On May 26, 2020, the Dept. of the Treasury and Internal Revenue Service issued a final version of proposed regulations protecting donor privacy. Rejecting pleas by some organizations that donors must be revealed, the explanation of the new final regulations said:
The Treasury Department and the IRS have concluded that the IRS does not need the names and addresses of substantial contributors to tax-exempt organizations not described in section 501(c)(3) to be reported annually on Schedule B of Form 990 or Form 990-EZ in order to administer the internal revenue laws. In light of the risks and burden associated with requiring the annual reporting of such information, this Treasury Decision revises the regulations under section 6033 to remove the general requirement for tax-exempt organizations not described in sections 501(c)(3) or 527 to report annually the names and addresses of substantial contributors.
The IRS had proposed regulations clarifying that tax-exempt organizations other than 501(c)(3) charities and 527 political organizations did not have to list donor names and addresses on Schedule B to IRS Form 990 annual reports. More than 8,000 comments were received on the proposed donor privacy regulations, the vast majority of which supported the IRS’s efforts to protect donors. In February, the IRS held a public hearing at which most commenters also supported the proposed regulations.
The Public Policy Legal Institute filed extensive comments supporting the proposed regulations, giving the history of the statutory language and prior IRS efforts to protect donors. The PPLI comments can be found here: Sched B donor disclosure comments final
The final version of the new regulations did not vary significantly from the proposed regulations, but included several of the additional features proposed by the PPLI’s comments.
One of the most important of the additional features requested by PPLI was to clearly instruct states and local governments of the strict limitations on the use of IRS information. The final regulations did just that:
The Treasury Department and the IRS reiterate that the [Internal Revenue] Code limits the purposes for which states may use returns or return information obtained from the IRS. When states receive returns or return information under section 6103(d), the use of that information is limited to the administration of state tax laws. When states receive returns or return information under section 6104(c), the use of that information is limited by statute to administering state laws relating to the solicitation or administration of charitable funds or charitable assets of such organizations. Use of returns or return information received from the IRS under these sections for purposes other than those listed above (for example, for the enforcement of campaign finance laws or consumer protection laws) is not consistent with states’ authorized use under sections 6103(d) and 6104(c). While some states may use name and address information for those authorized purposes, the divergent comments from state attorneys general indicate that the desire to obtain such information, and the purpose for doing so, may differ from state to state. To the extent that any state determines that the burdens of collecting and maintaining such information are justified by its own needs, such a state is free to require reporting of such information to the state and to maintain the information at the state’s own expense.