Treasury Eliminates Donor Information Disclosures by 501(c)(4) and 501(c)(6) Organizations

The Treasury Department announced a change in the regulations making it no longer necessary for 501(c)(4) and 501(c)(6) organizations to disclose the identities of their donors on their annual information returns to the IRS. More specifically, tax-exempt organizations described by section 501(c), other than section 501(c)(3) organizations, are no longer required to report the names and addresses of their contributors on the Schedule B of their Forms 990 or 990-EZ. The donor disclosure requirements for 501(c)(3) and 527 organizations are not affected by the change.

The spin by Treasury, led by Secretary Steven T. Mnuchin and ultimately President Trump, is captured by the title of its press release issued earlier today, Treasury Department and IRS Announce Significant Reform to Protect Personal Donor Information to Certain Tax-Exempt Organizations. The general rationale offered by Mnuchin for the elimination of the disclosure requirement:

Americans shouldn’t be required to send the IRS information that it doesn’t need to effectively enforce our tax laws, and the IRS simply does not need tax returns with donor names and addresses to do its job in this area.

The concern with the elimination of the disclosure requirement, however, is that more dark money will flow through 501(c)(4) social welfare organizations (like the NRA), 501(c)(5) labor organizations, and 501(c)(6) business leagues (like the U.S. Chamber of Commerce) to fund political campaigns with no identification of the source of those funds. As noted in this Reuters article:

The change protects the privacy of wealthy donors of “dark money” donations to politically active groups.

A letter from several nonprofits, including Public Citizen and Sunlight Foundation, to the House Ways and Means Committee regarding an earlier bill proposing a similar change to the disclosure requirement explains:

Eliminating the existing requirement for disclosure to the IRS of donations to 501(c)(4) “social welfare” groups would open the door wide for secret, unaccountable money from foreign governments, foreign corporations and foreign individuals to be illegally laundered into federal elections through 501(c)(4) groups.

While foreign money cannot be legally given or spent in our elections, the only real protection we currently have against the use of 501(c)(4) groups to launder foreign money into federal elections is that 501(c)(4) groups must disclose their donors, including foreign donors, to the IRS. This requirement means that 501(c)(4) groups know they can be held accountable if they illegally spend foreign money in U.S. elections.

However if donor disclosure to the IRS is eliminated, no one will know whether a 501(c)(4) group has received foreign funds and is illegally spending them in our elections, other than the foreign donors and 501(c)(4) groups involved. There will be no way to hold them accountable for illegally spending foreign money in federal elections.

The elimination of the disclosure requirement on Schedule B of Form 990 or 990-EZ takes place immediately as it applies to information returns for taxable years ending on or after December 31, 2018, meaning it will influence funding for the mid-term elections.


Rev. Proc. 2018-38

I.R.S. Will No Longer Force Kochs and Other Groups to Disclose Donors (NY Times)

‘Dark money’ groups don’t need to disclose donors to IRS, Treasury says (Washington Post)

Treasury defends move to halt nonprofit disclosures amid Wyden threat (Politico)

The government is making it easier for “dark money” donors to go unnamed (Vox)

Treasury Weakens Donor Disclosure Requirements for Some Nonprofits (Nonprofit Quarterly)

Trump just made it easier for groups like the NRA to hide dark money donors. The timing couldn’t be worse. (NBC)