Treasury Announces Form 990 Transparency Initiative

What happened:
The U.S. Department of the Treasury announced that the IRS plans to revise Form 990 — the annual information return filed by tax-exempt organizations — to add new reporting requirements around government contracts, government grants, and fiscal sponsorship arrangements. Treasury Secretary Scott Bessent framed the announcement as ending what he called hiding of “fraud, abuse, and extremist activity behind complicated nonprofit arrangements.” Treasury and the IRS indicated they expect to publish proposed regulations and provide a public comment period before any changes are finalized.

What fiscal sponsorship is and why it is targeted:
Fiscal sponsorship is a legal structure through which a tax-exempt organization supports charitable projects — for example, providing a legal and financial home for a new nonprofit project before it obtains its own 501(c)(3) status. Recent congressional oversight has raised concerns that some arrangements may be used to obscure who controls funds and how they are used. The announcement does not allege fiscal sponsorship is inherently improper, but signals increased scrutiny is coming.

What nonprofits would face:
Organizations receiving federal funding, government grants, or operating fiscal sponsorship arrangements would face new reporting obligations. The IRS’s stated focus on “who controls the money and where it goes” means that unclear or under-documented arrangements will draw scrutiny. The core areas to review now are:

• All fiscal sponsorship agreements — roles, responsibilities, and financial controls should be explicitly documented.
• Government grants and contracts — ensure proper classification and reporting.
• Decision-making authority and financial oversight — documented clearly at the board level.
• If your organization uses fiscal sponsorship in any form, consult legal counsel before proposed regulations are published.

Where things stand:
No final rule has been issued. Proposed regulations and a public comment period are the next steps. Participating in the comment period is one of the most effective ways to shape the final rule. PANO will monitor developments and share updates, including comment period opportunities, as the rulemaking process moves forward.