For private foundations and most public charities, filing an accurate and complete annual
information return with the IRS is a legal requirement. Those returns serve as a primary source
of information about their finances, governance, operations and programs for federal regulators, the public and many state charity officials. Beyond this basic requirement, charitable organizations can demonstrate their commitment to accountability and transparency by offering additional information about what they do and how they operate.

A good first step is to provide an annual report that lists the organization’s board and staff members, describes its mission, shares information on program activities, and details financial information including, at a minimum, its total income, expenses and ending net assets. Such reports need not be elaborate, can be produced in paper or electronic form, and can direct the reader to other readily available documents (such as the Form 990 return or audited financial statements) for further information. If an organization chooses to produce such reports on a less frequent basis, such as every two or three years, it should ensure that any intervening changes in its board and staff or programs and its current financial statements are provided as an attachment or are otherwise made known to readers of the report.

• Transparency is essential to earn the public’s trust.

• The board should understand what must be public information, what should be shared with the public, and what must be guarded as confidential information.

• Posting the IRS Form 990 on the Internet is the easiest way to meet the IRS public availability requirement.
  

• A professional, clear, accurate website promotes transparency and can act as a central repository for organizational information.

• IRS Forms 990 and 990-T from the last three years must be available to anyone who asks for them.

• IRS Form 1023, the application form for tax exemption for charities, is also a public document.

• If the organization is a “covered entity” under the Health Insurance Portability and Accountability Act (HIPAA) rules, it needs guidelines for handling confidential documents.

• IRS Form 990 inquires about the process of making governing documents available to the public.

Federal law requires many public charities, including all supporting organizations,¹ and all private foundations to file an annual information return (Form 990, 990-EZ, or 990-PF) with the Internal Revenue Service that provides accurate information about its finances and programs. The IRS may impose penalties on any organization that fails to file timely and accurate returns, and failure to file for three consecutive years will result in revocation of tax-exempt status. Charitable organizations are required to make these forms,² as well as their initial application for recognition of tax exemption, correspondence with the IRS in connection with that application, available for free inspection during regular business hours at its principal, regional, and district offices.³ Copies of these documents must also be provided without charge, other than a reasonable fee for reproduction and postage costs, to any individual who submits such a request in person or in writing. 

A tax-exempt organization may meet the public inspection requirement by posting those documents on a widely available internet site maintained by the organization or as part of an online database maintained by another organization that contains similar documents of tax-exempt organizations.  In either case, the internet site must clearly inform visitors that the documents are available and provide instructions for downloading hem. Any individual with access to the internet must be able to download, view, and print the document without having to pay a fee or acquire special computer hardware or software, other than software that is readily available free of charge. 

Beginning in 2008, each public charity that is not otherwise required to file 990 or 990-EZ ⁴ will be required to file an annual notice electronically with the IRS that indicates its legal name; mailing address; web site address; taxpayer identification number; name and address of a principal officer; evidence of the continuing basis for the organization’s exemption from filing Form 990; and, upon termination, notice of that termination. There are no monetary penalties for failure to file the notice, but failure to file the annual notice for three consecutive years will result in revocation of tax-exempt status.

¹ Religious congregations and specific related institutions, specified governmental instrumentalities, and other organizations relieved of this requirement by authority of the IRS, are excluded from this requirement. Public charities (other than supporting organizations) with annual gross receipts of $25,000 or less are relieved of this requirement until 2008.

² Each annual information return must be made available for a period of three years beginning on the date the return is required to be filed or is actually filed, whichever is later. For tax years beginning after August 17, 2006, the requirement that charitable organizations make their annual IRS returns available for public inspection also includes the requirement to disclose the Form 990-T (report of unrelated business income).

³ IRC § 6104. Organizations that received tax exemption prior to 1987 are not required to make their initial application for tax-exemption available if they do not have a copy of the application.

⁴ Other than houses of worship and specific related institutions, specified governmental instrumentalities, and other organizations relieved of this requirement by authority of the IRS.

1. Have we established procedures to make sure our staff complies with the legal requirements for making certain IRS documents available to the public?
2. Are there other organizational and governance documents that we want to make available to the public as a matter of transparency? 
3. What are some of the benefits of becoming more transparent and sharing organizational outcomes? 
4. Has our organization made a “commitment” to be transparent? Have we identified other organizations that could serve as a model for us? 
5. What steps can we take to optimize our website as a way to communicate and provide information with the public about our organization? What other methods of communication are we using or should we consider? 
6. Traditionally, organizations have used an annual report to share important information. Have we considered all the options to assess what is the most cost-effective and useful way to share information with the public?

1  Laws and Regulations

3  Conflicts of Interest

19 Review of Mission and Goals

27 Accuracy and Truthfulness of Fundraising Materials