TBOR2 public disclosure requirements triggered.

The IRS has published much-anticipated final regulations under Sec. 6104(d), triggering broader public disclosure requirements for public charities and other organizations (other than private foundations) exempt from tex under Sec. 501(c) or (d). The regulations adopt, with substantial modifications, rules proposed in September 1997. (Forthcoming regulations will address disclosure by private foundations.)

The issuance of these regulations finally triggers the augmented public disclosure requirements enacted in the Taxpayer Bill of Rights 2 (TBOR2). The TBOR2 sets forth rules that exempt organizations (other than private foundations) must follow for both written and in-person requests for copies of their three most recent Forms 990, Return of Organization Exempt From Income Tax, and their exemption applications. However, these new requirements did not take effect until 60 days after publication of the final regulations. With the April 9, 1999 publication of final regulations, the effective date of the TBOR2 public disclosure requirements became June 8, 1999.

Additionally, TBOR2 increased the Sec. 6652 penalty for failure to allow public inspection or provide copies of an information return as required from $10 to $20 per day, with a $10,000 maximum. The penalty for failure to allow public inspection or provide copies of an exemption application as required was increased from $10 to $20 per day, with no maximum. Under these rules, the penalties apply to "any officer, director, trustee, employee, or other individual who is under a duty to allow inspection or provide copies."

Annual Returns, Exemption Application

Regs. Sec. 301.6104(d)-3(b)(4) provides that an exact copy of the three most recent annual returns and all information furnished to the IRS on Forms 990, 990EZ, Short Form Return of Organization Exempt From Income Tax, 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons, and 1065 must be provided. The definition of "exact copy" includes all schedules, attachments, supporting documents and compensation information (whether required by statute or by regulations), but excludes the name and address of any contributor to the organization. It is important to note that Form 990-T, Exempt Organization Business Income Tax Return, Form 1120-POL, U.S. Income Tax Return For Certain Political Organizations, Schedule A of Form 990-BL and Schedule K-1 of Form 1065 are not subject to public disclosure.

Organizations are only required to provide copies of returns subject to disclosure for three years after the later of the date the return was required to be fried (including extensions) or the date the return was filed. An amended return is subject to public disclosure for three years after it was filed with the Service.

In addition to the organization's three most recent annual information returns, its exemption application (such as Forms 1023, Application For Recognition of Exemption, and 1024, Application for Recognition of Exemption Under Section 501(a) or for Determination Under Section 120, including all supporting documents and any letter or document issued by the IRS in connection with the application) must be disclosed. No disclosure is required while an exemption application is pending or if an adverse determination is issued. Just as with annual information returns, information related to the identity of donors may be omitted from public disclosure. An organization is not required to provide copies of its exemption application if its exemption was granted prior to July 15, 1987 and it did not have a copy of its application on that date.

Public Inspection and Copies

The final regulations generally follow the proposed regulations on the offices of an exempt organization at which documents must be available for public inspection. Organizations must provide Copies or make their information available for public inspection at their principal, regional and district offices during normal business hours. Regional and district offices are defined as those with paid employees, whether full-time or part-time, whose aggregate number of paid hours is at least 120 per week.

Generally, copies of documents must be provided on the same day in the case of an in-person request. In unusual circumstances (such as the receipt of a large volume of requests, requests made shortly before the end of regular business hours or requests made on a day when the organization's managerial staff is conducting special duties), an organization may provide the requested copies on the sooner of the next business day after the unusual circumstances cease to exist or the fifth business day after the date of the request. In the case of a written request, the organization generally must provide the copies within 30 days of the date it receives the request.

Organizations may charge a reasonable fee for copying and mailing. At present, the maximum billable fee is $1 for the first page and $0.15 for each additional page, plus actual postage. If an organization requires advance payment (as it is permitted), the 30-day period begins when the organization receives payment. If the organization receives a written request without advance payment, it has seven days from the date of the request to notify the requester of its prepayment policy and the amount due.

Special Rules

Sec. 6104(d) provides that exempt organizations are not required to comply with requests for copies of their annual information return and exemption application if they have made the information "widely available." (However, those documents still must be available for public inspection at an organization's offices.) Regs. Sec. 301.6104(d)-4 states that organizations can meet this exception by posting the applicable document on their Web page on the Internet or by having the documents posted on another organization's Web page as part of a database of similar materials. The Website must clearly inform readers that the document is available and provide instructions for downloading it. Also, the document must be posted in a format that, when accessed, downloaded, viewed and printed in hard cops exactly reproduces the image of the application for tax exemption or annual information return as it was originally filed, except for information that may be omitted from disclosure.

Regs. Sec. 301.6104(d)-5 also sets out rules for determining whether an exempt organization is the subject of a "harassment campaign," such that compliance with requests for copies is not required. The regulations define a harassment campaign as a singular coordinated effort to disrupt the operations of an organization rather than to obtain information. Facts and circumstances that may indicate the presence of a harassment campaign include a sudden increase in the number of requests, an extraordinary number of requests containing similar language or requests that contain language hostile to the organization. If an organization believes that it is the target of a harassment campaign, it must submit a written application to the IRS Key District Director where the organization's principal office is located, describing in detail the facts and circumstances of the alleged harassment campaign. While the application is being considered by the Service, the organization may suspend compliance for any request it believes to be part of the campaign.

FROM HANK HALL, CPA, WASHINGTON, DC