2)(i) Except as otherwise provided in this paragraph and paragraph (g) of this section, every organization exempt from taxation under section 501(a), and required to file a return under section 6033 and this section . . . shall file its annual return on Form 990 . . . .

(ii) The information generally required to be furnished by an organization exempt under section 501(a) is: . . .

(f) The total of the contributions, gifts, grants and similar amounts received by it during the taxable year, and the names and addresses of all persons who contributed, bequeathed, or devised $5,000 or more (in money or other property) during the taxable year . . .

Paragraph (6) in the referenced subsection (g) states:

(6) The Commissioner may relieve any organization or class of organizations . . . from filing, in whole or in part the annual return required by this section where he determines that such returns are not necessary for the efficient administration of the internal revenue laws.

On July 30, 2018, the Commissioner exercised authority under 26 CFR 1.6033-2(g)(6) in adopting Revenue Procedure 2018-38, which stated:

In exercising his discretion under § 1.6033-2(g)(6), the Commissioner balances the IRS's need for the information against the cost and risks associated with reporting of the information. The IRS does not need personally identifiable information of donors to be reported on Schedule B of Form 990 or Form 990-EZ in order for it to carry out its responsibilities. The requirement to report such information increases compliance costs for some private parties, consumes IRS resources in connection with the redaction of such information, and poses a risk of inadvertent disclosure of information that is not open to public inspections.

Accordingly, tax-exempt organizations required to file the Form 990 or Form 990-EZ, other than those described in § 501(c)(3), will no longer be required to provide names and addresses of contributors on their Forms 990 or Forms 990-EZ and thus will not be required to complete these portions of their Schedules B (or complete the similar portions of Part IV of the Form 990-BL).

The Revenue Procedure noted that the Commissioner lacked the discretion to eliminate reporting of contributor names and addresses for 501(c)(3) organizations because IRC section 6033(b) specifically requires their returns to include "the total of the contributions and gifts received by it during the year, and the names and addresses of all substantial contributors." The Revenue Procedure required 501(c) exempt organizations to continue to collect and keep the names and addresses of contributors and provide them if requested by the IRS, but only 501(c)(3) exempt organizations had a duty to furnish those names and addresses as Schedule B of their returns.

Regrettably, in Bullock v. Internal Revenue Service, 2019 WL 3423485 (July 30, 2019), the U.S. District Court for the District of Montana held that Revenue Procedure 2018-38: (1) "effectively amends a previous rule that required tax-exempt organizations to file substantial-contributor information annually," (2) is "a legislative rule," and (3) therefore "requires the IRS to follow the notice-and-comment procedures pursuant to" the Administrative Procedures Act (APA) (5 U.S.C. 553). With the NPRM, the IRS responds to the decision in Bullock and follows the APA notice-and-comment procedures with respect to the IRS-proposed policy to eliminate the requirement for organizations exempt under IRC section 501(c) (other than 501(c)(3)) to include with their annual returns the names and addresses of contributors.

The IRS-proposed policy respects the privacy of Americans who donate to tax exempt organizations (other than 501(c)(3) organizations), which is especially appropriate when the IRS admits that it has no need for the names and addresses of such donors to carry out its responsibilities. The policy also reduces the risk of accidental disclosure, whether by the IRS or others with whom the IRS had in the past shared donor names and addresses. In addition, tax exempt organizations (again, other than 501(c)(3) organizations) will save time and money by no longer having to fill out Schedule B to submit the names and addresses of donors.

NFIB supports and appreciates the efforts of the IRS to eliminate the duty and burden of reporting the names and addresses of donors for most types of tax exempt organizations.

Sincerely

David S. Addington
Senior Vice President and General Counsel
National Federation of Independent Business
Washington, DC