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The Appropriate Role Of The Internal Revenue Service With Respect To Tax-Exempt Organization Good Governance Issuesabout control, about whether the public interest is truly being served.This is so because, while there are clear, widely acknowledgedprocesses by which government and business institutions should besubject to incentives and restraints that lead them to serve the interestsof society, it is not readily apparent what process, if any, is guidingnonprofit activity so that it benefits society… The proposals that theCommission has considered in this regard revolve around ideas ofopenness, of accountability, of accessibility—of, in so many words,making the inner workings of these institutions more visible, theirdecisions more public and more clearly responsive to the public needsand social change.Consistent with this pro-disclosure approach, as part of the Tax Reform Act of 1976,Congress required tax-exempt organizations filing Forms 990 to disclose lobbyingexpenditures. 226 In 1980, Congress simplified the reporting requirements for privatefoundations by combining two forms that private foundations had previously needed tofile. Congress enacted this change to reduce administrative costs for foundations andincrease the amount of information about foundations available for public and Stateinspection. 227In 1987, as part of the Omnibus Budget Reconciliation Act of 1987, Congress furtheramplified the reporting and disclosure requirements for the Form 990. According to theHouse Report, Congress echoed the concerns it had expressed in 1958:The present-law procedure under which the public can obtain copies ofthe exemption application and annual information returns of tax-exemptorganizations through requests to the Internal Revenue Service has notproved effective. For example, the present-law disclosure proceduredoes not result in the full and timely public disclosure of the activities ofcharitable organizations, as needed to facilitate accountability of suchorganizations to the public from whom they solicit tax deductiblefunds…the increased availability of information will help assure that thedouble tax benefits of deductibility of contributions and exemption fromincome tax are limited to organizations whose assets are devotedexclusively to charitable purposes…because most such charitiesregularly solicit contributions or receive other support from the public,the public should have ready access to current information about theactivities of these organizations. 228As part of this legislation, Congress added to section 6104 a requirement that taxexemptorganizations other than private foundations make copies of their three most226Sen. Rep. 94-938 (1976). The lobbying provisions changes several other times, but this memo does not review these changes indetail.227Sen. Rep. 96-1039 (1980).228H.R. Rep. No. 100-391, at 1612 (1987).ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 94
The Appropriate Role Of The Internal Revenue Service With Respect To Tax-Exempt Organization Good Governance Issuesrecent Forms 990, along with copies of their exemption applications, supportingdocuments, and determination letters, available for public inspection at theorganizations’ principal offices and certain regional or district offices during regularbusiness hours. 229In 1987, as part of the Revenue Act of 1987, Congress also increased the amount ofinformation organizations had to include on their information returns. In particular, thelegislation required filers to disclose information concerning direct and indirect transfersto other tax-exempt organizations and to political organizations. According to the HouseReport, in Congress’s view, “the [prior] annual return [did] not require sufficientinformation as to whether the charitable organization is affiliated with, or closelyconnected to, other types of exempt organizations that may engage in substantiallobbying activities or political organizations…additional information about therelationship of charitable organizations to other types of exempt organizations orpolitical organizations—which are not eligible to receive tax-deductible charitablecontributions—is needed to achieve better enforcement of the rules governing the taxexemptstatus of charities.” 230Congress further increased disclosure requirements as part of the Taxpayer Bill ofRights 2 231 in 1996 in an effort to “enhance the oversight and public accountability oftax-exempt organizations by providing increased public access to documents filed by[exempt] organizations with the IRS.” 232 In that same year, as part of the SmallBusiness Job Protection Act of 1996, Congress also clarified reporting and notificationrequirements for lobbying and political expenditures on the part of tax-exemptorganizations. The Taxpayer Bill of Rights 2 required filers of the Form 990 (notincluding private foundations) to comply with requests for copies of the organization’sForm 990 for the three most recent taxable years. 233 The bill required organizationsreceiving such requests in person to provide copies immediately and organizationsreceiving such requests in writing to provide copies within 30 days. 234 The legislationalso forbade organizations from charging more than a “reasonable fee for reproductionand mailing costs” for the copies. 235 Organizations could meet these requirements bymaking copies “widely available.” 236229Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, sec. 10702 (1987).230100 H.Rpt. 391 (1987).231Small Business Job Protection Act of 1996, Pub. L. No. 104-188, sec. 1004 (1996).2322000 JCT Study supra note 97, at 128.233Taxpayer Bill of Rights 2, Pub. L. No. 104-168, sec. 1314 (1996).234Id.235Id.236Id. Treas. Reg § 301.6104(d)-2 provides that tax-exempt organization can “make its application for tax exemption and/or anannual information return widely available by posting the document on a World Wide Web page that the tax-exempt organizationestablishes and maintains or by having the document posted, as part of a database of similar documents of other tax-exemptorganizations, on a World Wide Web page established and maintained by another entity.” Many organizations currently post theirForms 990 on their own web pages. In addition, third parties such as the organization GuideStar publish Forms 990 for multipleexempt organizations on the web, although that does not current qualify as a posting for purposes of Treas. Reg § 301.6104(d)-2.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 95
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