“Change is the law of life. And those who look only to the past or present are certain to miss the future.” -John F. Kennedy
A federal judge ruled last week in a case against the IRS that signals an important shift in the availability of nonprofit data. As we have long argued, we are moving towards a future when nonprofits’ 990 data will be freely available in electronic (“machine-readable”) format. This ruling was a step in that direction.
So, what actually happened? In short, the judge ruled that Freedom of Information Act (FOIA) requests for individual e-filed nonprofit Forms 990 must be made available in electronic format. This does not mean that paper-filed Forms 990 must be made available in electronic format. Nor does it mean that the IRS must release all Forms 990 in bulk: the ruling applies only those individual forms listed in a FOIA request.
Colleagues have asked us if there are implications for GuideStar. In the short-term there are no implications. The judge ruled on a request for nine specific forms. GuideStar has data on 2.2 million organizations.
However, we do expect that the IRS will eventually release machine-readable 990 data in bulk. It may take quite some time: the IRS has faced significant budget cuts and has limited capacity. And, indeed, we do not envy the pressure they are under on this and many other topics. Still, we expect the shift will happen.
So in the long-term, there probably will be significant implications for GuideStar. And on balance, we think they’re quite positive! Over our history, GuideStar has spent about $18 million digitizing Forms 990. Each year, we spend about another $1 million to digitize more. At some point if (when) the IRS releases this data in open format it will offer an immense cost savings for GuideStar.
And in the long term this would change some parts of GuideStar’s business model. 98% of our users use GuideStar’s tools for free. But we do draw significant revenue from the 2% that pay us for additional tools and services. A portion of our revenue on some of our products would be eroded if (when) the IRS releases all of its data.
But let’s be clear: that is OK. The world changes. This would be good for the field. And, more importantly, this will continue to drive us to be more useful to the field. We’re already offering many tools that go far beyond sharing the content of the 990: Charity Check, Financial SCAN, Philanthropedia, and others.
The 990 is an invaluable data source. But it is a regulatory document. It is not designed to tell the full story of an organization. If we only look at IRS forms to understand nonprofits, we betray the diversity and complexity of the nonprofit community. For that reason, we have been collecting additional data directly from nonprofits for years. So far, more than 107,000 nonprofits have updated their profiles on GuideStar, supplying information directly to us and our network of partners.
The next step for us at GuideStar is to make the data we have come to life. Over the next year we will launch new data visualizations, a redesigned user experience, and tools to contextualize our data. We must go beyond the question of what data is available—and figure out how to make it useful.
Nonprofits do not exist for the sake of existing. We exist to advance our missions. And we do that in the context of a changing world. GuideStar is itself a nonprofit and we can and must continue to evolve to meet our mission in new and better ways.
And this is what we care about: better data will lead to better decisions and, with your help, better decisions can help lead to a better world. Join us as we move towards a new kind of data infrastructure for the social sector.
Jacob Harold is a social change strategist, grantmaker, and author. Jacob came to GuideStar from the Hewlett Foundation, where he led grantmaking for the Philanthropy Program. Between 2006 and 2012, he oversaw $30 million in grants that, together, aimed to build a 21st-century infrastructure for smart giving.
At the beginning of his career, Jacob worked as a climate change campaigner for Rainforest Action Network and Greenpeace USA and as organizing director at Citizen Works. He also worked as a consultant to nonprofits and foundations at the Bridgespan Group and as a climate change strategist for the David and Lucile Packard Foundation based at The Energy and Resources Institute in New Delhi, India.
Jacob was recently named to the NonProfit Times (NPT) 2014 Power and Influence Top 50 list, and currently serves as a term member for the Council on Foreign Relations. He has written extensively on climate change and philanthropic strategy. His essays have been used as course materials at Stanford, Duke, Wharton, Harvard, and Oxford. He earned an AB summa cum laude from Duke University and an MBA from the Stanford Graduate School of Business with a certificate in public management. Harold has further training from Green Corps in grassroots organizing, Bain in business strategy, the Chinese Academy of Sciences in complex systems science, and the School for International Training in Tibetan studies. Harold was born and raised in Winston-Salem, North Carolina, where his parents ran small community-based nonprofit organizations.