Interactive Website Aims to Make Nonprofit Data Easily Accessible

For open-data advocates in the charity world, the holy grail is a system in which information from nonprofits nationwide can be aggregated, sliced, and analyzed by researchers, donors, and law-enforcement officials. That dream may never be realized, but a website being developed by the National Association of State Charity Officials is being touted as a good first step.

That website was a prime topic this week at an event at the Urban Institute in Washington, D.C., to discuss the future of nonprofit data collection. State charity officials at the event said they have expanded plans for a multistate nonprofit web portal that has been years in development.

Originally, the portal was seen simply as a tool for nonprofits and fundraisers to register and file annual reports with many states at once. Now, however, officials envision an interactive site that would include, among other things, information from the Form 990 that charities file with the Internal Revenue Service. The site would make the data it collects available in a format that allows for easy analysis.

“We needed to think a bit bigger,” said Mary Beckman, head of the Massachusetts Attorney General’s Health Care and Fair Competition Bureau.

Unintended Consequences

Details of the site are still being worked out. The National Association of State Charity Officials is seeking comment on its plan, which calls for the site to go live late next year. Even then, it will likely be some time before states nationwide can share nonprofit data with the public. Only 39 states currently require nonprofit registration, and only six provide for electronic filing.

Although many in attendance at the Urban Institute event saw benefits in greater access to charity records, they also identified unintended negative consequences for nonprofits.

For instance, it is unclear how the portal would handle portions of the Forms 990. Foundations and charities now have the ability to “tell their story” in the nonnumeric, narrative sections, said Lawrence McGill, vice president for research at the Foundation Center. If IRS nonprofit data is collected in machine-readable format — language that computers can read, aggregate, and tabulate — charity watchdogs and other evaluators will surely develop applications to sort through the narrative sections to characterize and rank foundations’ performance, Mr. McGill said. To ensure they are rated fairly, nonprofits will have to develop a systematic approach to the language in the filings, and “that’s going to be a hit-or-miss proposition for a long time,” he said.

Open-data systems that track gifts to nonprofits will fail to account for the entirety of charitable giving, especially as nontraditional giving methods such as crowdfunding take hold, said Lucy Bernholz, a research scholar at Stanford University’s Center on Philanthropy and Civil Society.

Ms. Bernholz also said she fears that the open-data push is increasing an emphasis on transparency that has already “train-wrecked” the principle of anonymous giving.

A Federal Push

Over the past several years, the push to open nonprofit data has gained steam at the federal level, according to Cinthia Schuman Ottinger, deputy director of philanthropy programs at the Aspen Institute. President Obama has included mandatory electronic filing of nonprofit tax information in his proposed budgets for the past three fiscal years. E-filing was also part of the sweeping tax overhaul debated on Capitol Hill in 2014, when then-chairman of the House Ways and Means Committee Dave Camp included it in a draft proposal.

The biggest step toward open data, Ms. Schuman Ottinger said, came in June when the federal government gave open-records activist Carl Malamud tax forms for nine nonprofits in a format computers could read after Mr. Malamud sued for their release.

“That rocked the 990 world as we know it,” she said.

Federal regulators insist that easy-to-analyze data is essential to catching nonprofit scam artists. Paying for such a system, however, is a hurdle.

Another catch, officials say: Tax information released in machine-readable format for only a small number of charities offers researchers and analysts an incomplete picture of nonprofit activity. Officials would prefer to wait until all nonprofits are mandated to file electronically.

Ultimately, aggregating tax information and using data analysis could help the IRS identify fraudulent groups — a task now handled by 450 IRS agents watching over the approximately 1.6 million nonprofits nationwide, according to Tamera Ripperda, director of the IRS Exempt Organizations division.

In January, Ms. Ripperda’s unit will begin using an automated redaction tool on Forms 990 that will black out personal information. That, she said, will make it easier to translate tax filings into data that can be used on spreadsheets and easily tabulated.

“We’re getting there,” she said, “baby step by baby step.”