E-filing of Forms 990 Proposed in CHARITY Act

by Linda M. Lampkin, Senior Nonprofit Compensation Specialist 26. April 2016 15:20

 

Senators John Thune (R-SD) and Ron Wyden (D-OR) have recently introduced S. 2750, the Charities Helping Americans Regularly Throughout the Year (CHARITY) Act, and the proposed legislation includes “requiring nonprofits to file their paperwork electronically,” according to the Senate press release.

The proposal also would require the IRS to release Form 990 data in an open, machine-readable format. The IRS now provides only TIF images, which provide a picture of the form – the data can only be used for analysis by manually entering the information into a database.  This is expensive and time-consuming, delaying timely access to usable data and creating the possibility of transcription errors.

While this proposed legislation represents progress on the Form 990 e-filing front, there is a long history and still a long way to go.  Past blogs have discussed what appeared to be promising developments.  Consider these examples:

  • The Federal Budget proposals for the last several years have included mandatory Form 990 E-filing.  President Obama again included mandatory electronic filing of the Form 990, with the requirement that the IRS release 990 data in an open, computable format.
  • A Federal District Court ruled that the IRS had to provide computer-readable data for some organizations that e-filed their Form 990 data.     
  • The Government Accountability Office (GAO) recommended that Congress expand the mandate for electronic filing of nonprofit tax forms. The report concluded that expanded e-filing would result in more accurate and complete data becoming available in a timelier manner, which, in turn, would allow the IRS to more easily identify areas of non-compliance.
  • Congressional discussions of tax reform in late 2014 included a requirement for open Form 990 data from both the House and the Senate.


So Form 990 e-filing seems to have bi-partisan legislative support, as well as support from the executive branch.  The nonprofit sector itself has been on record as supporting e-filing for years.  And the federal court has ruled that electronically-filed data should be available to the public.  Why hasn’t it happened?

The IRS has consistently responded that it just doesn’t have the money to pay the administrative costs involved – in fact, Congress has actually decreased its budget in recent years.  In 2015, the IRS did announce that it would release electronically-filed Form 990 data in an open format in 2016, but there has been no further news on this and we are almost five months into 2016.

What are the chances that this bill will become law?  At the moment, passage is probably unlikely, with only two sponsors so far and it is an election year.  Some say that it does establish language and an intent, making it more likely that that e-filing could be included in a larger budget or appropriations bill later this year.  At the time of writing, the upcoming election appears to have had a chilling effect on all Congressional activities, so this may not be the year when e-filing and computer-usable Form 990 data are achieved.  There is little opposition to the concept – just not enough positive support at the moment!