All exempt organizations are required to make their current year Form 990 and two prior year returns available for public inspection. In addition, organizations exempt under IRC Section 501(c)(3) must make the current year Form 990-T and two prior year returns available. These forms contain a wealth of information including financial information, compensation information, listing of board members, grantee information, and information on policies and procedures. In addition, the IRS is required to provide copies of these returns upon request under the Freedom of Information Act (FOIA). Up until now, the IRS has only made the returns available in an image format which is not digitally readable.
Currently when the IRS provides returns to the public, they remove confidential information from the returns; e-filed and paper-filed, and convert them to image files. This image file is not easy to navigate and does not allow for data manipulation. As a result, watchdog groups like GuideStar, Charity Navigator and Urban Institute who receive these files from the IRS, spend significant time and money manipulating the image files prior to making the information available to the general public. For example, GuideStar converts the image files to PDFs for individuals to access. Charity Navigator inputs information from the returns into their own database to analyze nonprofits according to their standards.
Carl Malamud, of Public.Resource.Org., recently filed a lawsuit against the IRS to obtain Form 990s in a computer readable format for nine nonprofit organizations under the FOIA. Public.Resource.Org won the lawsuit against the IRS. The IRS has 60 days to produce Form 990s in a digitally readable format for the nine organizations named in the lawsuit.
This ruling could have a large impact on nonprofit organizations. Digitally readable formats will allow public users of these forms to more easily search for particular items to compare across organizations, such as compensation and lobbing expenses. Users of Form 990s can include prospective board members, current and former employees, reporters and media, and watchdog groups. In addition, his ruling may open the door to more requests by outside groups for digitally readable data. For example, GuideStar, Charity Navigator and Urban Institute may request computer readable format for all returns allowing them to minimize the time and effort required to provide the information currently available, or to offer more information. As a result, nonprofit organizations may be subject to a deeper level of scrutiny by individuals and groups and, therefore, should continually review their Form 990s from a public perception and be proactive and prepared to answer questions that may arise.