Nonprofits recognized as tax-exempt by the Internal Revenue Service (IRS) with annual incomes of more than $25,000 are required to submit financial and other information to the IRS annually using Form 990 and to make that information publicly available. Nonprofits must also make their application to the IRS for tax-exempt status publicly available.
IRS Form 990
IRS Form 990 is a tax return filed annually by tax-exempt nonprofits for informational purposes only. Information reported on the forms include the mission and programs of the organization; names of board members, officers, key staff and their compensation; donor contributions; and how the nonprofit's budget was applied. Religious entities such as churches and synagogues, though tax-exempt, are not required to file a return with the IRS and are exempt from the IRS's public disclosure rules.
Application for Tax-Exempt Status
To apply for tax-exempt status from the IRS, an organization must fill out and submit Form 1023, which requires such information as the organization's board of directors, bylaws (a legal document that tells how the nonprofit is governed) and budgets for the current and upcoming years. The public has a right to see this form and all the attachments sent in by the nonprofit as well as the determination letter sent by the IRS ruling the organization as tax-exempt.
Nonprofits are required to allow public inspection of their Form 990 and Form 1023 during their regular business hours at their main office; they are allowed to charge a modest fee for copying the documents and actual postage. But a nonprofit does not have to reply to individual requests if it makes these documents available online on their website or other websites that make Form 990s available by a searchable database. People can also request the information directly from the IRS.
What's Not Disclosed
Nonprofits don't need to show the names of their contributors, just how much in contributions they've received. They are also not obligated to show information in their tax-exempt application relating to trade secrets, patents or other processes of the organization if that would adversely affect it. These must be ruled as exempt by the secretary of the IRS. And nonprofits are not required by law to share internal documents with the public, such as their bylaws or minutes of board meetings; however, they may want to share such documents in order to be as transparent with the public about their operations as much possible.
Private Foundations and Form 990-PFs
Private foundations submit Form 990-PFs, which are more detailed informational tax-returns than what public charities file with the IRS. They are required to make their forms 990-PFs and 1023 widely available as well, but, unlike public charities, private foundations are required to list names of their contributors.
- Image by Flickr.com, courtesy of Pawel Loj