ProPublica recently reported that the IRS has yet to release nearly a half million non-profit tax records. You may be wondering why that is something you should be concerned about. In fact, the lack of records release has some pretty significant implications for transparency and charitable giving. Drew McManus has been painstakingly combing through records since 2005 to assemble his annual Orchestra Compensation Reports. I believe among the reasons why he didn’t have a 2022 edition examining the impact of the pandemic during the 2019-2020 fiscal year was partially due to the lack of 990 filings available for review.
Additionally, many individuals, corporations and foundations use the filing data to make giving decisions.
“This is having an impact on nonprofits, fundraising, donors … and charity regulators,” said Cinthia Schuman Ottinger of the Aspen Institute, who coordinates a group of practitioners who work with nonprofit tax data (ProPublica is a part of this group). “The whole ecosystem suffers when there are delays of this kind.”
Michael Thatcher, the CEO of Charity Navigator, said the end of the year is a crucial time for charitable giving.
And, he said, “it’s not just the donors that are upset by this.” Many organizations want their latest information out there as well, especially if their finances have improved or they’ve done significant work in recent years. “They want to show that to the world, and guess what, when you go to Charity Navigator, you’re seeing two-year-old information.”
Many of the missing filings could help shed light on how organizations — and the nonprofit sector as a whole — have fared during tumultuous years marked by a pandemic, economic upheaval and large infusions of federal relief dollars.
Courtney Aladro, a charity regulator for the Massachusetts attorney general and NASCO board member, said that regulators across the country use the IRS repository of documents to confirm or corroborate the information that charities submit to their states….
“Those are some pretty important years because of some of the difficulties over the last few years,” Aladro said. “The use and expenditure of COVID relief funds, for example. It’s pretty important for charity regulators and law enforcement to monitor that, and not having that information will make it more difficult.”
The IRS has been hampered by underfunding and understaffing which has lead to both delays in release and embarrassing release of tax information that was not supposed to be released. A recent bill passed by Congress will seek to modernize systems and hire more staffing, but it could be years before the problems are ironed out.
1 thought on “IRS 990 Backlog Hampering Non-Profit Giving and Transparency”
Last I checked, Pro Publica only had the digital data versions available and while the IRS is making good progress on that open data project, it’s not complete so having the review copies made from the versions processed by the IRS is critical for verification.
I agree that it will take years to not only catch up but to provide donors relying on that information with the confidence they need to inform their decisions. I have concerns this may not only have a negative impact on donor decisions but tempt some organizations into becoming lax with transparency.