Three recent developments signal progress in the move toward electronic filing of the Form 990, the annual IRS reporting form required from nonprofit organizations. Whether these will be enough to actually get an e-filing requirement enacted is anyone’s guess.
#1 – Proposed in the 2016 Federal Budget
The 2016 Federal Budget released by President Obama again included a proposal for mandatory electronic filing of the Form 990. If enacted, the IRS would also be required to release 990 data in an open, computable format. Currently, IRS provides only .TIF images which provide only a picture of the form – the data can only be used for analysis by manually entering the data into a database. This is expensive and time-consuming, delaying access to usable data and increasing the potential for transcription errors.
#2 – Disclosure of E-Filed Data Mandated by Federal Court
Since some Forms 990 are already e-filed, an open government data advocacy group (Public.Resource.org), requested forms for nine organizations that did file electronic data under the Freedom of Information Act. When the request to IRS for the machine-readable data was denied, the group sued the IRS, and now a federal district judge has ordered the IRS to release the electronic 990 data within 60 days. The IRS can file an appeal of the judge’s ruling within the same 60-day period. So, stay tuned for further legal developments.
#3 – Recommended by GAO
The Government Accountability Office (GAO) recommended that Congress expand the mandate for electronic filing of nonprofit tax forms. The December GAO report, “TAX-EXEMPT ORGANIZATIONS: Better Compliance Indicators and Data, and More Collaboration with State Regulators Would Strengthen Oversight of Charitable Organizations” (see http://www.gao.gov/assets/670/667595.pdf), 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.
These developments follow the inclusion of a requirement for open Form 990 data in the December 2014 tax reform discussion drafts from both the House – by Rep. Dave Camp (R-Michigan), former chair of the House Ways and Means Committee – and the Senate -- by Senator Max Baucus (D-Montana), former chair of the Senate Finance Committee.
So, this push for Form 990 e-filing movement has bi-partisan legislative support and support from the executive branch, as evident in President Obama’s budget proposal, and the GAO recommendation which was supported by the IRS. The nonprofit sector itself has been on record as supporting e-filing for years. Now there is even a federal court ruling that the electronically filed should be available to the public. The requirement of e-filing and subsequent release of machine-readable 990 data on a large scale is long overdue. Is it time at last for the needed legislative action?