IRS reduces donor reporting rules for some tax-exempt groups

IRS reduces donor reporting rules for some tax-exempt groups
© Greg Nash

Certain tax-exempt groups will no longer be required to provide the names and addresses of donors to the IRS on annual forms under guidance that the Treasury Department and IRS released Monday evening.

The guidance reflects a priority of conservatives, who have been pushing for the IRS to bar collection of the donor information as part of their efforts to prevent the agency from targeting groups for their political beliefs.

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Under federal law, charitable organizations that are tax-exempt under section 501(c)(3) have to provide to the IRS information about the names and addresses of substantial donors. The IRS has required other types of tax-exempt organizations — including 501(c)(4) groups that advocate for specific policies, such as the National Rifle Association and the Koch brothers-backed Americans for Prosperity — to also provide the agency with that information.

The names and addresses of donors is generally supposed to be kept private, but this information has improperly been made public in the past, notably in the case of the socially conservative National Organization for Marriage in 2012.

Under the new guidance, social-welfare groups and other tax-exempt organizations, besides charitable and political organizations, will no longer have to provide the IRS with the names and addresses of donors. The groups will still have to keep donor information in their own records and make it available for the IRS when the agency needs the information in audits of taxpayers.

Treasury Secretary Steven MnuchinSteven Terner MnuchinTrump announces tariffs on 0B in Chinese goods Trump: China tariff announcement to come Monday afternoon Trump could hit China with tariffs of 0 billion as soon as Monday MORE said in a statement that the IRS doesn't need tax-exempt groups to routinely provide the government with information on donor identities in order to administer the tax code.

“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," he said.

The Treasury Department has been required in the past to make groups' annual forms available to the public, generally minus information about names and addresses. Mnuchin said that "the same information about tax-exempt organizations that was previously available to the public will continue to be available, while private taxpayer information will be better protected."

Republicans have been critical of the IRS in recent years, particularly because of revelations in 2013 that the agency had subjected conservative groups' applications for tax-exempt status to extra scrutiny. Treasury said in a news release that its new policy would reinforce changes that the IRS has made following those revelations.

House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyTrump announces tariffs on 0B in Chinese goods New GOP tax cuts would add .8 trillion to deficit, says report House panel advances key bill in new round of GOP tax cuts MORE (R-Texas) praised the guidance.

"I applaud the Trump Administration for strengthening First Amendment protections and prioritizing personal freedom and privacy with this action,” he said.

The U.S. Chamber of Commerce said the “action will help ensure that sensitive donor information will not fall into the hands of those who wish to suppress the First Amendment right to free speech.”

In 2016, the House passed a bill from Rep. Peter Roskam Peter James RoskamJordan hits campaign trail amid bid for Speaker Trump's woman problem may cost the GOP the House House votes to delay ObamaCare health insurance tax MORE (R-Ill.) to largely ban the IRS from collecting information about donor identities, largely along party lines. But the measure wasn't considered by the Senate and the Obama administration opposed it. Democrats voted against the bill because they were concerned it would reinforce the secrecy around donations to 501(c)(4) groups, and they were concerned that the bill could have facilitated the illegal use of foreign money in U.S. elections.

—Updated Tuesday at 12:35 p.m.