New Public Disclosure Rules Extended To Private Foundations

Private foundations will soon be required to provide copies of their annual IRS Form 990PF information returns to anyone who asks, under new proposed Treasury regulations. The Form 990PF reveals the foundation's grants, the names and addresses of its contributors, and a great deal of financial information, as well as any compensation paid to officers, directors and trustees. Penalties of up to $10,000 will apply for any refusal to comply with the new rules.

For many years, every private foundation has been required to publish an annual newspaper notice stating that its return is available for public inspection at the foundation's principal office for a period of 180 days after the notice. Congress changed this requirement last year by extending much broader disclosure rules to private foundations. The new rules will become effective for private foundations 60 days after final regulations are published in the Federal Register. (The recently-released regulations are currently in proposed form only.) The effective date will likely be early in the Year 2000.

Under the new rules, a foundation will be required to provide a copy of its annual return to anyone who asks for it in person or in writing, including email. If the request is made in person, the foundation must provide a copy on the day the request is made. In unusual circumstances, where compliance would be unreasonably burdensome (e.g., a foundation receives a volume of requests that exceeds its copying capacity), it may have additional time, but never more than five business days. If the request is made in writing, the copy must be provided within 30 days.

There is one alternative to complying with requests for copies: the foundation may instead make its Form 990PF "widely available." This means posting the completed form on its website, or posting it on a central website as part of a database. In limited circumstances, a foundation may also deny requests for copies if the IRS determines that the foundation has been subject to a harassment campaign.

When fully implemented, the new rules will require private foundations to disclose their three most recent Form 990PFs. Under a special transition rule, however, a foundation will initially be required to disclose only the first Form 990PF due after the effective date of the new rules. The following year, it will be required to disclose its two most recent returns, and in the third year, its three most recent returns.

The new disclosure rules put a premium on ensuring that the Form 990PF is completed in a thoughtful and appropriate manner. Given the profound financial influence of private foundations, journalists and others are likely to seize the opportunity to scrutinize these forms closely.

A foundation may charge up to $1 for the first page and $.15 for additional pages, plus actual postage costs, for providing copies.

The disclosure rules also require foundations to provide copies of their original tax exemption application (IRS Form 1023). A special transition rule applies for applications filed before July 15, 1987, but only if the organization did not have a copy of the application as of that date.