How to Disclose Appropriate Nonprofit Information - dummies

How to Disclose Appropriate Nonprofit Information

By Stan Hutton, Frances Phillips

Disclose is a funny word, isn’t it? It seems to imply that your nonprofit is hiding something that must be pried from your clutches. Don’t think of it that way. The IRS regulations that lay out the rules for disclosure refer to “the public inspection of information.” That’s much more genteel.

What you do need to show

What information must be disclosed to the public? It’s simple, really. Your three most recent filings of IRS Form 990 and your IRS Form 1023 application for tax exemption and supporting documents — if you received your exemption after July 15, 1987 — must all be available to the public.

If you have a question, refer to IRS Publication 557, which you can find at the IRS website.

Form 990 is the annual report that you must file with the IRS. In a nutshell, it’s a report of your annual finances and activities as a nonprofit organization. The IRS has three versions of the 990 form, and the version you file depends on your nonprofit’s gross receipts and total assets held. Don’t panic!

Current IRS regulations state that the three most recent 990 reports and attachments to the report must be available for public inspection at the organization’s primary place of business during regular business hours.

A staff member may be present during the inspection, and copies may be made for the person requesting them. If you make copies on your own copier, you may charge what the IRS charges: $0.10 per page for black and white or $0.20 per page for color.

If your organization is a private foundation, special disclosure rules apply. Check with the Council on Foundations about disclosure requirements.

If you work out of your home or really have no primary place of business, you can arrange to meet at a convenient place or mail copies to the person who requested them. You have two weeks to do so. The information also can be requested in writing, and if it is, you have 30 days to respond.

If you received your exemption after July 15, 1987, you must include your application for exemption and all the supporting materials submitted with it in the information you make available for inspection. Although the IRS doesn’t say so, you should include your articles of incorporation and your bylaws, if you attached them to your application.

You need to know the rules and regulations about public inspection of nonprofit materials, but frankly, in the many years we’ve been working for nonprofits, no one has ever asked to see our 990 forms. This doesn’t mean that you won’t be asked, however. Follow the Boy Scout motto and be prepared.

On your 990, you need to disclose compensation paid to board members. This information is available for public inspection, as are employee salaries and contractor payments of more than $100,000 per year.

Check your state and local government requirements to see whether your nonprofit must make other information available under local laws.

What you don’t need to show

You don’t need to reveal your donor list. Donors who contribute more than $5,000 must be named on Schedule B of your 990-EZ or 990 report, but 501(c)(3) public charities aren’t required to make the information public.

Other items that may remain private include the following:

  • Trade secrets and patents

  • National defense material

  • Communications from the IRS about previous unfavorable rulings or technical advice related to rulings

  • Board minutes and contracts

IRS regulations go into more detail, but these four items sum up the major points. If you have questions about a particular item, consult your attorney or tax advisor.

The public disclosure rules offer a nice tool for anyone who gets a bee in his bonnet and wants to harass your organization. So if you start getting request after request after request, check with the nearest IRS office. IRS officials have the authority to relieve you of the disclosure responsibilities if they agree that harassment is occurring.

How to use the web to satisfy disclosure requirements

You can avoid the hassle of photocopying your Form 990 by placing the required information on the web. If you do so, be sure that you post an exact copy of the materials, not a summary or a retyped copy. You can scan documents and put them on your website as graphics, but the best way to do it is to put the documents in PDF format using Adobe Acrobat.

GuideStar keeps a database of basic information about U.S. nonprofit organizations as well as PDF files of 990 returns. You can add information about your nonprofit to the GuideStar database. Some states also maintain web databases of 990 forms of nonprofits incorporated in their jurisdictions. Remember that you need to make available your three most recent 990 returns and your application for exemption.

If someone arrives at your office and asks to inspect your 990 forms, you still need to allow them the privilege. Web access to the materials only relieves you of the responsibility of mailing out copies.