WASHINGTON— The U.S. Department of the Treasury today announced that the Internal Revenue Service (IRS) plans to revise the Form 990 to improve transparency, strengthen tax administration, and provide clearer reporting on certain activities of tax-exempt organizations described in section 501(c)(3) of the Internal Revenue Code, including government contracts, government grants, and fiscal sponsorship arrangements. The changes are intended to detect misconduct and hold wrongdoers accountable.
Government grants and contracts can involve substantial public funds. Clearer reporting in these areas can help the IRS and the public better understand the sources and uses of that funding, support proper revenue classification, and reduce the risk of fraud, abuse, and misuse of taxpayer dollars.
“Public money and tax-exempt status demand public accountability,” said Treasury Secretary Scott Bessent. “We are ending the days of hiding fraud, abuse, and extremist activity behind complicated nonprofit arrangements. When bad actors misuse charitable structures, directors and officers should understand that transparency can lead to scrutiny, accountability, and liability under the law.”
Fiscal sponsorship is an umbrella term for several longstanding and lawful structures through which a tax-exempt organization may support charitable projects and initiatives. Recent congressional oversight has raised concerns that some fiscal sponsorship arrangements may be used to obscure who is operating a project, who controls project funds, and how those funds are being used. Increased reporting can help address those concerns and make it harder for rogue organizations to hide behind opaque arrangements.
Treasury and the IRS expect to publish proposed regulations and provide an opportunity for public comment before any reporting changes are finalized. Treasury and the IRS will consider administrative feasibility, proportionality, and reporting burden as the proposal is developed.
“Tax-exempt status is not immunity from scrutiny,” said Treasury Assistant Secretary and Acting IRS Chief Counsel Ken Kies. “If an organization receives public funds or tax-deductible donations, it should be prepared to show who controls the money and where it goes.”
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