The IRS is contemplating a significant overhaul of its Form 990 filing requirements, requiring nonprofits to disclose whether their top officials have been convicted of financial or terrorism-related crimes, according to sources within the agency. This proposal, detailed in multiple reports and leaked internal communications, is expected to target individuals with criminal records that could raise concerns about potential wrongdoing or connections to illicit activities. The core of the initiative centers around the IRS’s established authority to investigate and prosecute such convictions, though the proposal doesn’t mandate identifying which officer, director, or trustee was involved. The IRS is considering this move as a means to pressure tax-exempt groups to sever ties with individuals with criminal records, ensuring donors can make informed decisions about how to best direct their money. Federal officials have expressed concerns about the potential legal ramifications of the proposal, including the risk of triggering investigations and potential revocation of tax-exempt status if the information is misused. The proposal is part of a broader effort by the Trump administration to target left-leaning nonprofits, particularly those with ties to anti-fascist groups. In March, the FBI and IRS Criminal Investigation jointly launched a ‘command post’ to investigate potential links between nonprofits and terrorism, following a directive from Attorney General Pam Bondi that targeted those believed to be financing domestic terrorism. The issuance of this directive came as part of a broader effort to focus on fraud in recent months and to spotlight the pandemic-era Feeding Our Future scandal. The IRS is facing scrutiny due to concerns about political interference, with Ken Kies, a tax attorney, suggesting the proposal could inadvertently violate the Supreme Court’s decision in the Americans for Prosperity Foundation v. Bonta case, which struck down a California requirement to turn over donor lists. The proposal is also linked to the 2021 memorandum directing the IRS to refer groups believed to be financing ‘domestic terrorism’ to the Justice Department. The proposed disclosure rule is not a new development; it follows a previous revision to the Form 990, and several federal criminal investigations are underway, including those targeting the Southern Poverty Law Center, which is accused of misleading donors and banks by funneling money to informants for white supremacist groups. The proposed rule also addresses the potential for the IRS to expedite the revocation of tax-exempt status for nonprofits if they fail to disclose convictions of any of their leaders. The IRS has indicated that it views the collection and disclosure of sensitive information as a potential infringement on freedom of association without furthering a narrowly defined governmental interest, a point that has drawn criticism from civil liberties advocates. Ellen Aprill, a senior scholar at UCLA Law School’s center for philanthropy and nonprofits, notes that the proposal could potentially lead to a fishing expedition, where the IRS collects information without clear authority to act on it. Alexander Reid, a partner at BakerHostetler, argues that the proposal would clash with the Supreme Court’s decision in *Americans for Prosperity Foundation v. Bonta*, which struck down a California requirement that charities turn over donor lists. He suggests that the bulk collection and disclosure of sensitive information from tens of thousands of charities could chill freedom of association without advancing a clearly defined governmental interest. Diane Yentel, president and CEO of the National Council of Nonprofits, sees the administration’s proposal as part of a broader trend of Republicans seeking to target groups considered to be not aligned with the Trump administration. She suggests that the proposal is a step too far when viewed in the context of the administration’s actions and rhetoric regarding groups associated with the far left, particularly those equating some nonprofits to ‘domestic terrorists.’ The proposal also raises questions about why the Trump administration wants this information, what it might use it for, and how it defines terrorism. The IRS has stated that it will continue to follow the money to ensure tax-exempt status is not exploited to facilitate illicit activity, and that the provision of information about criminal convictions could aid in identifying and prosecuting potential fraud. The proposal is part of a broader effort by the Trump administration to target left-leaning nonprofits, with recent actions including focusing on the pandemic-era Feeding Our Future scandal and investigating potential links between nonprofits and terrorism. The IRS has also stated that it views the collection of information about board members as part of a legal effort to ensure the accuracy of the information submitted to the agency.
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Source: CBS News
