New law requires mandatory electronic filing of Form 990

• Published date: 01 September 2019
• Date: 01 September 2019
• DOI: http://doi.org/10.1002/nba.30649

SEPTEMBER 2019 NONPROFIT BUSINESS ADVISOR

5

© 2019 Wiley Periodicals, Inc., A Wiley Company • All rights reserved

DOI: 10.1002/nba

Regulatory News

New law requires mandatory electronic ling

of Form 990

Under legislation recently signed into law by

President Trump, all charities in the United States will

now have to le their annual Form 990s electronically,

a move that is expected to benet the charitable sector,

and, more broadly, the public, by making critical

information about each charity easily accessible

online and for free.

The legislation—H.R. 3151, known as the Taxpayer

First Act—requires that exempt organizations le

electronically starting with their 2020 tax year, a

date that varies from organization to organization

depending on their individual accounting and

bookkeeping systems. For some groups, however,

the law might allow for a delay in compliance for

up to two years if they can demonstrate to the IRS

that the new requirements would impose an undue

economic burden.

According to Cinthia Schuman of the Aspen

Institute Program on Philanthropy and Social

Innovation, which helped develop the e-filing

provision, there’s not much in the new mandate that

could really lead to increased burden.

“There wasn’t much pushback from charities

leading up to this,” she explained. The new requirement

won’t cost more in ling fees compared to traditional,

hard copy ling, and it shouldn’t require additional

staff time or resources compared to traditional ling,

she told Nonprot Business Advisor. The only possible

hang-up might be a requirement to use tax preparers

that are approved by the IRS to electronically le—

it’s possible that some organizations might have to

switch CPAs, or insist their current CPAs apply for

approval. But, Schuman said, that’s not expected to

be much of an issue either, as e-ling has caught on

with the wider public and, thus, most tax preparers

are already approved for it.

According to Schuman, some 35% of nonprots

don’t e-le yet, which means tens of thousands of

organizations will have to make the switch. But

unlike just about every other new rule or requirement

issued by the government, this one seems to be nearly

universally accepted. That’s because it’s a no-brainer,

Schuman said.

“This has been widely viewed as a commonsense

provision for a long time,” she said.

Under the old rules, if an organization wanted

to get electronic access to charities’ Form 990s, they

had to pay for it—the cost of which could range into

the thousands, depending on how many les they

were requesting—and what they got in return was

essentially a photo image of the form, where the data

could not be ferreted out through electronic means.

Instead, the entity requesting the form had to have

the data manually transferred from the e-form onto

their computer, a costly effort.

Under the new system, the IRS will have to make

the Form 990 data publicly available in a machine-

readable format, cutting down expenses for users of

the data tremendously.

It will also cut down on administrative burden for

the IRS, Schuman said, as processing returns will be

much more efcient and the results more accurate.

Improved accuracy will come on the front end, as

nonprots will be alerted to typos and mistakes in

their forms during the ling process, while inputting

the data. Inadvertent mistakes like putting a decimal

point in the wrong place can divert resources at the

IRS as staff follow up on such forms and correct them

as needed. Under the new system, those mistakes

should be caught ahead of time and corrected before

forms are submitted, Schuman said.

Having easy access to all organizations’ Form

990 data will also make it easier for researchers to

study the philanthropic sector and identify broad

(See FORM on page 8)

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