IRS Issues Final Regulations on Public Access to Foundations’ Tax Returns

The Internal Revenue Service has issued its final regulations on how private foundations must comply with a new law designed to give the public greater access to their annual informational tax returns.

The rules, which take effect on March 13, appeared the January 13 Federal Register.

Congress passed legislation in 1998 to make foundations follow the same disclosure requirements as those followed by charities. The provisions were not to take effect until 60 days after the I.R.S. issued final regulations on how it will enforce the statute.

Under the new law, foundations eventually will have to provide photocopies of their three most-recent tax returns — and their original applications for tax-exempt status — to anyone who requests them in person or in writing.

Foundations currently need only make their most-recent tax returns available to the public for inspection for 180 days from the date they publish a notice that they have filed the returns.

Exemptions from the copying requirement will be made if foundations make their returns “widely available” through the Internet. The new law drops the requirement that private foundations publish notices that they have filed their returns.

Congress had stiffened the requirements for public access to charities’ informational tax returns in 1996, but the changes only started to make a big difference for most groups last spring. Since June 8, charities have been required to follow the law and the service’s new rules for disclosure of their tax forms (The Chronicle, April 22, 1999).

The process for putting the foundation law into effect has moved quickly — in part because the tax agency borrowed the same rules that it used for charities.

But there are some differences. For example, the final regulations make clear that private foundations, unlike charities, will have to make available copies of the names and addresses of their contributors.

Like charities, foundations will not have to accede to requests for information when it is clear that the purpose of the requests is to disrupt the organization’s operations. Foundations will be able to charge a reasonable fee for providing photocopies.

Foundation officials who refuse to allow public inspection or to provide copies of tax returns will face a personal penalty of $20 for every day they fall behind in providing a form, up to a maximum of $10,000 per return.