Effective June 8, 1999, non-profits will have to mail their Form 990 Annual Information Returns and Form 1023 (Application for Recognition of Tax Exemption) upon request or post them on the Internet under final regulations issued by the Internal Revenue Service. The regulations implement a portion of the "Taxpayer Bill of Rights" legislation signed into law by President Clinton in July of 1996. Among other provisions, the law establishes a series of intermediate sanctions (such as excise taxes and other financial penalties) for non-profits that improperly use charitable dollars to benefit directors, trustees, officers and employees. It also broadens the manner and circumstances under which a non-profit must make its Form 990 Annual Information Return and Form 1023 (Application for Recognition of Tax-Exempt Status) available to the public.

The disclosure regulations, published in the April 9, 1999, Federal Register, govern the circumstances under which a non-profit must make the Form 990 and 1023 available. They take effect June 8, 1999. The IRS expects to finalize the intermediate sanctions regulations later this year.

Prior to the passage of the "Taxpayer Bill of Rights," a non-profit was required to make its three most recent Form 990's and its Form 1023 available for public inspection at its principal place of business. Under the new law, in addition to the public inspection requirements, all tax-exempt organizations, including private foundations, will have to provide copies of their Form 1023 to anyone who requests it. Tax-exempt organizations other than private foundations will have to provide copies of their three most recent Form 990's upon request. Under the Tax and Trade Relief Extension Act of 1998, similar disclosure requirements will also be extended to private foundations; however, the requirement will not take effect until 60 days after final regulations have been published. The IRS intends to issue these regulations separately.

Copies of all schedules, attachments and supporting documents filed with these forms must also be provided, except for the names and addresses of contributors to the organization and Form 990-T (Exempt Organization Business Tax Return). An organization does not have to provide a copy of its Form 1023 if that form was filed prior to July 15, 1987, unless the organization had a copy of the application on July 15, 1987. Also, an organization that has not yet been recognized as tax-exempt is not required to provide a copy of its pending Form 1023.

Allowable Charges and Timeliness of Responses to Requests for Documents

The organization may charge "reasonable fees" for copying (not to exceed IRS fees for the same materials, currently $1.00 for the first page and $.15 for each subsequent page), plus actual postage costs, but may not charge any additional fees. An organization may require that the fees be prepaid before copies are provided.

If the request is made in person, the copies must generally be provided on the same day of the request, although some limited extensions are granted for "unusual circumstances." If the request is made by mail, the organization must provide the copies within 30 days of receiving the request (or 30 days after receipt of payment, if the organization chooses to require advance payment for copies).

The regulations allow an organization to retain an agent to respond to requests for its documents, but the organization retains responsibility for complying with the law and regulations as well as associated penalties for failure to comply.

"Widely Available" Exception

The law provides that a non-profit need not provide copies of its Form 990 or 1023 if it has made those documents "widely available." Under the IRS regulations, an organization can satisfy this requirement by posting the document(s) on the Internet, either on the organization's own World Wide Web page, or as part of a database of similar documents, established and maintained by another entity (for an example, see Philanthropic Research Inc.'s GuideStar Web page at http://www.guidestar.org).

For documents to be considered "widely available," the following requirements must be met:

• The documents must be posted in a format that allows an individual using the Internet to access, download, view and print them in a manner that exactly reproduces the image of the original document filed with the IRS (except information exempt from public disclosure requirements, such as contributor lists). Portable Document Format (.PDF) is an example of one format that would meet this requirement. For organizations that had posted their materials on the Internet prior to April 9, 1999, certain transitional rules have been established to allow them to make necessary adjustments to meet the new standard.
• The World Wide Web page must clearly inform readers that the document is available and provide instructions for downloading it.
• Neither the tax-exempt organization nor the organization maintaining the Web page (if different) can charge a fee for downloading the information. Documents cannot be posted in a format that would require special computer hardware or software (other than software readily available to the public free of charge).

An organization that makes its documents available on the Web must tell anyone requesting the information where this information can be found, including the Web address, if applicable. This information must be provided immediately for in-person requests and within 7 days for mailed requests.

Exceptions for Harassment Campaigns

An organization will not have to comply with a request that is found to have been part of a campaign to harass the organization where compliance would not be deemed in the public interest. The regulations state that a group of requests for an organization's Form 990 or 1023 is indicative of a harassment campaign if "the requests are part of a single coordinated effort to disrupt the operations of a tax-exempt organization rather than to collect information about the organization."

An organization that feels that it is the subject of a harassment campaign must apply for such a determination to the director of the IRS key district where the organization's principal office is located. The application must be filed within 10 business days from the time the organization began to reasonably believe that a request was part of a harassment campaign. The organization may suspend compliance with requests that it believes are part of such a campaign until a final determination is made by the IRS.

In determining whether harassment is occurring, the IRS will review the facts and circumstances of each individual case. However, some indicators of a harassment campaign may include: a sudden increase in the number of requests; an extraordinary number of requests made through form letters or similarly worded correspondence; evidence of intent to significantly deter the organization's personnel from pursuing its exempt purpose; requests containing language hostile to the organization; direct evidence of bad faith by organizers of the alleged harassment campaign; evidence that the organization has already provided the requested documents to a member of the alleged harassing group; and a demonstration by the organization that it routinely provides copies of its documents upon request.

Under normal circumstances, requests from members of the news media will not be considered harassment by the IRS, nor will an increase in unrelated requests resulting solely from an article or story appearing in the news media. The organization must demonstrate evidence of a coordinated, intentional effort on the part of the persons requesting the information.

The rules also provide special exceptions to allow organizations to ignore multiple requests from a single individual or address without seeking a determination of harassment from the IRS. An organization may disregard requests beyond the first two within any 30-day period or the first four within any one-year period that come from the same person or same address.

The complete text of the new regulations can be found by searching the Federal Register on the Internet at http://www.access.gpo.gov/su_docs/aces/aces140.html (in the "search terms" field, type: "Form 990" AND "Public Disclosure" with quotation marks around each phrase).