Are You Aware Of Public Inspection Requirements?
Under Internal Revenue Code (“IRC”) §6104, any tax-exempt organization that files a Federal Form 990, Return of Organization Exempt from Income Tax, is required to make available for public inspection its three most recently filed Forms 990 and its application for tax-exemption; either Form 1023 or Form 1024. This information must be made available during regular business hours at the organization’s principal office and at any regional offices having three or more employees. Instructions and guidance related to the public inspection requirements are outlined in Appendix D of the Form 990 instructions.
WHAT IS OPEN FOR INSPECTION?
With limited exception, the complete Form 990 or Form 990-EZ, including all schedules, attachments and supporting documentation, is open for public inspection. In addition, copies of a tax-exempt organization’s application for tax-exemption, either Form 1023 or 1024, must also be made available for public inspection.
In addition to the above, if a tax-exempt organization is required to file a Form 990-T, Exempt Organization Business Income Tax Return, the three most recently filed Forms 990-T are also open for public inspection.
Please note that donor information, including name and address, included on Schedule B, Schedule of Contributors, and certain foreign reporting forms are not open for public inspection. Form 1023 and Form 1024 are not open for public inspection if the application was submitted prior to July 15, 1987, and the organization did not have a copy of its original application on July 15, 1987. Also, an organization that has not yet been recognized as tax-exempt is not required to provide a copy of its pending application for tax-exemption.
REQUESTS THROUGH THE INTERNAL REVENUE SERVICE (“IRS”)
Requests can also be made directly through the IRS via Form 4506-A, Request for Public Inspection or Copy of Exempt or Political Organization IRS Form, to request the following:
- A copy of a tax-exempt or political organization’s return, report, notice, or exemption application; or
- An inspection of a return, report, notice, or tax-exemption application at an IRS office.
Requesters may order, through the IRS, the complete set of all information returns filed for a year or a partial set by state or by month. For a nominal fee, the IRS will provide copies of a tax-exempt organization’s returns. The format of the copies may be either photocopies, CD or DVD. Items such as return, report, notice, or tax-exemption application can be inspected at an IRS office free of charge.
COSTS, TIME TO RESPOND AND OTHER SPECIAL RULES RELATING TO REQUESTS
Tax-exempt organizations may charge “reasonable fees” for copying plus actual postage costs, but may not charge any additional fees. An organization may require that the fees be prepaid before copies are provided. Upon notification by the organization that the fee must be prepaid, if the individual making the request does not pay the fee within thirty days, or if the individual pays the fee by check and the check does not clear the bank, the organization may disregard the request.
If the request is made in person, the copies must generally be provided on the same day, although some limited extensions are granted for “unusual circumstances”. If the request is made by mail, the organization must provide the copies within thirty days of receiving the request, or thirty days after receipt of payment, if the organization chooses to require advance payment for copies. Unusual circumstances which tax-exempt organizations could face are:
- Requests received that exceed the organization’s daily capacity to make copies;
- Requests received shortly before the close of business that require an extensive amount of copying; or
- Requests received on a day when the organization’s staff capable of fulfilling the request is conducting special duties.
The regulations allow an organization to retain an agent to respond to requests for its documents, but the organization retains the ultimate responsibility for complying with the law and regulations as well as associated penalties for failure to comply.
A tax-exempt organization must honor a written request for a copy of documents if the written request is addressed to, and delivered by mail, electronic mail, facsimile, or a private delivery service to a principal, regional, or district office of the organization. In addition, the tax-exempt organization must honor a written request for a copy of documents if the requester provides the address to which the copy of the documents should be sent. A tax-exempt organization must also fulfill a request for any specific part or schedule of its application or return. Any request for a portion of an application or return must identify the specific part or schedule being requested.
APPLICABILITY TO GROUP EXEMPTION RULINGS
Local or subordinate organizations included in a group exemption ruling must, upon request, make available for public inspection, or provide copies of, the application for tax-exemption and Form 990. The application submitted to the IRS requesting the group exemption ruling, along with all documents submitted by the parent or central organization to include the local or subordinate organization in the group exemption ruling, must also be made available for public inspection.
The local or subordinate organization must comply with any request for public inspection within a reasonable amount of time, which is normally considered two weeks, after receiving a request made in person for public inspection or copies and at a reasonable time of day. In cases where the parent or central organization submits to the IRS a list or directory of local and subordinate organizations included in the group exemption ruling, the local or subordinate organization is required to provide only the application for the group exemption ruling and those pages that specifically refer to it.
A copy of Appendix D to the Form 990 instructions and Federal Form 4506-A with applicable instructions may be accessed at the healthcare services section of our Firm’s Website.
If a local or subordinate organization does not file its own tax return, because it is affiliated with a central or parent organization which files a group return, it must make available, upon request, copies of the group return filed by the central or parent organization. If the group return includes separate schedules for each local or subordinate organization, any schedules relating to other subordinates included in the group return may be omitted by the organization that received the request.
EXCEPTION
A tax-exempt organization does not need to provide copies of its Form 990 or application for tax-exemption if it has made those documents “widely available”. An organization is considered to have made its Form 990 or application for tax-exemption widely available if it has posted it to the internet; either through its own website, or as part of a database maintained by an unrelated organization. It is important to note that the posting of a tax-exempt organization’s Form 990 on GuideStar (www.guidestar.org) does not satisfy the requirements pertaining to making the document widely available to the public. This is due to the fact that the Form 990 is modified by GuideStar prior to posting on their website.
SPECIAL RULES RELATING TO PUBLIC INSPECTION
During an inspection by an individual, a tax-exempt organization may have one of its employees present and must allow the individual conducting the inspection to freely take notes. If the individual provides their own photocopying equipment, the tax-exempt organization must allow the individual to photocopy the document at no charge.
If a tax-exempt organization does not maintain a permanent office, it must make its application for tax-exemption and its annual information returns available for inspection at a reasonable location of its choice. After a tax-exempt organization receives a request for inspection, it must permit public inspection within a reasonable amount of time and at a reasonable time of the day. The tax-exempt organization may choose to mail a copy of its application for tax-exemption and annual information returns to the requester instead of allowing an inspection. In addition, a tax-exempt organization can charge for copying and actual postage costs only if the requester consents to the charge.
FAILURE TO COMPLY
Any tax-exempt organization that does not comply with the public inspection requirements will be assessed a penalty of $20 for each day that inspection was not permitted, up to a maximum of $10,000 for each return. The penalties assessed for failure to permit public inspection of tax-exemption applications are the same, except there that the $10,000 maximum does not apply. In addition, a $5,000 penalty for any individual who willfully fails to comply with the public inspection can be assessed.
For more information on the topics discussed or services we can provide, please contact:
Scott Mariani, JD, Partner
Practice Leader
973.898.9494 ? [email protected]
Questions or comments?
E-mail us at [email protected]
To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
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