The IRS is considering a proposal that would require nonprofits to disclose on their annual Form 990 whether any of their top officials have been convicted of certain financial or terrorism-related crimes within the past 10 years. While the proposal is still under consideration and no changes have been finalized, it could create new compliance responsibilities for charitable nonprofits.
According to reporting from CBS News, convictions that could fall under the proposed disclosure requirement include fraud, money laundering, securities fraud, tax evasion, theft, and providing material support to terrorists. The proposal would reportedly require organizations to disclose whether a covered conviction exists, but would not require them to identify which officer, director, or trustee was convicted.
Why This Matters
Although the number of nonprofits with leaders who have these types of convictions is likely to be very small, the proposal could create new administrative and financial burdens for organizations of all sizes. Nonprofits may need to conduct background checks on board members and other leaders to ensure that their Form 990 disclosures are accurate.
These additional compliance costs could be particularly challenging for smaller nonprofits with limited staff and financial resources. Nonprofit leaders may also have questions about how the IRS would use the information and how the proposal could affect organizations’ ability to recruit and retain board members.
The proposal has also raised concerns about freedom of association and potential First Amendment implications. Legal experts cited by CBS News questioned whether collecting this information from nonprofits is sufficiently connected to the IRS’s authority and warned that the requirement could create a chilling effect on participation in nonprofit organizations.
Diane Yentel, president and CEO of the National Council of Nonprofits, said nonprofits support reasonable regulation that helps maintain public trust, but called the proposal “a step too far” given the administration’s broader actions and rhetoric toward certain nonprofits. She also noted that complying with the requirement could take “precious time and resources” away from nonprofits’ work serving their communities.
What Happens Next?
Nothing has been finalized, and the proposal is one of at least two potential revisions to the Form 990 currently moving through the Treasury Department and IRS.
As additional details become available, nonprofits should watch for information about which individuals and convictions would be covered, what documentation organizations may need to maintain, and how the IRS would enforce the new disclosure requirement.
CNE Will Keep You Informed
CNE will continue to monitor developments alongside our national advocacy partners and share updates that are most relevant to Virginia’s nonprofit community. We encourage nonprofit leaders to stay informed as the IRS and Treasury Department consider potential changes and as more information becomes available.