Final regs. for exempt organization disclosure requirements.

The activities and operations of today's exempt organizations (EOs) are far more complex than they were in 1969 when Congress passed a large portion of the law governing them. Sophisticated compensation arrangements, royalty agreements, joint ventures and acquisitions of for-profit subsidiaries are only some examples of the relatively complex activities currently conducted by EOs.

Despite the changing face of EOs, the basis for exemption from Federal taxation has remained the same; the organization must be organized and operated to benefit the public through activities directed at an acceptable class of persons. Public disclosure requirements are one method imposed by the IRS to ensure that EOs are responsive and accountable to the public they serve and, therefore, operating to benefit an acceptable class of persons.

On April 8, 1999, the Service issued Regs. Sec. 301.6104(d)-1-3, public disclosure for EOs other than private foundations. These final regulations and Sec. 6104(d), as amended by the Tax and Trade Relief Act of 1998, became effective June 8, 1999. On Jan. 13, 2000, the IRS issued final regulations on the public disclosure requirements for private foundations, which generally follow the rules outlined below for public charities. Private foundations are required to follow these new rules for tax returns due after March 12, 2000.

Required Information

As defined by the final regulations, an EO must make its application for exemption available. Compliance would include providing copies of Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code; Form 1024, Application for Recognition of Exemption Under Section 501(a) for Determination Under Section 120 of the Internal Revenue Code; and any supporting documents filed by the organization as part of its application. It also includes any correspondence from the Service issued in response to the application.

EOs must also make their annual information returns available for a period of three years from the later of the return's due date or the date it was actually filed. This includes all related schedules and attachments, except for contributors' schedules. Form 990-T, Exempt Organization Business Income Tax Return, is not required to be disclosed.

Making the Required Information Available

An exempt organization must make the required information available for inspection or copying at its principal office and at certain regional offices during regular business hours. Copies requested in person must be provided the same day, unless unusual circumstances prevent honoring the request. Unusual circumstances may include a request that is not possible to fulfill, because it occurred near the end of regular business hours. If unusual circumstances exist, the request must be fulfilled the day after the unusual circumstances have ended, but no later than five days after the request.

Requests made in writing must be mailed within 30 days. If an organization requires prepayment for the copies, it must notify the person requesting the information of its prepayment policy within seven days of the initial request. Having done this, an organization has 30 days from the date of payment receipt to mail the copies requested.

An organization may charge the individual making the request a fee for actual postage costs incurred and a reasonable fee for copying. The copying fee may not exceed the fee charged by the IRS for similar requests, currently $1 for the first page and $0.15 for each additional page.

An organization may also make its documents available on the Web. Having done so in accordance with the regulations, an organization is relieved of responding to requests for copies.

The final regulations also address what an EO should do if it believes it is the target of a harassment campaign; penalties for not complying with the disclosure requirements are also included. The major difference in the final regulations between public charities and private foundations is that private foundations must now make their list of contributors available for public inspection.

Conclusion

Public disclosure of an EO's documents plays a vital role in ensuring that EOs are responsive and accountable to the public they serve. The final regulations on public disclosure requirements for exempt organizations provide clear guidance to EOs that have received a request for organizational documents or records, and to members of the public who are interested in acquiring this information.

FROM COLIN BUZZELL, MINNEAPOLIS, MN