A federal judge on July 30, 2019 overturned an IRS ruling, issued almost exactly a year ago, that allowed many nonprofits to stop disclosing their donors on their annual tax returns.

In Revenue Procedure 2018-38 (July 16, 2018), the IRS allowed social welfare organizations under section 501(c)(4), professional and trade associations under section 501(c)(6), and many other types of organizations required to file a Form 990 series return, to cease disclosing their large donors ($5,000 or more) on Schedule B of the Form 990. The major exceptions were section 501(c)(3) organizations and section 527 political organizations, both of which are subject to statutory requirements for donor disclosure that the IRS could not waive. Those IRS rules are described in more detail here.

Even though the names of donors disclosed on Schedule B of the Form 990 were not made available to the public, only to the IRS, many commentators viewed the new rules as facilitating “dark money” in politics. The state of Montana, joined by the state of New Jersey, brought a lawsuit alleging that the IRS could not simply waive the donor disclosure requirements, which were established by IRS regulation, without providing an opportunity for public comment in accordance with the Administrative Procedure Act.

In his decision this week, Judge Brian Morris of the U.S. District Court of Montana agreed, and set aside the IRS’s new rules. The IRS has not yet announced whether it will appeal.

The question in the wake of the court ruling is whether affected groups, including 501(c)(4) and 501(c)(6) organizations, should now disclose their donors. The first Form 990s on which donors did not have to be disclosed were those due May 15, 2019. However, many nonprofit organizations took advantage of the automatic extension and have not yet filed. If nonprofits have yet to file their Form 990, it is certainly safest to disclose donors. However, it may be reasonable for nonprofits to take the position that the court decision is not final until the IRS’s time to appeal has expired, or if the IRS does appeal, that the court decision is not final until the court proceedings are complete. The IRS may issue guidance for nonprofits on how to proceed in any interim period.

For those nonprofit organizations that have already filed their Form 990 without disclosing donors on Schedule B, acting in good faith in compliance with IRS guidance in effect at the time of filing, while it is not completely without risk, there is support for the position that they are not obligated to file amended returns disclosing their donors.1

We will be monitoring developments, including any guidance that may be forthcoming from the IRS, and are available to advise if you have questions on how to manage your particular filing situation.


  1. See Treas. Reg.§ 1.451-1(a) (“If a taxpayer ascertains that an item should have been included in gross income in a prior taxable year, he should, if within the period of limitation, file an amended return and pay any additional tax due”); Badaracco v. Commissioner, 464 U.S. 386, 393 (1984) (although Treas. Regs. 301.6211-1(a), 301.6402-3(a), 1.451-1(a), and 1.461- 1(a)(3)(i) refer to an amended return, none of them requires the filing of such a return); Broadhead v. Commissioner, TCM 1955-328, affirmed 254 F.2d 169 (CA-5, 1958) (no regulation requires the filing of amended returns).
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Photo of Lawrence H. Norton Lawrence H. Norton

Larry Norton, a former general counsel of the Federal Election Commission (FEC), advises clients on federal and state campaign finance laws, lobbying disclosure, gift and ethics rules, pay-to-play laws, and the tax implications of political activities. His clients include corporations and their PACs…

Larry Norton, a former general counsel of the Federal Election Commission (FEC), advises clients on federal and state campaign finance laws, lobbying disclosure, gift and ethics rules, pay-to-play laws, and the tax implications of political activities. His clients include corporations and their PACs, advocacy groups and trade associations, candidates, super PACs, lobbying shops and law firms, and high-net-worth individuals. Larry recognizes the unique issues facing organizations seeking to influence public policy and elections. He provides pragmatic and creative solutions to complex problems, troubleshoots new projects and programs, and helps clients manage their legal and reputational risks.

George E. Constantine

George Constantine is co-chair of Venable’s Nonprofit Organizations Group and leads Venable’s associations practice. George concentrates his practice on providing legal counseling to and advocacy for nonprofit organizations, including trade associations, professional societies, advocacy groups, charities, and other entities. He has extensive experience…

George Constantine is co-chair of Venable’s Nonprofit Organizations Group and leads Venable’s associations practice. George concentrates his practice on providing legal counseling to and advocacy for nonprofit organizations, including trade associations, professional societies, advocacy groups, charities, and other entities. He has extensive experience with many of the major legal issues affecting nonprofit organizations, including tax exemption, antitrust, governance, and transactional matters. He is well versed in matters related to association standard setting and enforcement, certification, accreditation, and code-of-conduct reviews.