Disclosure Rules for Forms 990 and 1023

Disclosure Rules for Forms 990 and 1023

This memo discusses the public disclosure requirements regarding your annual information return (Form 990) and application for tax exemption (Form 1023) that became effective on June 8, 1999. In short, organizations are now required to provide copies of the three most recent Forms 990 and their Form 1023 to anyone who asks for them. The rather intricate details follow (much of which has been taken from the recently promulgated Treasury Regulations, sections 301.6104(d)-2-5, April 9, 1999 (Regs)).

As of June 8, 1999 Federal law requires you to give copies of your three most recent Forms 990 and your Form 1023 (application for tax exemption) to anyone who comes into your office and asks for any or all of these documents. Generally, you must provide the copies on the day the request is made. If unusual circumstances would place an unreasonable burden on your organization on the day the documents are requested, you must provide them no later than the next business day following the day that the unusual circumstances cease to exist or the fifth business day after the date of the request, which ever occurs first. Unusual circumstances include receipt of a volume of requests that exceeds your daily capacity to make copies or requests received shortly before the end of regular business hours or requests received on days when your staff is conducting special duties, such as student registration or attending an off-site meeting.

You may charge a reasonable amount for making the copies ($1 dollar for the first page and 15 cents for every page thereafter.) You need not provide the copies until you have received payment for them. With the exception of the schedule in which you list your donors, you must include all schedules, attachments, supporting materials (for example, if someone requested your Form 1023, such materials would include your certificate of incorporation and by-laws), and all letters from the IRS concerning these documents. (You are not required to provide the list of the names and addresses of your donors that you include with your Form 990 or your 1023.) Similarly, if someone asks you in writing to mail them a copy of these documents you must do so, again for a reasonable cost (copying charges as above plus mailing costs). A written request can be made by mail, e-mail or fax, and it must include the address to which the documents are to be sent. Generally the copies must be mailed within 30 days of receiving the request. A copy is deemed provided on the date of the postmark of the letter in which it is sent. If sent by certified or registered mail, the date of the registration or the date of the postmark or your receipt shall be deemed the date received. If someone asks for only a part of your Form 1023 or 990s rather than the entire documents, you must give them the parts asked for. Prior to June 8, 1999 groups were required to show these documents without charge to anyone who came into their office and asked to look at them. If you take advantage of the “widely available” rules discussed below, you need not provide copies to anyone but must still show them to people who come into your office to look at them. There are detailed rules about when and how these documents are to be made available which are beyond the scope of this memo.

A Note on Being Reimbursed for Providing Copies

As mentioned, you may charge a reasonable amount for providing copies ($1 for the first page plus 15 cents for each additional page plus actual mailing costs, if mailed). (Of course, you don't have to impose a charge.)

You are not required to make copies available until you have received payment. While there are no particular complications about payments when a requester comes into your office and asks for copies, there are a few wrinkles if a request is made in writing. If you decide not to require payment, you must mail the documents requested within 30 days of receipt of the request.

If you do require prepayment, there are several scenarios that might develop. First, if you are not asked about payment but require payment in advance, and you receive a written request without payment (or insufficient payment), you must inform the requester of your prepayment policy within 7 days of receipt of the request. This will include informing the requester of the charges for copying and mailing your application and each annual return, with and without attachments, so that the requester may include the proper payment with her request for copies. Similarly, if you are asked about costs by a potential requester, you must inform her within 7 days of such charges. In circumstances where you have required prepayment, you must mail the requested document(s) within 30 days from the date you receive payment. You shall be deemed to have received a payment 7 days after the date of the postmark on the letter with which the payment was sent. If a request is made for documents without prepayment and you want to avoid the step of informing the requester of your prepayment policy, you may send the requester the documents asked for with a bill for charges, even if the requester had not been informed of your payment policy, so long as the bill does not exceed $20. (This must be done within 30 days from the time the request was made.) If the bill covering the fee charged for copying and posting does exceed $20, you must receive consent from a requester before providing copies.

All of this could be a big pain in the rear-side, particularly if you get a lot of requests. As an alternative, if you post these documents on the web, you need not make hard copies available. On this last point, the new rules provide that if an organization makes their 990s, etc., “widely available” through the Internet in an acceptable format (see note below on “Requirements”), it is not required to provide paper copies on request. (Even if these documents are posted on the Web, you must, however, still show copies of these documents to those who come into your office and ask to see them.) We now explain how you can go about posting your 990s, etc., on the Web.

In brief, you can either post the documents on your own web site or send them to a service that will post them for you. Once posted, all you need to do when a request is made for the documents is to give the web site address (URL) where they are located. For those who do not have their own web site, we have found a good and reliable service that will post these documents for you, if you fax your documents to them. It is a new service called 990online.com. 990online.com charges approximately $100 a year for this service, which if you receive a number of requests each year may be worth your while to pay. 990online.com will scan the material you have sent into an electronic file that will then be posted on its web site in a format that will meet IRS requirements. You can find out exactly what to do by consulting 990online.com's web site, located at www.990online.com. If your organization does have a web site, but doesn't have the expertise or tools to scan and convert your IRS materials into the format that the regulations require, 990online.com can perform those tasks for you and provide you with an electronic document to publish on your own web site.

A Note on Complying with the “Widely Available” Requirements

The Regs provide that a document will be considered to be widely available only if:

“(a) the World Wide Web page through which it is available clearly informs readers that the document is available and provides instructions for downloading it;

(b) the document is posted in a format that, when accessed, downloaded, viewed and printed in hard copy, exactly reproduces the image of the application for tax exemption or annual information return as it was originally filed with the IRS (except for information permitted to withheld from public disclosure); and

(c) any individual with access to the Internet can access, download, view and print the document without special computer hardware or software required for that format (other than software that is readily available to members of the public without payment of any fee) and without payment of a fee to [your] organization or to another entity maintaining a World Wide Web page.”

It should be noted that Guidestar posts Form 990s of nonprofit organizations that are available to be downloaded and viewed by anyone for no charge at www.guidestar.org.

The penalties for failing to comply with the public inspection requirements have increased and one should be aware that some of these penalties might apply to individual staff members of organizations required to make their documents public. If an organization does not disclose its application for exemption (Form 1023), it will be subject to an IRS fine of $25 per day with no maximum penalty. If an organization does not disclose its annual information return(s) (Form 990), it will be fined $20 per day with a maximum penalty of $10,000 for any one return. If the IRS determines that an organization willfully failed to comply with a request of information, the organization may be fined an additional $5,000 for each application or return in question.

If an organization denies an individual's request for documents, such individual may provide a statement (by writing, phone, or fax) that describes the reasons why the individual believes that the denial was violation of the disclosure requirements to the district director for the key district in which the organization is located. For New York groups the key district is: IRS, Brooklyn Key District, 625 Fulton Street, 10 MetroTech Center, Brooklyn, New York 11201; phone: 718/488-2000; fax: 718/488-2077.

Where did we put that Form 1023?

Most organizations will have little trouble finding their last Form 990s, but what about their final, approved application for tax exemtpion--IRS Form 1023?

Unless your agency applied for tax exemption within the last few years you may have trouble location your 1023 and all of the supporting materials.

However, groups who filed their Form 1023 before July 15, 1987 and did not have a copy of the form on July 1987 are exempt from the requirement of supplying or showing a copy of their Form 1023. This is because prior to July 15, 1987 there was no requirement to show a copy of the Form 1023 to anyone, and many groups did not retain their copy of Form 1023.

For those groups who filed their 1023 after July 15, 1987 and cannot find their copy, contact the IRS Customer Service at 877/829-5500 to get replacement copies of their Form 1023 and 501c Determination Letter.

Beyond the scope of this memo are rules regarding relief from the public disclosure requirements if you are the target of a harassment campaign and rules regarding the use of agents to comply with your disclosure obligations.