An IRS official responded to concerns regarding disclosures of the expanded definition of “interested persons” in Schedule L of Form 990, and said that organizations can use a placeholder—in lieu of including a substantial contributor’s actual name—when disclosing transactions with substantial contributors.
IRS Form 990, Return of Organization Exempt from Income Tax, includes Schedule L, Transactions With Interested Persons, that is used by organizations filing Form 990 or Form 990-EZ to provide information on certain financial transactions or arrangements between the organization and disqualified persons or other interested persons.
According to IRS Exempt Organizations Director Tamera Ripperda—who spoke during a program sponsored by the Tax Exempt / Government Entities Council - Gulf Coast Area—organizations required to file Schedule L are to apply certain instructions from Schedule L, Part III to Parts II and IV because the IRS does not redact Schedule L prior to making an organization’s annual return public.
Schedule L is used to provide information about certain financial transactions or arrangements between the organization and disqualified persons or other interested persons. For Parts II-IV of Schedule L, “interested persons” includes substantial contributors required to be reported by name in Schedule B, “Schedule of Contributors.” Prior to 2014, “interested persons” included substantial contributors for Part III, but not Parts II and IV.
The Part III instructions provide that if a person has status as an interested person only because the person is a substantial contributor or is related to a substantial contributor, the filing organization is to enter the term “substantial contributor” or “related to substantial contributor” instead of the person’s name in order to protect the person’s confidentiality. However, the instructions for Parts II and IV, added in 2014, do not authorize the use of a placeholder.
Section 6104(b) generally excludes the name and address of any contributor to an exempt organization (other than a private foundation or section 527 political organization) from disclosure. Accordingly, this information is redacted from Schedule B of an organization’s public inspection copy of its annual return.
Because Schedule L information is not redacted from the public inspection copy of an organization’s annual return, identifying information of substantial contributors could be made public through Schedule L—even though the same information would be redacted from Schedule B. Application of the Part III placeholder instructions to Parts II and IV would prevent substantial contributor information from incorrectly being made public.
For more information, contact the Managing Director-in-Charge of KPMG’s Washington National Tax Exempt Organizations Tax group
D. Greg Goller | +1 (703) 286-8391 | email@example.com
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