The U.S. Department of the Treasury announced a major Form 990 transparency initiative on April 23, 2026, aimed at increasing oversight and uncovering hidden funding in the nonprofit sector. The primary goals of the proposed revisions are to better detect fraud, abuse, misuse, and "extremist activity" by requiring more detailed disclosures from tax-exempt organizations.
Key Areas of Enhanced Reporting
The proposed revisions to Form 990 will focus on two specific areas Treasury officials say may currently be used to obscure financial activities:
- Government Contracts and Grants: Organizations may be required to provide clearer reporting on the sources and specific uses of public funds; and
- Fiscal Sponsorship Arrangements: New requirements may force nonprofits to identify sponsored projects directly, disclose who controls those funds, and how those funds are used.
Objectives of Enhanced Reporting
- Public Accountability: Treasury Secretary Scott Bessent stated that "tax-exempt status is not immunity from scrutiny" and emphasized that directors and officers could face legal liability for misusing charitable structures.
- Detection of Misconduct: The initiative follows a recent Whistleblower Alert calling for tips on the misuse of federal funds, self-dealing, and improper payments to insiders.
- Resource Allocation: By generating "structured data," the IRS aims to use automated analysis to identify high-risk filings more efficiently.
Next Steps for Nonprofits
Treasury and the IRS expect to publish formal proposed regulations and will open a public comment period before any proposed changes are finalized. In the meantime, nonprofit leaders should proactively review their donor documentation and governance relationships to prepare for increased transparency requirements.
Please visit BDO’s Nonprofit Tax Services page for more information on how BDO can help.