Who Must Disclose?Organizations which are exempt from federal taxation under Internal Revenue Code 501(c) or (d) must disclose certain information. (Private foundations should abide by existing rules until new regulations are issued.) Tax-exempt organizations must disclose this information at their main office and most regional or district offices where three or more employees work.
What Must Be Disclosed?Tax-exempt organizations must disclose their applications for tax-exemption (including all supporting attachments, correspondence with the IRS, and final determination letter)—Forms 1023 or 1024—and their last three years' annual tax/information returns (Form 990 or 990-EZ and most attachments). Generally, organizations cannot withhold information on employee compensation or other "private" information, but do not have to disclose information about donors or members or other protected "taxpayer information." If requested, under rules described below, an organization must provide copies of the disclosed material, and a request may ask for only a part or section of the application or return.
When Must Applications and Returns Be Made Available for Inspection?Applications and returns must be disclosed upon request, in person or in writing. Generally inspection must be available during normal working hours and at the time of the request.
When Must Copies Be Provided?Organizations which post their applications and returns on the Internet in specified ways (and inform requesters of their availability) do not need to provide copies. There are national clearinghouses (such as GuideStar, http://www.GuideStar.org) which will publish disclosure information on the Internet.
Otherwise, if a request is made in person, an organization must provide copies of disclosable applications and returns the day they are paid for, except in special circumstances (and then within five business days). Copies requested in writing must be provided within 30 days of advance payment.
An organization may require advance payment for copies. Payment is limited to $1 for the first page and $.15 for each page thereafter (these fees are tied to the IRS's own cost for copies), plus the actual cost of postage to send the copies. Payment must be accepted in cash or by certified check, money order or either credit card or personal check. If a request for copies is received without advance payment, the organization must send a request for payment within seven days. Similarly, if the cost for the copies is more than $20, the organization must receive consent from the requester.
There are special rules to protect against multiple requests from a "harassment" campaign.
What Are the Penalties for Not Disclosing the Information?Penalties for failing to permit inspection or provide copies of applications and returns apply to both the organization and its managers (personal liability). Penalties can be as high as $5,000 for willful failure to allow inspection or provide copies, plus $20 per day up to a maximum of $10,000 per information return (and no limit on failure to disclose applications).
The full text of the new disclosure regulations can be found at the Federal Register Web site.
The preceding is a guest post by Barnaby Zall, a lawyer in Rockville, Maryland specializing in tax-exempt organization law and constitutional litigation. He can be contacted at:
Law Offices of Barnaby Zall
7018 Tilden Lane
Rockville, MD 20852