Authored by Stu Cvrk via American Greatness,
On April 23, the US Treasury Departmentannounced that the IRS plans to revise Form 990—the annual information return filed by tax-exempt organizations—to improve transparency and strengthen oversight, specifically targeting reporting on government contracts, government grants, andfiscal sponsorship arrangements. The stated goals are to detect misconduct and hold wrongdoers accountable.
Treasury Secretary Scott Bessent put the matter bluntly: “We are ending the days of hiding fraud, abuse, and extremist activity behind complicated nonprofit arrangements. When bad actors misuse charitable structures, directors and officers should understand that transparency can lead to scrutiny, accountability, and liability under the law.”
The acting IRS chief counsel added: “If an organization receives public funds or tax-deductible donations, it should be prepared to show who controls the money and where it goes.”
Why is this seemingly innocuous regulatory requirement a really big deal, as most Americans have no idea what Form 990 is used for?
Let us answer that in some detail.
Right now, enormous sums of money flow through nonprofit “umbrella” organizations to dozens or hundreds of sub-groups, and the paper trail essentially disappears. The IRS currently has no mechanism on the Form 990 to require disclosure of fiscal sponsorship arrangements. The new rules would force these pass-through organizations to reveal who is getting the money and what it’s being used for.
Think of this in the context of the Southern Poverty Legal Center indictments, which are only the tip of the iceberg of fiscal sponsorship arrangements and transactions.
Fiscal sponsorship is a legitimate and longstanding practice. In a typical fiscal sponsorship relationship, a nonprofit organization’s 501(c)(3) tax-exempt status is extended to groups engaged in activities that serve the fiscal sponsor’s mission, typically for a fee. Donations to the project are directed to the fiscal sponsor and are restricted to supporting activities of the charitable venture. The fiscal sponsor is responsible for assuring the activities of the project fulfill their charitable purpose. Here is how the left-wing Tides Foundation advertises fiscal sponsorshipson their website.
The legitimate use case: a new charity that hasn’t yet received IRS 501(c)(3) status can operate under an established nonprofit’s umbrella while it goes through the process. The problem is what happens at scale when the model is weaponized.
Source: ZeroHedge News
