[Federal Register Volume 84, Number 175 (Tuesday, September 10, 2019)]
[Proposed Rules]
[Pages 47447-47454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19501]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-102508-16]
RIN 1545-BN28


Guidance Under Section 6033 Regarding the Reporting Requirements 
of Exempt Organizations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document contains proposed regulations that would update 
information reporting regulations under section 6033 that are generally 
applicable to organizations exempt from tax under section 501(a) to 
reflect statutory amendments and certain grants of reporting relief 
announced through subregulatory guidance that have been made since the 
current regulations were adopted, particularly with respect to tax-
exempt organizations required to file an annual Form 990 or 990-EZ 
information return.

DATES: Written or electronic comments and requests for a public hearing 
must be received by December 9, 2019.

ADDRESSES: Submit electronic submissions via the Federal eRulemaking 
Portal at http://www.regulations.gov/ (indicate IRS REG-102508-16) by 
following the online instructions for submitting comments. Once 
submitted to the Federal eRulemaking Portal, comments cannot be edited 
or withdrawn. The Department of the Treasury (Treasury Department) and 
the IRS will publish for public availability any comment submitted to 
its public docket, whether submitted electronically or in hard copy. 
Send hard copy submissions to: CC:PA:LPD:PR (REG-102508-16), Room 5203, 
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,

[[Page 47448]]

Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
102508-16), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW, Washington, DC 20224.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Office of the Associate Chief Counsel (Employee Benefits, Exempt 
Organizations, and Employment Taxes) at (202) 317-3150; concerning 
submissions of comments and requests for a public hearing, Regina 
Johnson at (202) 317-6901 (not toll-free numbers), 
[email protected].

SUPPLEMENTARY INFORMATION: 

Background

    The paragraphs of section 6033 of the Internal Revenue Code (Code) 
outline various requirements for an annual information return to be 
filed by organizations that are exempt from tax under section 501(a) or 
described in section 527, including exceptions to the filing 
requirement. Section 6033(a)(1) requires certain organizations that are 
exempt from tax under section 501(a) (``tax-exempt organizations'') to 
file annual information returns that include gross income, receipts and 
disbursements, and ``such other information for the purpose of carrying 
out the internal revenue laws as the Secretary may by forms or 
regulations prescribe.'' The annual information returns required under 
section 6033 are Forms 990, ``Return of Organization Exempt From Income 
Tax;'' 990-EZ, ``Short Form Return of Organization Exempt From Income 
Tax;'' 990-PF, ``Return of Private Foundation;'' and 990-BL, 
``Information and Initial Excise Tax Return for Black Lung Benefit 
Trusts and Certain Related Persons.'' Annual returns filed by tax-
exempt organizations, tax-exempt political organizations described in 
section 527(e) (``section 527 organizations''), and nonexempt private 
foundations described in section 6033(d) and section 4947(a)(1) trusts 
(which are both treated as section 501(c)(3) organizations for this 
purpose) are information returns intended to help ensure that the 
filing organizations comply with applicable federal tax laws. 
Additionally, most information on these annual returns under section 
6104 of the Code is available for public inspection.
    Section 6033(a)(3) provides a list of organizations that are 
excepted from the filing requirements imposed under section 6033(a)(1). 
Specifically, section 6033(a)(3)(A)(ii) provides that section 
6033(a)(1) shall not apply to any organization (other than a private 
foundation) that is described in section 6033(a)(3)(C) whose gross 
receipts are not normally more than $5,000 annually. The list of 
organizations provided in section 6033(a)(3)(C) includes certain 
fraternal beneficiary societies, orders or associations described in 
section 501(c)(8); certain organizations described in section 501(c)(3) 
(such as religious organizations and educational organizations 
described in section 170(b)(1)(A)(ii)); and organizations described in 
section 501(c)(1) that are corporations wholly owned by the United 
States or any agency or instrumentality thereof or wholly-owned 
subsidiaries of such corporations.
    Section 6033(a)(3)(B) provides discretionary authority to the 
Secretary to relieve any organization required to file under section 
6033(a)(1) (other than supporting organizations described in section 
509(a)(3)) from filing an information return where he determines that 
such filing is ``not necessary to the efficient administration of the 
internal revenue laws.''
    Section 6033(b) provides a list of items that are required to be 
furnished annually by organizations described in section 501(c)(3), 
``at such time and in such manner as the Secretary may by forms or 
regulations prescribe.'' The statutory list of items required to be 
furnished annually has been amended by Congress from time to time to 
account for additional requirements of organizations described in 
section 501(c)(3). Section 6033(b) was updated by the Taxpayer Bill of 
Rights 2, Public Law 104-168, in 1996 to include items in sections 
6033(b)(10) (relating to taxes imposed on certain lobbying and 
political expenditures by organizations described in sections 
501(c)(3)) and 6033(b)(11) (relating to taxes imposed with respect to 
an organization, an organization manager, or any disqualified person 
under section 4958).
    Section 6033(g)(2) provides that a political organization (as 
defined by section 527(e)(1)) that has gross receipts of $25,000 or 
more for a taxable year \1\ shall file an annual return containing the 
information required by section 6033(a)(1) for organizations exempt 
from taxation under section 501(a). The statute authorizes the 
Secretary to modify the information required to be reported to require 
only information that is necessary for purposes of carrying out section 
527 and such other information as the Secretary deems necessary to 
carry out the provisions of section 6033(g).
---------------------------------------------------------------------------

    \1\ In the case of a qualified State or local political 
organization described in section 527(e)(5), $25,000 is replaced by 
$100,000.
---------------------------------------------------------------------------

    Section 6033(h) provides additional reporting requirements for 
controlling organizations, within the meaning of section 512(b)(13). 
Section 6033(h) requires controlling organizations to include on their 
returns any (1) interest, annuities, royalties, or rents received from 
each controlled entity (within the meaning of section 512(b)(13)), (2) 
any loans made to each such controlled entity, and (3) any transfers of 
funds between such controlling organization and each such controlled 
entity.
    Section 6033(k) provides additional reporting requirements for 
sponsoring organizations described in section 4966(d)(1). Section 
6033(k) requires each such organization to report on its annual return 
(1) the total number of donor advised funds (as defined in section 
4966(d)(2)) it owns at the end of such taxable year, (2) the aggregate 
value of assets held in such funds at the end of such taxable year, and 
(3) the aggregate contributions to and grants made from such funds 
during such taxable year.
    Section 6033(l) provides additional reporting requirements for 
supporting organizations described in section 509(a)(3). Section 
6033(l) requires each supporting organization to report on its annual 
return (1) the supported organizations (as defined in section 
509(f)(3)) with respect to which such organization provides support; 
(2) whether the organization meets the requirements of clause (i), 
(ii), or (iii) of section 509(a)(3)(B); and (3) a certification that 
the organization meets the requirements of section 509(a)(3)(C).
    The general rule of confidentiality of returns is found in section 
6103, which states that returns and return information shall be 
confidential, and, except as authorized by this title, no person having 
access to this information shall disclose any return or return 
information obtained by him in any manner.
    One of the exceptions to the general rule of confidentiality can be 
found in section 6104. In general, under section 6104(b), the Secretary 
must make the annual returns filed under section 6033 available to the 
public. However, the Secretary is not authorized to disclose to the 
public the name or address of any contributor to any tax-exempt 
organization other than a private foundation (as defined in section 
509(a), including trusts described in section 4947(a)(1) that are 
treated as private foundations) or a section 527 organization. Section 
301.6104(b)-1(b)(2) provides that although the names

[[Page 47449]]

and addresses are not to be disclosed, the amounts of contributions to 
an organization shall be made available for public inspection unless 
the disclosure of such information can reasonably be expected to 
identify any contributor.
    In addition to the required disclosure by the Secretary, section 
6104(d) and Sec.  301.6104(d)-1 require certain tax-exempt 
organizations to provide their annual information returns upon request 
by a member of the public. Similar to the restrictions on disclosing 
contributor information placed on the Secretary by section 6104(b), an 
organization, other than a private foundation or a section 527 
organization, is not required to disclose the names and addresses of 
its contributors under section 6104(d)(3)(A).
    The current Treasury Regulations (``final regulations'') reflect 
many of the statutory requirements of section 6033. Consistent with 
section 6033(a)(1), Sec.  1.6033-2(a)(1) of the final regulations 
states that ``except as provided in section 6033(a)(3) and paragraph 
(g) [of Sec.  1.6033-2], every organization exempt from taxation under 
section 501(a) shall file an annual information return specifically 
setting forth its items of gross income, gross receipts and 
disbursements, and such other information as may be prescribed in the 
instructions, issued with respect to the return.''
    Although the information to be reported for any particular year is 
set forth in the form and instructions, the final regulations under 
section 6033 provide a list of ``information generally required to be 
furnished by an organization exempt under section 501(a)'' on the 
annual return. The list provided in Sec.  1.6033-2(a)(2)(ii) of the 
final regulations generally tracks the list set forth for section 
501(c)(3) organizations in section 6033(b), though not all items in 
section 6033(b) are currently included in the regulations because the 
statute has been amended following the original issuance of the 
regulations, and not all statutory changes were subsequently reflected 
in the regulations. The list in the regulations includes, but is not 
limited to, gross income for the year; dues and assessments from 
members and affiliates for the year; expenses incurred within the year 
attributable to gross income; disbursements (including prior years' 
accumulations) made within the year for the purposes for which it is 
exempt; a balance sheet showing its assets, liabilities, and net worth 
as of the beginning and end of such year; the total of the 
contributions, gifts, grants and similar amounts received by it during 
the taxable year; the names and addresses of all officers, directors, 
or trustees (or any person having responsibilities or powers similar to 
those of officers, directors or trustees) of the organization; and 
certain compensation and payment information.
    As relevant here, Sec.  1.6033-2(a)(2)(ii)(f) provides that 
organizations required to file an annual information return generally 
must provide the names and addresses of persons who contribute $5,000 
or more during the taxable year. This provision is more expansive than 
section 6033(b)(5), which applies specifically to organizations 
described in section 501(c)(3). In addition, Sec.  1.6033-
2(a)(2)(iii)(d) provides that organizations described in section 
501(c)(7) (social clubs), section 501(c)(8) (fraternal beneficiary 
societies), or section 501(c)(10) (domestic fraternal societies) 
generally must report the name of each person who contributes more than 
$1,000 to be used exclusively for religious, charitable, scientific, 
literary, or educational purposes, or for the prevention of cruelty to 
children or animals.
    Incorporating section 6033(a)(3), Sec.  1.6033-2(g)(1) provides a 
list of organizations that are not required to file an annual return 
under section 6033(a)(1). Within that list, Sec.  1.6033-2(g)(1)(iii) 
provides that organizations described in section 6033(a)(3)(C) whose 
gross receipts are generally not more than $5,000 annually are not 
required to file the return required under section 6033(a)(1). Further, 
Sec.  1.6033-2(g)(6) provides that the Commissioner may relieve any 
organization or class of organizations (other than a supporting 
organization described in section 509(a)(3)) from filing, in whole or 
in part, the annual return required under section 6033 where the 
Commissioner ``determines that such returns are not necessary for the 
efficient administration of the internal revenue laws.''
    Accordingly, other than with regard to supporting organizations, 
section 6033 and the final regulations in this part issued under 
section 6033 provide the Commissioner with broad discretionary 
authority to determine what information is reported and to grant 
relief, in whole or in part, from the annual filing requirements of 
tax-exempt organizations if it is determined that the information is 
not necessary for the efficient administration of the internal revenue 
laws.
    For decades, the Commissioner has exercised the discretion under 
section 6033(a)(3)(B) and Sec.  1.6033-2(g)(6) to relieve organizations 
of filing requirements in section 6033 through subregulatory guidance 
such as revenue procedures and annual information return instructions 
(for example, Rev. Proc. 95-48, 1995-2 C.B. 418, and Rev. Proc. 96-10, 
1996-1 C.B. 577). Revenue Procedure 83-23, 1983-1 C.B. 687, represents 
one such exercise of this discretion. In that revenue procedure, the 
Commissioner increased to $25,000 the minimum amount of gross receipts 
normally required to be received in a year by an organization exempt 
under section 501(a) to trigger a filing requirement under section 
6033(a). That revenue procedure also expanded the group of tax-exempt 
organizations not required to file an annual information return due to 
a gross receipts threshold beyond those listed in section 
6033(a)(3)(C). Revenue Procedure 2011-15, 2011-3 I.R.B. 322, further 
increased this gross receipts threshold amount to $50,000 for most 
organizations exempt under section 501(a).\2\ Revenue Procedure 2011-15 
also relieved most foreign organizations and organizations formed in a 
United States possession from a filing requirement under section 
6033(a) if their gross receipts from sources within the United States 
do not exceed the $50,000 threshold and if they have no significant 
activity (including lobbying and political activity and the operation 
of a trade or business, but excluding investment activity) in the 
United States.
---------------------------------------------------------------------------

    \2\ An organization that is not required to file an annual 
return by virtue of Rev. Proc. 2011-15 must submit a Form 990-N e-
Postcard annually in electronic format as described in section 
6033(i)(1). Rev. Proc. 2011-15, section 3.03.
---------------------------------------------------------------------------

    Similarly, consistent with past exercises of authority under 
section 6033 and the implementing regulations, the Treasury Department 
and the IRS issued Rev. Proc. 2018-38, 2018-31 I.R.B. 280, granting 
tax-exempt organizations required to file the Form 990 or Form 990-EZ, 
other than those described in section 501(c)(3), relief from reporting 
the names and addresses of contributors on Schedules B, ``Schedule of 
Contributors,'' filed with Form 990 or 990-EZ (or completing the 
similar portions of Part IV of the Form 990-BL). Revenue Procedure 
2018-38 also provides that organizations described in sections 
501(c)(7), (8), or (10) need not provide, on their annual information 
returns required under section 6033, the names and addresses of persons 
who contributed more than $1,000 during the taxable year to be used for 
exclusively charitable purposes. Revenue Procedure 2018-38 does not 
affect the information required to be reported on Forms 990, 990-EZ, or

[[Page 47450]]

990-PF by organizations described in section 501(c)(3) (which for 
purposes of section 6033 include nonexempt charitable trusts described 
in section 4947(a)(1) and nonexempt private foundations described in 
section 6033(d)) or section 527 organizations.
    On July 30, 2019, the United States District Court for the District 
of Montana released its decision in the case of Bullock, et al. v. IRS, 
No. 4:18-cv-00103-BMM (D. Mont. Jul. 30, 2019). The court noted that 
``the substance of [the Commissioner's] ultimate decision [on reporting 
the names and addresses of contributors] remains subject to the 
Commissioner's discretion,'' but set aside Rev. Proc. 2018-38 and held 
that the IRS should have followed the notice and comment procedures of 
the APA in providing the reporting relief set forth in Rev. Proc. 2018-
38.

Explanation of Provisions

    The proposed regulations contained in this notice of proposed 
rulemaking modify the final regulations under section 6033 to align 
them with certain statutory amendments to section 6033 that have not 
previously been reflected in the regulations and to update the 
regulations to encompass certain instances in which the Commissioner 
has previously exercised discretion under the statute and regulations 
to relieve organizations, in whole or in part, from the filing 
requirements set forth in section 6033 or the regulations in this part 
issued under section 6033. The Code provides discretion to the 
Secretary, and his or her delegate,\3\ to determine what information is 
necessary for the efficient administration of the federal tax laws 
involving tax-exempt organizations. The Secretary has previously 
exercised that discretion through various forms or guidance. These 
proposed regulations would incorporate certain past exercises of 
discretion into a single location for ease of use. These proposed 
changes are also intended to update the regulations so that they more 
fully present the current reporting requirements for most tax-exempt 
organizations.
---------------------------------------------------------------------------

    \3\ Section 7701(a)(11)(B) provides that the term ``Secretary'' 
means the Secretary of the Treasury or his delegate, which may 
include the Commissioner.
---------------------------------------------------------------------------

    Specifically, as further discussed later in this preamble, these 
changes include the following: (1) Adding items listed in section 
6033(b)(10) and (11), as applicable, to the list of items generally 
required to be reported; (2) adding other statutory reporting 
requirements for controlling organizations, sponsoring organizations, 
and supporting organizations; (3) amending the gross receipts threshold 
(with an additional requirement for foreign organizations and United 
States possession organizations) that triggers a filing requirement 
under section 6033 for organizations exempt under section 501(a) (other 
than private foundations and supporting organizations); (4) clarifying 
that section 527 organizations with gross receipts greater than $25,000 
generally are subject to the reporting requirements under section 
6033(a)(1) as if they were exempt from taxes under section 501(a); and 
(5) specifying that only organizations described in section 501(c)(3) 
and section 527 organizations generally would continue to be required 
to provide names and addresses of contributors on their Forms 990, 
Forms 990-EZ, and Forms 990-PF.
    The Treasury Department and the IRS request comments on any other 
grants of section 6033 related reporting relief announced pursuant to 
past exercises of the Commissioner's discretion that should be 
incorporated into the regulations or any other clarifications to 
reflect statutory changes. For example, these proposed regulations do 
not incorporate Rev. Proc. 96-10, 1996-1 C.B. 138, which relieves from 
a filing requirement under section 6033(a) certain organizations that 
are operated, controlled, or supervised by one or more churches, 
integrated auxiliaries, or conventions or associations of churches 
because it is unclear whether Rev. Proc. 96-10 currently has practical 
application. The relevant language provided indicates that these types 
of organizations are likely supporting organizations under section 
509(a)(3). Section 509(a)(3) provides public charity status to 
organizations, known as supporting organizations, that are operated, 
supervised, or controlled by, or in connection with, one or more 
specified organizations described in section 509(a)(1) or (2), which 
includes churches, conventions or associations of churches, and some 
integrated auxiliaries of churches.
    The Pension Protection Act of 2006, Public Law 109-280, modified 
the Secretary's general discretion under section 6033(a)(3)(B) so that 
the Secretary is no longer permitted to relieve a supporting 
organization of its filing requirements. The Treasury Department and 
the IRS expect that few, if any, organizations meeting the requirements 
of Rev. Proc. 96-10 may still rely on this revenue procedure given the 
2006 statutory change; thus, incorporating the provisions of Rev. Proc. 
96-10 into regulations is unnecessary. However, the Treasury Department 
and the IRS request comments on the continued usefulness of Rev. Proc. 
96-10.
    In addition, Rev. Proc. 95-48 grants reporting relief for 
governmental units and affiliates of governmental units. The Treasury 
Department and the IRS are considering whether the reporting relief in 
this revenue procedure should be updated and whether such relief should 
be incorporated into the regulations under section 6033 and request 
comments on the relief provided in this revenue procedure, as well as 
whether any other reporting relief should be specified or added.

Items Required in Annual Information Returns

    Section 6033(a)(1) provides that the Secretary, or his or her 
delegate, may by forms or regulations prescribe ``other information for 
the purpose of carrying out the internal revenue laws'' to be reported 
on an annual return required under section 6033. This authority is 
reflected in Sec.  1.6033-2(a)(1). Consistent with these grants of 
discretion, Sec.  1.6033-2(a)(2)(ii) provides a general list of items 
that a tax-exempt organization may expect to provide on its annual 
information return required by section 6033.
    As previously stated in this preamble, the Treasury Department and 
the IRS have determined that the regulations should be updated to 
reflect certain additional items listed in section 6033(b) for 
organizations described in section 501(c)(3).
    Therefore, these proposed regulations would amend Sec.  1.6033-
2(a)(2)(ii) by adding two new provisions to reflect items that have 
been added to section 6033(b) but that have not yet been added to the 
list in the regulations of items generally required to be reported on 
an organization's annual information return. These items are those 
found in section 6033(b)(10) (relating to taxes imposed on certain 
lobbying and political expenditures by organizations described in 
section 501(c)(3)) and 6033(b)(11) (relating to taxes imposed with 
respect to an organization, an organization manager, or any 
disqualified person on any excess benefit transaction under section 
4958). In addition, a cross-reference to Sec.  1.6033-2(a)(1) has been 
added to the introductory sentence of Sec.  1.6033-2(a)(2)(ii).
    In an effort to further increase the ability of a taxpayer 
generally to find its reporting requirements in one place, the Treasury 
Department and the IRS are also incorporating into the regulations the 
statutory reporting requirements found in section 6033(h) for 
controlling organizations (as defined in section

[[Page 47451]]

512(b)(13)), section 6033(k) for sponsoring organizations (as defined 
in section 4966(d)(1)), and section 6033(l) for supporting 
organizations (as defined in section 509(a)(3)).
    While these amendments to the regulations are part of an effort to 
further increase the ability of a taxpayer generally to find its 
reporting requirements in one place, tax-exempt organizations will 
continue to find their current annual return reporting requirements in 
the forms and instructions found at irs.gov. The Treasury Department 
and the IRS request comments on any other requirements in section 6033 
that should be incorporated into Sec.  1.6033-2.

Gross Receipts Filing Threshold

    Section 6033(a)(1)(B) grants the Secretary, or his or her delegate, 
discretion to relieve any organization (except an organization 
described in section 509(a)(3)) from the requirement to file a return 
if the Secretary determines that the filing is not necessary to the 
efficient administration of the internal revenue laws and Sec.  1.6033-
2(g)(6) specifies that this relief from filing may be granted in whole 
or in part.
    The Treasury Department and the IRS have previously determined that 
the efficient administration of the tax laws does not require the 
filing of returns by organizations that are exempt under section 501(a) 
(other than private foundations and supporting organizations) that 
normally have less than $50,000 in gross receipts annually, except for 
foreign organizations and organizations formed in a United States 
possession that have significant activity (including lobbying and 
political activity and the operation of a trade or business, but 
excluding investment activity) in the United States. Rev. Proc. 2011-
15. This threshold seeks to balance the efficient use of resources for 
both tax-exempt organizations and the IRS with ensuring compliance with 
the tax laws by tax-exempt organizations, particularly since such 
organizations must continue to file Form 990-N under section 6033(i). 
This notice of proposed rulemaking proposes to amend Sec.  1.6033-
2(g)(1)(iii) to reflect the $50,000 gross receipts filing threshold 
currently in effect, rather than the $5,000 gross receipts threshold 
found in section 6033(a)(3)(A)(ii), and the application of the $50,000 
threshold to organizations other than those listed in section 
6033(a)(3)(C). Thus, the proposed regulations would provide that the 
gross receipts threshold for all organizations (other than private 
foundations and supporting organizations) formed in the United States 
would be $50,000. The notice of proposed rulemaking also proposes 
simply to incorporate the previously granted relief from the filing 
requirement under section 6033(a) for foreign organizations and 
organizations formed in a United States possession (other than private 
foundations and supporting organizations) that is currently found in 
Rev. Proc. 2011-15.
    The proposed regulations will also specify that the Commissioner 
retains discretion to provide possible further increases in this amount 
pursuant to Sec.  1.6033-2(g)(6). Therefore, the Treasury Department 
and the IRS also propose amending Sec.  1.6033-2(g)(6) to clarify that 
the Commissioner has authority to further provide relief through forms, 
instructions to forms, or guidance published in the Internal Revenue 
Bulletin.

Clarifying the Treatment of Section 527 Organizations

    Section 6033(g)(2) provides that section 527 organizations shall 
file an annual return containing the information required by section 
6033(a)(1) for tax-exempt organizations. As noted previously in this 
preamble, the Treasury Department and the IRS have determined that the 
regulations should more fully reflect the requirements of section 6033 
for tax-exempt organizations. The Treasury Department and the IRS 
propose to add Sec.  1.6033-2(a)(5) to state the current requirement 
that section 527 organizations, subject to the filing exceptions 
provided by section 6033(g)(3) or as permitted under section 
6033(g)(4), follow the reporting requirements under section 6033(a)(1) 
in the same manner as tax-exempt organizations, except when the 
Commissioner revises those requirements as appropriate to carry out the 
purposes of section 527. The proposed Sec.  1.6033-2(a)(5) would also 
state the current requirement that section 527 organizations, like 
organizations described in section 501(c)(3), must continue to report 
the names and addresses of contributors on the section 527 
organizations' annual Forms 990 or Forms 990-EZ. The addition of Sec.  
1.6033-2(a)(5) does not affect the current reporting requirements of 
section 527 organizations.
    The Treasury Department and the IRS request comments on the 
proposed clarification of the treatment of section 527 organizations 
found in Sec.  1.6033-2(a)(5).

Reporting of Names and Addresses of Contributors

    Section 6033 does not specify that the names and addresses of 
contributors to tax-exempt organizations, other than those described in 
section 501(c)(3), be reported on annual information returns. 
Consistent with the Secretary's broad discretion under section 6033(a) 
to set forth information reporting requirements ``for the purpose of 
carrying out the internal revenue laws . . . by forms or regulations,'' 
Sec.  1.6033-2(a)(2)(ii) of the final regulations provides a list of 
items that are generally required to be included in the annual filings 
of organizations exempt under section 501(a). The proposed regulations 
would amend the final regulations to clarify that the need to provide 
the names and addresses of substantial contributors will generally 
apply only to tax-exempt organizations described in section 501(c)(3). 
This clarification is consistent with the limited application of the 
requirement in section 6033(b)(5). As discussed in the prior section of 
this preamble, section 527 organizations must also continue to report 
the names and addresses of substantial contributors.
    In exercising this discretion, the Treasury Department and the IRS 
seek to balance the IRS's need for the information against the costs 
and risks associated with reporting of the information. The IRS does 
not need the names and addresses of substantial contributors to tax-
exempt organizations not described in section 501(c)(3) to be reported 
annually on Schedule B of Form 990 or Form 990-EZ in order to carry out 
the internal revenue laws, including provisions dealing with transfer 
taxes. A requirement to annually report such information--rather than 
providing it to the IRS as required upon examination--increases 
compliance costs for affected tax-exempt organizations and consumes IRS 
resources in connection with the redaction of such information as 
required in section 6104(b). Some have expressed concern regarding the 
potential use of the names and addresses of substantial contributors 
when evaluating possible private benefit or inurement. Tax-exempt 
organizations continue to be required to file Schedule L of Form 990 or 
Form 990-EZ identifying transactions between the exempt organization 
and interested persons (including substantial contributors), which may 
indicate possible risks of private benefit or inurement. The primary 
utility of the names and addresses of substantial contributors, 
however, arises during

[[Page 47452]]

examination of a tax-exempt organization, at which point such 
information may be collected from the relevant tax-exempt organization. 
Under the proposed rule, tax-exempt organizations are still required to 
report the amounts of contributions from each substantial contributor 
as required by the Schedule B of the Form 990 and 990-EZ as well as 
maintain the names and addresses of substantial contributors should the 
IRS need this information on a case-by-case basis, which the Treasury 
Department and the IRS have concluded is sufficient for the efficient 
administration of the Code.
    The Treasury Department and the IRS are also concerned that the 
requirement to report the names and addresses of substantial 
contributors poses a risk of inadvertent disclosure of information that 
is not open to public inspection because this information on Schedule B 
generally must be redacted from an otherwise disclosable information 
return. The IRS has experienced incidents of inadvertent disclosure and 
has taken other steps to reduce future occurrences of such disclosures. 
By reducing the number of organizations providing the names and 
addresses of contributors on Schedule B, the potential for inadvertent 
disclosure of names and addresses can be decreased further.
    Finally, the Treasury Department and the IRS note that the change 
in annual reporting to the IRS of the names and addresses of 
substantial contributors will have no effect on information currently 
available to the public. Sections 6103 and 6104 prohibit the IRS from 
publicly disclosing the names and addresses of contributors to tax-
exempt organizations (other than private foundations). With respect to 
such tax-exempt organizations, any names and addresses of substantial 
contributors on Schedule B are not made public and disclosure 
restrictions prohibit making such information available for use by 
other agencies for enforcement purposes, unless a specific exception 
applies.\4\ The Treasury Department and the IRS are aware of concerns 
raised regarding campaign finance laws; however, Congress has not 
tasked the IRS with the enforcement of campaign finance laws. 
Furthermore, the Code generally prohibits the IRS from disclosing any 
names and addresses of such organizations' substantial contributors to 
federal agencies for non-tax investigations, including campaign finance 
matters, except in narrowly prescribed circumstances.\5\
---------------------------------------------------------------------------

    \4\ The confidentiality and disclosure of tax returns and return 
information in both tax and non-tax investigations is governed by 
section 6103. Section 6103 contains several provisions authorizing 
the disclosure of returns and return information to Federal law 
enforcement agencies under prescribed circumstances after meeting 
specified procedural requirements. For example, these include 
disclosures to the Department of Justice (DOJ) for the investigation 
and prosecution of non-tax Federal crimes via an ex parte court 
order or via a request from the highest ranking official of a 
Federal agency or the highest officials within DOJ and in the course 
of an investigation after referral to and approval by DOJ as a Grand 
Jury Tax Investigation.
    In the context of states, sections 6103 and 6104 authorize 
disclosure of certain returns and return information to the states 
for specified purposes. Generally, section 6103(d) authorizes 
disclosure to state tax agencies for state tax administration, while 
section 6104(c) permits disclosure of return information, in the 
case of organizations other than those described in section 
501(c)(1) or (3), to an appropriate state officer to the extent 
necessary in administering state laws relating to the solicitation 
or administration of charitable funds or charitable assets of such 
organizations. Some states may also independently obtain donor 
information from the organizations.
    \5\ See note 4.
---------------------------------------------------------------------------

    Accordingly, the Treasury Department and the IRS are proposing to 
modify the regulations to no longer specify that tax-exempt 
organizations (other than organizations described in section 501(c)(3)) 
are generally required to report the names and addresses of their 
substantial contributors on their annual information returns. However, 
as noted previously in this preamble, tax-exempt organizations must 
continue to report the amounts of contributions from each substantial 
contributor as well as maintain the names and addresses of their 
substantial contributors in their books and records in accordance with 
section 6001 and Sec.  1.6001-1(a) and (c) in order to permit the IRS 
to efficiently administer the internal revenue laws through 
examinations of specific taxpayers. The records retained will enable 
organizations to substantiate upon examination the number of certain 
contributors and the amounts of their contributions and to facilitate 
the reporting of information on certain financial transactions between 
organizations and certain contributors. The Treasury Department and the 
IRS request comments on concerns regarding the efficient administration 
of the Code without the annual reporting of the names and addresses of 
substantial contributors for tax-exempt organizations other than those 
described in section 501(c)(3) and section 527 organizations.
    The Treasury Department and the IRS propose to revise Sec.  1.6033-
2(a)(2)(ii)(f) to provide that organizations described in section 
501(c)(3) generally would be required to continue to provide names and 
addresses of contributors of more than $5,000 on their Forms 990, 990-
EZ, and 990-PF. Similarly, Sec.  1.6033-2(a)(2)(iii)(d) would be 
revised to remove reference to the provision of names of contributors 
who contribute over $1,000 for a specific charitable purpose to 
organizations described in sections 501(c)(7), (8), and (10).

Proposed Effective/Applicability Date

    These regulations are proposed to be effective as of the date of 
publication of the Treasury decision adopting these rules as final 
regulations in the Federal Register. While these regulations are not 
effective until these rules are adopted as final in the Federal 
Register, under section 7805(b)(7), a tax-exempt organization may 
choose to apply the final regulations to returns filed after September 
6, 2019. After issuing the final regulations, the Treasury Department 
and the IRS will withdraw any revenue procedures superseded by the 
final regulations.

Special Analyses

    This regulation is not subject to review under section 6(b) of 
Executive Order 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) between the Department of the Treasury and the Office of 
Management and Budget regarding review of tax regulations.

Paperwork Reduction Act

    The collection of information contained in this notice is reflected 
in the collection of information for Forms 990 and 990-EZ that have 
been reviewed and approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act (44 U.S.C. 3507(c)) under 
control numbers 1545-0047 and 1545-1150, respectively. To the extent 
there is a decrease in burden as a result of this change, the decrease 
in burden will be reflected in the updated burden estimates for the 
Forms 990 and 990-EZ. The requirement to maintain records to 
substantiate information on the Form 990 or 990-EZ is already contained 
in the burden associated with the control numbers for those forms and 
remains unchanged.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB control number.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are

[[Page 47453]]

confidential, as required by 26 U.S.C. 6103.

Regulatory Flexibility Act

    It is hereby certified that these final regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based on the fact that these regulations reflect 
statutory requirements and reporting relief previously announced 
through forms, instructions to forms, or guidance published in the 
Internal Revenue Bulletin. The collection of information contained in 
these proposed regulations instead maintains a current recordkeeping 
obligation while removing a filing burden. Accordingly, a Regulatory 
Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) is not required. Pursuant to section 7805(f), this 
regulation has been submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the Addresses heading. 
The Treasury Department and the IRS request comments on all aspects of 
the proposed regulations. All comments will be available for public 
inspection and copying. A public hearing may be scheduled if requested 
in writing by any person that timely submits written comments. If a 
public hearing is scheduled, notice of the date, time, and place for 
the hearing will be published in the Federal Register.

Drafting Information

    The principal authors of these regulations are personnel from the 
Office of the Associate Chief Counsel (Employee Benefits, Exempt 
Organizations, and Employment Taxes). However, other personnel from the 
Treasury Department and the IRS participated in their development.

Statement of Availability of IRS Documents

    IRS Revenue Procedures, Revenue Rulings, Notices, and other 
guidance cited in this document are published in the Internal Revenue 
Bulletin (or Cumulative Bulletin) and are available from the 
Superintendent of Documents, U.S. Government Publishing Office, 
Washington, DC 20402, or by visiting the IRS website at http://www.irs.gov.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

0
Par. 2.Section 1.6033-2 is amended by:
0
1. Revising the section heading;
0
2. In paragraph (a)(2)(ii) introductory text, removing ``The'' and 
adding ``Subject to paragraph (a)(1) of this section, the'' in its 
place;
0
3. In paragraph (a)(2)(ii)(f), revising the first sentence and removing 
``subdivision (iii) of this subparagraph'' and adding ``paragraph 
(a)(2)(iii) of this section'' in its place;
0
4. Redesignating paragraphs (a)(2)(ii)(k) and (l) as paragraphs 
(a)(2)(ii)(m) and (n);
0
5. Adding new paragraphs (a)(2)(ii)(k) and (l);
0
6. Revising the first sentence of paragraph (a)(2)(iii)(d)(1);
0
7. Adding paragraphs (a)(5), (6), (7), and (8);
0
8. Revising paragraph (g)(1)(iii);
0
9. Removing the ``or'' at the end of paragraph (g)(1)(vi);
0
10. Removing the period at the end of paragraph (g)(1)(vii) and adding 
``; or'' in its place;
0
11. Adding paragraph (g)(1)(viii);
0
12. Revising paragraph (g)(3);
0
13. Adding paragraph (g)(5) and a sentence at the end of paragraph 
(g)(6);
0
14. Redesignating paragraph (k) as paragraph (l);
0
15. Adding a new paragraph (k); and
0
16. Adding paragraph (l)(5).
    The revisions and additions read as follows:


Sec.  1.6033-2  Returns by exempt organizations and returns by certain 
nonexempt organizations.

    (a) * * *
    (2) * * *
    (ii) * * *
    (f) The total of the contributions, gifts, grants and similar 
amounts received by it during the taxable year, and, in the case of an 
organization described in section 501(c)(3), the names and addresses of 
all persons that contributed, bequeathed, or devised $5,000 or more (in 
money or other property) during the taxable year. * * *
* * * * *
    (k) In the case of organizations described in section 501(c)(3), 
the respective amounts (if any) of the taxes imposed on the 
organization, or any organization manager of the organization, during 
the taxable year under any of the following provisions (and the 
respective amounts (if any) of reimbursements paid by the organization 
during the taxable year with respect to taxes imposed on any such 
organization manager under any of such provisions):
    (1) Section 4911 (relating to tax on excess expenditures to 
influence legislation);
    (2) Section 4912 (relating to tax on disqualifying lobbying 
expenditures of certain organizations); and
    (3) Section 4955 (relating to taxes on political expenditures of 
section 501(c)(3) organizations), except to the extent that, by reason 
of section 4962, the taxes imposed under such section are not required 
to be paid or are credited or refunded.
    (l) In the case of organizations described in section 501(c)(3), 
(4), or (29), the respective amounts (if any) of--
    (1) The taxes imposed with respect to the organization on any 
organization manager, or any disqualified person, during the taxable 
year under section 4958 (relating to taxes on excess benefit 
transactions); and
    (2) Reimbursements paid by the organization during the taxable year 
with respect to taxes imposed under such section, except to the extent 
that, by reason of section 4962, the taxes imposed under such section 
are not required to be paid or are credited or refunded.
* * * * *
    (iii) * * *
    (d)(1) Organizations described in section 501(c)(7), (8), or (10) 
that receive contributions or bequests to be used exclusively for 
purposes described in section 170(c)(4), 2055(a)(3), or 2522(a)(3), 
must attach a schedule with respect to all gifts that aggregate more 
than $1,000 from any one person showing the total amount of the 
contributions or bequests from each such person, the specific purpose 
or purposes for which such amount was received, and the specific use or 
uses to which such amount was put. * * *
* * * * *
    (5) Political organizations, as defined by section 527(e)(1), that 
have gross receipts of $25,000 or more for the taxable year (or in the 
case of a qualified State or local political organization, as defined 
in section 527(e)(5), that has gross receipts of $100,000 or more for 
the taxable year) generally must comply

[[Page 47454]]

with the requirements of section 6033 and this section in the same 
manner as organizations exempt from tax under section 501(a), except to 
the extent that the Commissioner may modify such requirements through 
forms, instructions to forms, or guidance published in the Internal 
Revenue Bulletin as appropriate for carrying out the purposes of 
section 527. For the purposes of this section, all references to 
organizations exempt from tax under section 501(a) shall include 
political organizations referred to in section 6033(g), other than 
those referred to in section 6033(g)(3) and except to the extent the 
Commissioner exercises discretion under section 6033(g)(4). This 
discretion may be exercised through forms, instructions to forms, or 
guidance published in the Internal Revenue Bulletin. In addition to the 
reporting requirements applicable to organizations exempt under section 
501(a), such political organizations generally must report the names 
and addresses of all persons that contributed, bequeathed, or devised 
$5,000 or more (in money or other property) during the taxable year.
    (6) Each controlling organization (within the meaning of section 
512(b)(13)) that is subject to the requirements of section 6033(a) 
shall include on its annual return such information required by that 
return regarding--
    (i) Any interest, annuities, royalties, or rents received from each 
controlled entity (within the meaning of section 512(b)(13));
    (ii) Any loans made to each such controlled entity; and
    (iii) Any transfers of funds between such controlling organization 
and each such controlled entity.
    (7) Every organization described in section 4966(d)(1) shall, on 
its annual return for the taxable year--
    (i) List the total number of donor advised funds (as defined in 
section 4966(d)(2)) it owns at the end of such taxable year;
    (ii) Report the aggregate value of assets held in such funds at the 
end of such taxable year; and
    (iii) Report the aggregate contributions to and grants made from 
such funds during such taxable year.
    (8) Every organization described in section 509(a)(3) shall, on its 
annual return--
    (i) List the supported organizations (as defined in section 
509(f)(3)) with respect to which such organization provides support;
    (ii) Specify whether the organization meets the requirements of 
clause (i), (ii), or (iii) of section 509(a)(3)(B); and
    (iii) Certify that the organization meets the requirements of 
section 509(a)(3)(C).
* * * * *
    (g) * * *
    (1) * * *
    (iii) Except as provided in paragraph (g)(1)(viii) of this section, 
an organization described in section 501(c) (other than a private 
foundation or a supporting organization described in section 509(a)(3)) 
the gross receipts of which in each taxable year are normally not more 
than $50,000 (as described in paragraph (g)(3) of this section);
* * * * *
    (viii) A foreign organization (described in paragraph (k)(1) of 
this section) or a United States possession organization (described in 
paragraph (k)(2) of this section) (other than a private foundation or a 
supporting organization described in section 509(a)(3))--
    (A) The gross receipts of which in each taxable year from sources 
within the United States (as determined under paragraph (k)(3) of this 
section) are normally not more than $50,000 (as described in paragraph 
(g)(3) of this section); and
    (B) That has no significant activity (including lobbying and 
political activity and the operation of a trade or business, but 
excluding investment activity) in the United States.
* * * * *
    (3) For purposes of paragraphs (g)(1)(iii) and (viii) of this 
section, the gross receipts (as defined in paragraph (g)(4) of this 
section) of an organization are normally not more than $50,000 if:
    (i) In the case of an organization that has been in existence for 1 
year or less, the organization has received, or donors have pledged to 
give, gross receipts of $75,000 or less during the first taxable year 
of the organization;
    (ii) In the case of an organization which has been in existence for 
more than one but less than 3 years, the average of the gross receipts 
received by the organization in its first 2 taxable years is $60,000 or 
less; and
    (iii) In the case of an organization which has been in existence 
for 3 years or more, the average of the gross receipts received by the 
organization in the immediately preceding 3 taxable years, including 
the year for which the return would be required to be filed, is $50,000 
or less.
* * * * *
    (5) An organization that is not required to file an annual return 
by virtue of paragraphs (g)(1)(iii) and (viii) of this section must 
submit an annual electronic notification as described in section 
6033(i). See Sec.  1.6033-6.
    (6) * * * This discretion may be exercised through forms, 
instructions to forms, or guidance published in the Internal Revenue 
Bulletin.
* * * * *
    (k) Foreign organizations and United States possession 
organizations--(1) Foreign organization. For purposes of this section, 
a ``foreign organization'' is any organization not described in section 
170(c)(2)(A).
    (2) United States possession organization. For purposes of this 
section, a ``United States possession organization'' is any 
organization created or organized in a possession of the United States.
    (3) Source of funds. For purposes of paragraph (g)(1)(viii) of this 
section, the source of an organization's gross receipts from gifts, 
grants, contributions or membership fees is determined by applying the 
rules found in Sec.  53.4948-1(b) of this chapter. For purposes of 
paragraph (g)(1)(viii) of this section, the source of an organization's 
gross receipts other than gifts, grants, contributions, and membership 
fees is determined by applying the rules in sections 861 through 865 
and the regulations in this part issued under section 861 through 865. 
For purposes of applying this paragraph (k)(3) regarding United States 
possession organizations, a United States person does not include 
individuals who are bona fide residents of a United States possession.
    (l) * * *
    (5) Paragraphs (a)(2)(ii)(f), (a)(2)(iii)(d)(1), (g)(1)(iii) and 
(viii), and (g)(3) of this section apply to annual information returns 
filed after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL 
REGISTER]. Under section 7805(b)(7) an organization may choose to apply 
the paragraphs listed in this paragraph (l)(5) to returns filed after 
September 6, 2019.

Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2019-19501 Filed 9-6-19; 11:15 am]
 BILLING CODE 4830-01-P