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Davis Brown Tax Law Blog


Tax Law Blog: IRS "Free Speech" Act Seeks to Make Charitable Contributions Confidential - June 14, 2016

On April 26, 2016, a bill intended to modify the reporting requirements for tax-exempt organizations was introduced in the House. The bill, called the “Preventing IRS Abuse and Protecting Free Speech Act” (H.R. 5053) seeks to amend the Internal Revenue Code to prohibit the IRS from requiring a tax-exempt organization to include in its annual returns the name, address, or other identifying information of any contributor.

 

The bill comes on the heels of past leaks of donor lists, which currently must be included on a tax-exempt organization’s annual informational tax return. Concerns with backlash against donors prompted the bill. While past leaks reportedly did not involve any malice by IRS employees, concerns continue to arise regarding the handling of this confidential information.

 

Currently, tax-exempt organizations under 501(c)(3) and 501(c)(4) of the Code must furnish to the IRS on Schedule B of their annual Form 990 (an informational report) a list including the name, address, and total contributions of each donor that gave $5,000 or more. Schedule B for these tax-exempt organizations is not open to public inspection, but the concern over IRS leaks remains.

 

The new bill would do away with the requirement to provide this Schedule B. The bill includes exceptions for: 

  1. required disclosures regarding prohibited tax shelter transactions; and
  2. contributions by the organization's officers, directors, or five highest compensated employees (including compensation paid by related organizations).

 

Those in support of the bill argue that the right to free speech includes the right to anonymous speech, including speech in the form of contributions to an organization. However, opponents to the bill claim that anonymity will enhance the secrecy surrounding the role of mega-donors in political campaigns. The House will consider the bill on June 14, 2016.