New Bill Mandates Public Disclosure of Donors for Nonprofits Receiving Federal Funds, Threatens Tax-Exempt Status

The "Putting Trust in Transparency Act" proposes a significant shift in how nonprofits operate if they receive any federal funding. This bill amends the Internal Revenue Code to require the IRS to publicly release the names, zip codes, and contribution amounts of all donors listed on Schedule B of Form 990 for any 501(c) organization that gets federal dollars. This disclosure must happen within 60 days of the IRS processing the form.

Opening the Books, But at What Cost?

The core idea, according to the bill's findings (Section 2), is that nonprofits using federal money are essentially acting on behalf of the government and should face similar fiscal scrutiny. The goal is transparency – letting the public see who funds these organizations. However, this comes with a major change: currently, while nonprofits report major donors to the IRS on Schedule B, that specific donor information isn't typically made public. This bill flips that switch for any group touching federal funds, no matter how small the amount.

What does this mean practically? Imagine a local food bank that gets a small federal grant to supplement its community donations. Under this act, all its major donors – even those whose money isn't directly tied to the federal grant – would have their names and contribution amounts posted online by the IRS. The same applies to advocacy groups, community centers, arts organizations, and any other 501(c) that receives federal assistance.

The Compliance Hammer: Lose Your Status

The bill doesn't just ask nicely. Section 3 amends the tax code (specifically Section 6033(j)) to automatically revoke the tax-exempt status of any organization receiving federal funds that fails to file the required Schedule B. The IRS would give a 60-day warning, but failure to comply after that means losing the 501(c) designation. Getting it back requires reapplying, though retroactive reinstatement is possible if the organization can show good cause for the initial failure.

This raises immediate concerns. For donors, the loss of anonymity could be a major deterrent. Knowing your name and donation amount will be public could lead individuals and foundations to redirect their giving, potentially harming organizations reliant on private support. Nonprofits themselves face the administrative burden of ensuring compliance and the potential financial hit if donations decline. While the bill aims for accountability, the public release of donor lists without safeguards raises privacy flags and questions about potential harassment or misuse of that information.