Charities, tax-exempt under IRC Section 501(c)(3) and social welfare organizations, tax-exempt under IRC Section 501(c)(4), required to register in California will be happy to hear that they no longer need to send the Schedule B donor listing with the copy of their Form 990 to the California Attorney General to fulfill their annual reporting requirement.
Organizations soliciting contributions in California are generally required to register with the state Attorney General’s office and maintain annual filings with the state’s charitable registry. The annual Form RRF-1 previously required an attachment of Form 990 as filed with the IRS for a complete filing, including an unredacted copy of Schedule B disclosing sensitive donor information. The state began increasing enforcement of this filing requirement in 2010, threatening suspension and fines for not including the required information.
California was one of only three states, along with New Jersey and New York, imposing this donor disclosure requirement. Chief Justice John Roberts noted in his opinion of the Court that California does not rely on Schedule B donor information to initiate investigations or detect charitable misconduct and has other means to obtain this information once an investigation is initiated.
While, the IRS uses Schedule B to annually collect the donor data filed with Form 990 for required exempt organizations, this information must be redacted by the organization for public inspection purposes. Schedule B filed with the IRS, where required, includes the name, address, amount given, and description of in-kind property given by major donors of a charity. Major donors are generally those giving over $5,000 in the reporting year. It’s important to note that the IRS updated the Schedule B disclosure requirements to omit names and addresses of donors, applicable for tax years ending on or after December 31, 2018, for most tax-exempt organizations. Only organizations classified under IRC Sections 501(c)(3) and 527 must currently disclose donor names and addresses on Schedule B, filed with the IRS.
The California Office of the Attorney General has already updated its website to confirm that, “Effective July 1, 2021, the Registry of Charitable Trusts will no longer require the filing of Schedule B to the IRS Form 990 as part of the registration and annual reporting requirements.”
New York: Effective July 30, 2021, the New York Attorney General’s Charities Bureau has suspended its collection of Schedule B to the IRS Form 990.
New Jersey: In light of the United States Supreme Court’s recent decision in Americans for Prosperity v. Bonta, the Division’s Charities Registration Section has determined that the requirement that charities submit the Internal Revenue Service (IRS) Form 990 Schedule B upfront as part of their initial and yearly registrations can no longer be enforced. The Division will therefore be revising its rules, and in the interim will not be taking enforcement action based on the failure to include Schedule B or an equivalent donor schedule in such registrations. The Division will deem any entities that were previously deemed non-compliant solely because they failed to submit Schedule B or an equivalent donor schedule to be in compliance with registration requirements.
Contact our Withum Not-For-Profit Team Members if you have any questions around Form 990, Schedule B or your Not-for-Profit reporting.