The U.S. Treasury just announced plans that may mean greater scrutiny for nonprofits on their future Form 990s. The plan to revise the 990 aims to improve transparency, strengthen tax administration, and provide clearer reporting — all in an effort to root out misconduct and establish more rigorous oversight. What remains unclear, however, is exactly what changes the IRS intends to make and how those changes will impact nonprofits.
990 Basics
The IRS Form 990 is the annual information return filed by most tax-exempt organizations to report their activities, finances, and governance. Even if a nonprofit is exempt from paying federal income tax, it must still file Form 990 to maintain its tax-exempt status and ensure transparency for donors and the general public.
Form 990 reports key financial information such as gross receipts, expenses, revenues, assets, and liabilities, and gives a clear view of the organization’s financial condition. It discloses governance information, including board composition, oversight practices, and certain policies and leadership details. It may also include other schedules that cover grants, related activities, or compliance matters required by the IRS. Because Form 990 is publicly available, it helps donors, funders, and the public access information about an organization’s mission, programs, and finances.
Treasury Secretary Scott Bessent used strong language in announcing the Treasury’s intentions, calling out the “bad actors” and promising to end, “the days of hiding fraud, abuse, and extremist activity behind complicated nonprofit arrangements.”
The press release reported that activities related to government contracts, governments grants, and fiscal sponsorship arrangements would be subject to additional reporting, but it did not specify what new features the 990 will include, or what specific new information will need to be reported. The Treasury and the IRS promise to publish proposed regulations and allow public comment before any reporting changes are finalized, but no timeline was provided.
Admin Burden
As accounting professionals, we strongly support filing improvements that enhance transparency and help curb abuse in the nonprofit sector. That said, reforms should not create unnecessary administrative burdens for organizations, some of whom are already operating with limited staff and resources.
The release gives no indication of what revisions the IRS is planning, or whether those revisions will apply across the board to all nonprofits, or will target 501(c)3s in particular industries or of a particular size.
Safeguards are important when practical and proportionate. However, a large nonprofit hospital with millions in revenue and a substantial administrative team is in a far different position than a small community nonprofit that relies heavily on volunteers and small donations to keep its operations moving. Reporting requirements should be fair, practical, and realistic considering an organization’s size, capacity, and mission. The release affirms that the IRS will, “consider administrative feasibility, proportionality, and reporting burden as the proposal is developed.” That commitment is an encouraging start — though how it will translate in practice remains to be seen.
At this stage, nonprofits should not be alarmed. The IRS cannot create new tax law through Form 990; it can only work within existing laws and rules. Creating new reporting requirements on Form 990 will have to wait until federal regulations are issued, and as we all know, federal wheels turn slowly.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
