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May 25, 2016

Regulators Say Limiting Donor ID Could Hit Anti-Fraud Work

State authorities charged with ferreting out nonprofit fraud are concerned their efforts could be hamstrung by legislation now before Congress that would lift the requirement that tax-exempt groups disclose major donors to the Internal Revenue Service, Reuters writes.

The Republican-backed measure cleared the House Ways and Means Committee in April and is awaiting a full House vote. It would overturn a rule that nonprofits list $5,000-plus contributors on Schedule B of their Form 990 filings. The data is supposed to remain private, but backers of the bill cite instances in which it has been released, which they say exposes donors who give to political and social causes to intimidation.

Regulators say they sometimes seek Schedule B information from nonprofits to help investigators spot conflicts of interest and suspicious financial transactions. "It's important forensic data to us state regulators," said Hugh Jones, a deputy attorney general in Hawaii. "It's evidence we can consider using in an investigation to determine whether a charity's board has breached its fiduciary duty."