IRS rules change allowing groups to keep donors’ names hidden is both disappointing and troubling

In the wake of the news that the Treasury Department and IRS this week implemented a rules change that allows many 501(c) organizations — including politically active dark money groups organized under Secs. 501(c)(4) and 501(c)(6) of the tax code — to keep their donors secret, Issue One Executive Director Meredith McGehee issued the following statement:

“It is both disappointing and troubling that the Treasury Department and IRS have decided that politically active nonprofits must no longer disclose the names of their substantial donors to the IRS. 

“For years, those opposing more robust transparency policies to prevent foreigners from funneling money into U.S. elections through 501(c) nonprofit organizations have shamelessly argued new rules are unnecessary because the IRS already collects this information. It is deeply concerning that many of those same organizations have now helped convince the IRS that collecting detailed information about the donors to politically active nonprofits is unnecessary, even as dark money groups pump huge sums of secret money into our elections. 

“Enforcement agencies need every tool available to safeguard our elections against foreign interference. Congress must now step up and strengthen our transparency rules to ensure foreigners aren’t using opaque tax-exempt organizations to meddle in our elections.”

Background:

For decades, the IRS had required most 501(c) nonprofit organizations to annually report their substantial donors’ names and addresses on Schedule B of the Form 990 tax return, as well as the amount of money each donor gave. The agency would then redact the donors’ names and addresses when making these annual tax filings available to the public — while showing the number of substantial donors and amounts given by each.

Going forward, nonprofits affected by this rules change will file versions of this form with the IRS that omit donors’ names and addresses. These documents will continue to be public records, allowing the public and the press to answer basic questions about how vast or limited a nonprofit’s donor base is, such as whether an organization is being primarily funded by one deep-pocketed donor, a handful of wealthy donors, a broad coalition, or expansive grassroots support.

Nonprofits affected by this rules change must also still maintain internal records of their substantial donors’ names and addresses, which the IRS may request on a case-by-case basis.

Last year, Issue One submitted comments to the agency opposing this proposed rules change.