Nearly 87,000 tax-exempt organizations filed Form 990s on paper last year rather than electronically, according to Internal Revenue Service data, delaying public disclosure of tax information and hindering attempts at broader analysis of the nonprofit sphere.
That figure represents about 30 percent of the 295,000 Form 990s filed in 2015. The IRS document is the cornerstone of nonprofit transparency, with information about organizations’ administrative expenses and executive salaries, among other data.
“That 30 percent represents a lot of organizations that do important work that donors and policy makers want to understand,” said Thomas Pollak, director of the Urban Institute’s National Center for Charitable Statistics.
The data covers all tax-exempt organizations that file the standard 990 form including charities, trade associations, and other organizations. The figures cover only those nonprofits filing standard 990 forms; they do not include smaller nonprofits filing the 990-EZ or 990-N form or private foundations filing 990-PFs.
Form 990s are required from every tax-exempt organization and provide crucial information to donors, charity watchdogs, and journalists. Electronic records can be analyzed and searched with the few strokes of a keyboard by IRS employees and will soon be available to the public as well. Paper filings must be manually transcribed at the taxpayers’ expense.
Also, electronic records are less likely to contain errors like stray Social Security numbers or inadvertent disclosure of donor rolls, which are supposed to remain in IRS hands.
Most, but not all, organizations with more than $10 million in assets must file their 990 information electronically, a standard that excludes most nonprofits.
A Chronicle analysis of the IRS data found that 70 percent of paper 990 filers reported less than $1 million in assets.
However, there were holdouts at the top end of the spectrum. The Chronicle contacted several charities with more than $100 million in assets to find out why they still filed on paper.
A spokesperson for the Global Fund to Fight AIDS, Tuberculosis, and Malaria, which reported $7.7 billion in assets in 2014, said paper filing is better suited to the organization’s administrative practices.
The New York Community Trust, which reported $2.6 billion in assets, cited issues with tax-preparation software that limited the length of its grant descriptions. Cal Farley’s, which runs schools for at-risk youth and community centers in Texas, said it files on paper because another report it submits to the 990, about employer-owned life-insurance contracts, must be filed that way. Farley’s reported $140 million in assets.
Disinterest in Congress
The IRS does not have authority to mandate electronic filing without an act of Congress.
“It wouldn’t cost anything,” said Cinthia Schuman, deputy director for philanthropy programs at the Aspen Institute, citing a 2014 report by the Congressional Joint Committee on Taxation. “It is our understanding that the system for handling the e-filed forms has been built and could easily expand.”
Disinterest and gridlock have thwarted action in Congress, according to Mr. Pollak.
Two bills now before the Senate include stipulations for electronic filing. The Taxpayer Protection Act of 2016 received a Senate markup on April 20 but has yet to see a vote on the floor.
Compared to past research, the new IRS data does suggest that electronic filing is becoming more routine. A 2013 study by the Aspen Institute’s Center for Philanthropy and Social Innovation estimated that only 41 percent of 990 forms were filed electronically in 2012.
Correction: This story has been changed to reflect the fact that the IRS data covered only standard 990 forms and not variations such as the 990-EZ, 990-N, or 990-PF. Also, the story has been updated to reflect the fact that the data covers more tax-exempt organizations than just charities.
