Public disclosure requirements for public charities.

New rules for charities.

Although many public charities, as exempt organizations, technically have been subject to public disclosure requirements for a long time, Congress recently changed the law to make this information much more accessible to the public.

Until 1996 exempt organizations had to make "available for public inspection at their offices" their exemption applications and certain of their information returns; there were no specific rules about the timing or format for providing that data. The new rules now detail the requirements public charities must follow.

An exempt entity must disclose and make available two sets of documents:

* Its exemption applications, all required attachments and any related correspondence with the IRS.

* Its three most recent annual information returns, including all schedules and attachments (but not the names and addresses of contributors).

TIME AND PLACE OF AVAILABILITY

In-person requests, A member of the public may request to inspect the documents at any principal office (as well as certain regional or district offices) of the organization. The entity must provide the information requested that same day. However, if the request places an "unreasonable burden" on the organization (such as an unusual volume of requests, requests at the end of regular business hours that require extensive copying or requests made when managerial staff who can fulfill the requests are conducting special duties), the staff must provide copies of the requested information no later than the next business day after the unusual circumstances cease to exist (limited to a maximum of five business days after the request).

Written requests. Written requests made by mail, email, fax or overnight service, which include the requester's address, must be honored within 30 days of receipt.

FEES

The entity may charge a "reasonable" reproduction fee that cannot exceed the IRS per-page charge ($1 for the first page; $.15 for each additional page) and also may assess charges for mailing costs. Money orders, credit cards and personal checks can be accepted for all requests. In addition, cash may be used for in-person requests, while certified checks are acceptable for written ones.

INTERNET DISCLOSURE

To alleviate the administrative burden that could follow a large number of requests for copies, an exempt organization does not have to provide copies of its exemption application and information returns if it posts exact replicas of the documents (as filed with the IRS) on the Internet. The Web site must clearly inform readers of the documents' availability and provide instructions for downloading them. Although no particular format is required, they must be posted to a site that can be accessed at no charge and that requires no special software or hardware. Organizations that post this information on the Internet still must honor in-person requests to view the applicable documents.

PENALTIES FOR NONCOMPLIANCE 

An organization that fails to honor a request for public inspection of its annual returns is subject to a penalty of $20 per day (up to a maximum of $10,000 per return) and to an additional $20 per-day penalty (with no maximum) if it fails to provide an exemption application when requested. An organization that willfully fails to comply with these public inspection rules can be subject to an additional $5,000 penalty.

For a discussion of these new rules, as well as other current developments, see the Tax Clinic, edited by Edward Sair, in the March 2000 issue of The Tax Adviser.

--Nicholas Fiore, editor The Tax Adviser