The Form 990 the IRS annual reporting return that most tax-exempt organizations are required to file annually includes information on financial, programmatic, and executive compensation and is the most comprehensive and accurate source of data on the nonprofit sector.  Although a public document since its inception in the 1940s, the forms until recently have only been available after a long IRS processing delay and then not in a machine readable format.  That may now be changing.

The U.S. House Ways and Means Committee has released a discussion draft of a bipartisan bill that includes mandatory Form 990  e-filing. Sponsored by Oversight Subcommittee Chairman Lynn Jenkins (R-KS) and Ranking Member John Lewis (D-GA), this is part of a larger IRS reform effort.

The bill would require any organization that files a Form 990 to file in electronic form and for all electronically filed returns to be made available to the public in machine-readable format, beginning the taxable year after the date of the law’s enactment.  If an organization feels this would be an undue burden, there is a process for the Secretary of Treasury to provide up to a two-year delay of the e-file requirement.

This bill is the most recent effort to make e-filing mandatory and to make the data available in a usable format.  Currently, approximately 60% of Forms 990 are electronically filed and available free on Amazon Web Services.  This legislation would expand e-filing, to complete the searchable database with all Forms 990 filed by the nonprofit sector.

This proposed legislation represents progress on mandatory Form 990 e-filing, but this has been a very long road so far.  Past blogs have discussed what appeared to be promising developments, as in these examples:

  • The Federal Budget proposals for the last several years have included mandatory Form 990 e-filing.
  • 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, concluding that this would result in more accurate and complete data becoming available sooner, which, in turn, would allow the IRS to more easily identify areas of non-compliance.

Hence, Form 990 e-filing seems to have widespread support, including bi-partisan legislative and IRS support.  On April 17, the House of Representatives actually passed this legislation, so it will now go on to the Senate for consideration.  The nonprofit sector itself has been on record as supporting e-filing for years.  Even a federal court has ruled that e-filed data must be available to the public.  But why hasn’t it happened?

The IRS has consistently responded that it doesn’t have a sufficient budget to pay the administrative costs involved – in fact, Congress has actually decreased its budget in recent years.  Yet, after the federal court ruling, the IRS did make the e-filed Form 990 data available through Amazon Web Services.  However, the data feeds have been irregular in timing and size over the year and a half since this process started.  It is difficult for users to plan, not knowing when and how much data will be available.  Also, the data from Amazon only includes the currently e-filed forms, about 60% of the total. 

The proposed bill includes what the nonprofit sector wants and needs, but what are the chances that this bill will become law?  There is little opposition to the concept – just not enough positive support currently, and it is part of a larger bill with an uncertain future.  Stay tuned!

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