New York recently adopted regulations impacting charitable organizations that are registered and required to file annual financial reports (the CHAR 500) with the New York Attorney General’s Charities Bureau.[1] These regulations, which became effective March 16, 2022, clarify that the names and street addresses of donors to public charities are no longer required to be disclosed to the Charities Bureau with the CHAR 500.

The regulations were proposed in response to the U.S. Supreme Court’s 2021 decision in Americans for Prosperity Foundation v. Bonta, which found California’s donor disclosure law requiring charities to submit an unredacted copy of IRS Form 990 Schedule B to be unconstitutional under the First Amendment. Following the Court’s decision, California, New York, and New Jersey suspended collection of Schedule B donor information, which is typically filed on a confidential basis with the IRS as part of the otherwise public Form 990. Six months later, the New York Attorney General’s Office proposed regulations to eliminate the requirement that charitable organizations provide the state with the names and addresses of donors on Schedule B. The final regulations remain unchanged from those proposed by the AG’s Office.[2]Continue Reading New York Adopts Regulations Amending Its Donor Disclosure Rules

Charitable and social welfare organizations that file annual financial reports with the New York Attorney General’s Charities Bureau now must file those reports—and potentially two other reports—with the New York Department of State. These requirements are a result of changes to the New York Executive Law, effective January 1, 2021. The following are key deadlines:

  • May 15: Annual financial reports (the CHAR 500) are due to the Charities Bureau and the Department of State by the fifteenth day of the fifth month after the close of the filing organization’s fiscal year. For organizations operating on a calendar year fiscal year, this means the CHAR 500 is due on May 15. Extensions are available for up to 180 days (mirroring the filing schedule for the IRS Form 990).
  • July 31 and January 31: New reports for 501(c)(3) and 501(c)(4) organizations related to certain advocacy activities in New York, if applicable, will be due to the Department of State before July 31 and January 31.

Continue Reading New Nonprofit Filing Requirements in New York

On October 2, 2019, a federal judge blocked the State of New Jersey from implementing and enforcing new campaign finance reporting and donor disclosure rules for 501(c)(4) and 527 organizations, which were enacted earlier this year as part of a sweeping and controversial campaign finance bill, S. 150. In its ruling, the Court found

A federal judge this week struck down on First Amendment grounds two provisions of New York’s lobbying law that would have required nonprofits to disclose their donors.

In 2016, New York state legislators passed legislation changing the state’s lobbying and campaign finance laws. Two important provisions dramatically expanded donor disclosure requirements for 501(c)(3) and 501(c)(4) organizations engaged in issue advocacy and lobbying in New York:

501(c)(4) Rules: The law required 501(c)(4) organizations to disclose all of their donors in public filings with the state when they spend over $10,000 in a calendar year on communications to at least 500 members of the public concerning the position of any elected official on potential or pending legislation.

501(c)(3) Rules: The law also required 501(c)(3) charitable organizations to disclose donors of $2,500 or more if the charitable organization made an in-kind donation of more than $2,500 to a Section 501(c)(4) organization engaged in lobbying in New York.Continue Reading New York Nonprofit Donor Disclosure Rules Struck Down

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.Continue Reading Donor Disclosure Rules for Nonprofit Tax Returns Overturned by Federal Court

The U.S. Supreme Court this week left in place a lower court ruling that expands donor disclosure for advocacy groups that fund independent expenditures. While the full effect of the ruling may not be known for some time, groups in the throes of an election season suddenly have to reconsider their electoral spending plans and fundraising practices, and donors to politically active 501(c)(4) social welfare organizations or 501(c)(6) business leagues have to account for an increased risk that their donations will be publicly disclosed.

What Does the Ruling Do?

Groups that are not registered with the Federal Election Commission (FEC) as campaign committees, party committees, or PACs are nonetheless required to file reports if they make an expenditure of more than $250 that expressly supports or opposes a federal candidate. These “independent expenditure” reports must itemize disbursements to each vendor involved in the creation and distribution of an ad (or other public communication), and identify the election involved and whether the organization supports or opposes the featured candidate.

In addition, a long-standing FEC rule requires that these reports identify donors who gave more than $200 to the organization in the calendar year for the purpose of funding the particular ad that is being reported. As a practical matter, donors seldom know that their funds will be used to pay for a specific ad, and thus donors have rarely been disclosed.

The district court struck down the FEC donor-disclosure rule, concluding that it applied the statutory disclosure requirement too narrowly. The court concluded that independent expenditure reports filed by groups that are not registered political committees must identify all donors who (1) give to the organization for the purpose of influencing a federal election, or (2) give for the purpose of funding the group’s independent expenditures, whether tied to a specific ad or not. The court stressed, however, that contributors to an organization’s “general programs” need not be identified.

The court deferred the effective date of the ruling for 45 days, giving the FEC time to adopt a new donor disclosure rule. That period came and went with no new rule or interpretive guidance. Crossroads GPS, which intervened in the case, has appealed the ruling to the D.C. Circuit.Continue Reading U.S. Supreme Court Allows Expanded Donor Disclosure Rules to Take Effect

The rise of politically-active nonprofits – deemed “dark money” groups by their critics – has been a hot-button issue in the last few election cycles. Election laws generally do not require groups operating under section 501(c)(4) of the tax code, commonly referred to as social welfare organizations, to register as political committees or disclose their

executive orderAt the National Prayer Breakfast earlier this year, President Trump vowed: “I will get rid of and totally destroy the Johnson Amendment.” The Johnson Amendment, named after former President Lyndon Johnson, refers to language in the Internal Revenue Code Section 501(c)(3) that prohibits charities, including religious organizations, from participating in campaigns on behalf of or in opposition to a candidate for public office.

The president took official action on May 4 through an Executive Order, titled “Promoting Free Speech and Religious Liberty,” that exhorts federal agencies to respect and protect “religious and political speech.” However, notwithstanding the controversy surrounding the announcement, including one organization’s threat to file a lawsuit the same day, the Order will have little practical effect, and the threat of a lawsuit was withdrawn.Continue Reading Trump Asks IRS to Keep Hands Off Religious Nonprofits: Will It Have Any Effect?

The question of when a politically-active, nonprofit 501(c)(4) group must publicly disclose its donors has been on the front burner in various states—most, like New York and California, have called for greater regulation, while others like Arizona have loosened the reins. At the federal level, silence has been the norm because the statute is generally read as only requiring disclosure by a 501(c)(4) (or other nonprofit such as a 501(c)(6)) if a donor contributes for the purposes of funding a particular ad. The FEC has consistently deadlocked on complaints alleging either that a donor gave for the purpose of supporting an ad or that a 501(c)(4) should be treated as a political committee and disclose all of its donors.

Last week, however, details were released from an FEC enforcement matter that met this stringent test and, as a result, the Commission levied fines totaling $233,000 against three nonprofit groups for failing to identify donors behind specific advertisements. These three settlement agreements, released as a group, provide significant guidance to nonprofit 501(c)(4)s and other actors as to what type of conduct will trigger donor disclosure at the federal level.Continue Reading The FEC Levels Fines on Nonprofits over Donor Disclosure

tax forms and notesA substantial number of organizations exempt under Internal Revenue Code (Code) § 501(c)(4), and their individual officers and directors, may be subject to financial penalties if they do not file a Form 8976, Notice of Intent to Operate Under Section 501(c)(4), with the Internal Revenue Service (Service or IRS) on or before September 6, 2016.

On July 8, 2016 the IRS released a revenue procedure for implementing new statutory requirements for certain organizations that operate under section 501(c)(4) of the Internal Revenue Code. This requirement comes on the heels of the December 2015 enactment of the Protecting Americans from Tax Hikes (PATH) Act of 2015.

The recently released Revenue Procedure 2016-41 contains temporary regulations implementing the 501(c)(4) provisions of the PATH Act and describes the new Form 8976 and the related rules for filing it.Continue Reading New Mandatory IRS Notification Process for 501(c)(4) Nonprofit Organizations Finally Announced