by Putnam Barber pbarber@tess.org
Memo to the I.R.S.: Don't do it.
An Internal Revenue Service proposal to raise the threshold above which charities must file informational tax returns -- in effect requiring fewer charities to do so -- is a mistake.
Form 990, as the return is known, is the only public report that non-profit organizations must make. As such, it is essential for the work of researchers who assemble profiles of the widely diverse non-profit world.
With 990 data, policy makers and advocates can call on the most reliable information available to guide their deliberations. Without it, they are forced back into dueling anecdotes and sound-bite impressions.
The form is also an important document for individuals. By requesting copies, anyone can inspect the finances and work of organizations that supply critical community services. Regulators at every level of government can also look to the 990 for details about suspect organizations and, often, can get instant reassurance that their suspicions were unnecessarily aroused.
Finally, the form is important for charities themselves. The process of preparing a return is the only common experience of self-assessment in which all substantial secular non-profit groups in the nation participate. (Churches are not required to file with the Internal Revenue Service.) By comparing its operations with statistics from the returns of other organizations, a charity can place itself within the context of the great work in which the non-profit world is engaged.
Approximately 600,000 non-profit organizations file a 990 each year with the I.R.S. Current rules allow organizations with less than $25,000 in annual revenues not to file.
A recent I.R.S. notice (The Chronicle, November 27) asks for opinions about raising the revenue threshold to $40,000, or even to $100,000. Chuck McLean, director of research for Philanthropic Research, which runs the Internet information service GuideStar (http://www.guidestar.org/), estimates that a threshold of $40,000 would reduce the number of filers by 10 per cent, while a threshold of $100,000 would reduce the number by a third.
Attention to the 990 usually focuses on its role as a disclosure document, accessible to all and revealing to any reader intimate facts about an organization's operations. That function of the 990 is undeniably important. It may be more important, in fact, for small organizations that work in relative obscurity than it is for the nationwide giants of the non-profit world, with their legions of supporters and daily experience with life in the limelight.
Less appreciated is the central function of Form 990 as a source of fundamental data on the scope, character, and impact of the non-profit world as a whole.
After decades of cooperation between the National Center for Charitable Statistics (http://nccs.urban.org/) and the Internal Revenue Service, there is published data from Forms 990 in the non-profit coalition Independent Sector's Nonprofit Almanacs, which are used by all serious observers of the non-profit world. In addition, several efforts are under way, including a joint effort by the Urban Institute and Philanthropic Research, to make past Forms 990 available through the Internet, thus enabling individuals, community organizations, and local-government officials to seek out useful patterns of non-profit activity without the expense and inconvenience of having to go to each charity to request its I.R.S. filing.
Those important benefits flow from the broad range of groups that must file and from public distribution of the form. As a result of the so-called 1996 Taxpayer Bill of Rights, charities are required to send copies of their Forms 990 to the public on request and are encouraged to publish that information on the Internet. To reverse that progress by narrowing the range of organizations that are subject to the annual ritual of preparing and filing a Form 990 would truly be a step backward -- a step filled with ironies for a nation where the existence of non-profit organizations, and public confidence in them, are essential to the success of a staggering range of valued activities and community services.
What, then, should the I.R.S. do instead? Is there a way for it to meet its stated goal to ``reduce the burden on tax-exempt organizations'' without abandoning the many public benefits of the current filing requirements?
First, the I.R.S. could support more actively the work of Bill Levis (see http://www.nonprofit-info.org/misc/fps/fps.html) and others at the City University of New York. Mr. Levis has outlined ways to streamline accounting and reporting requirements for non-profit organizations. The more straightforward this process can be, the smaller the burden on those who keep the books and run the programs.
Second, the I.R.S. could allow more organizations to use the 990-EZ short form, which is currently allowed only for those organizations with less than $100,000 per year in gross receipts or $250,000 in total assets. With the short form, organizations are not required to list their expenses by category -- program, administration, and fund raising -- thus making the form easier to fill out. The limit on who can use the form could be raised, thus easing the burden on small non-profit groups without diminishing the total number of organizations for which basic information is available.
Third and most important, the I.R.S. could move rapidly toward supporting electronic filing of Forms 990. Though the I.R.S. is expanding the number of things it does electronically, there is no indication that it plans to require or even permit tax-exempt organizations to file electronically.
The reasons for encouraging electronic filing of non-profit information extend beyond the strong motives of convenience for the filer and more-efficient processing for the I.R.S. Unlike other documents filed with the I.R.S., the returns filed by non-profit organizations are supposed to be accessible to the public. Having the original document delivered to the I.R.S. in an electronic form and thus available for immediate publication on line is the most efficient way of meeting that objective.
To be sure, there are many in the non-profit world whose first reaction might be to welcome raising the filing threshold for Form 990, believing that they will have more time and energy to devote to their missions. But the small benefit of a few hours reclaimed by avoiding the task of filling out the form is surely not worth the loss of accountability, visibility, and commitment to common values that result from its widespread use.
Putnam Barber is president of the Evergreen State Society in Seattle,
which works to strengthen non-profit groups and civic organizations. The
society's World-Wide Web address is http://www.tess.org
.