News and analysis
April 11, 2013

White House Seeks to Force Charities to File Tax Forms Electronically

President Obama is asking Congress to require nonprofits to file their informational tax returns electronically and taking other steps to encourage the Internal Revenue Service to make charity data more easily available to the public.

In his budget proposal for fiscal 2014, which starts October 1, Mr. Obama urged Congress to phase in a requirement that would force all charities to file their returns electronically within the next three years.

Currently, federal law requires only tax-exempt organizations that have assets of $10-million or more during a calendar year (and that file at least 250 other documents with the IRS, such as wage documents for employees) to file their tax returns electronically. Very few meet that requirement, but the number that voluntarily file is relatively high. Some 683,157 groups of the nearly 1.3 million tax-exempt groups filed their returns electronically in 2012.

Mr. Obama also asked the IRS to release data on all tax-exempt groups in a timely manner and using a format that is easy for computers to read.

The IRS took the first step last week to show it is already taking steps to make data more available by releasing big chunks of data from tax forms filed in 2012 in a way that makes it easy for anyone to put it in a spreadsheet or database.

Saving Government Money

Nonprofit research groups applauded the president’s move.

“The White House has been a big proponent of open data in areas like health, energy, and education, so it’s great to see that nonprofits are up there and that nonprofit data is being treated in the same way,” says Cinthia Schuman Ottinger, deputy director for philanthropy programs at the Aspen Institute, and head of its Nonprofit Data Project. 

 Mr. Obama’s electronic filing proposal is designed not just to make information more readily available to potential donors, regulators, the press, and others who have a stake in nonprofit finances but also to reduce the costs to the federal government of handling nonprofit returns.

The administration said it would endorse a transition period of three years for small groups and those that would find making an earlier deadline an undue hardship.

Ms. Schuman Ottinger said she was not sure whether the proposal would be enacted by Congress, but she urged nonprofits to back the mandatory electronic-filing rule.

“This is a president who has made open data a priority. Now I hope that the nonprofit sector gets behind it.”

Not all nonprofits are eager to do that until they hear more details about how the requirement will  be administered.

Jennifer Chandler, vice president and director of network support and knowledge sharing, at the National Council of Nonprofits, said her organization supported the Obama administration's interest in promoting transparency.

"But we are also concerned about the practical aspect of whether every charitable nonprofit that has a requirement to file a 990 or 990-N can do so electronically. There are still parts of our country where there is still not reliable broadband Internet.”

Send an e-mail to Sarah Frostenson.