IRS proposal would force nonprofits to disclose leaders' terrorism convictions

The Trump administration is exploring a significant change that would require nonprofit organizations to disclose convictions of their leaders for terrorism-related or financial crimes in their annual tax filings. Sources familiar with the matter revealed that this proposal is being weighed by the IRS.

If implemented, the disclosure requirement would be added to the Form 990, the standard annual tax return for nonprofits. Officials believe this measure would encourage tax-exempt groups to distance themselves from individuals with such criminal backgrounds and enable donors to make more informed decisions about their contributions. The types of convictions that could be subject to reporting include providing material support to terrorists, fraud, money laundering, securities fraud, tax evasion, and theft.

While the proposal would not mandate the identification of specific officers or directors convicted, it is expected to cover offenses within the past decade. This is one of at least two proposed revisions to the Form 990 currently under review by the Treasury Department and the IRS. Another proposal, announced earlier, focuses on new disclosure requirements for nonprofits receiving government funding.

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No one has a right to privacy of their criminal record. If your board members are convicted criminals, I am hard pressed to understand why you have a problem with that being publicized. You should have to explain why those people are on your board.

Supporters of the measure, like Tom Jones of the conservative American Accountability Foundation, argue that individuals with criminal records should not expect privacy and that nonprofits should explain why such individuals are on their boards. A Treasury Department spokesperson stated that the agency is considering various measures to enhance accountability for nonprofits and prevent the exploitation of tax-exempt status for illicit activities.

However, within the IRS, some officials have privately expressed reservations. Concerns have been raised regarding the agency's legal authority to handle such conviction information and its relevance to tax law enforcement. These officials reportedly view the proposal as a potential form of political targeting that could lead to legal challenges, including those based on free speech grounds. Professor Roger Colinvaux of Catholic University of America described the rule as "guilt by association," noting that federal law does not prohibit individuals with felony convictions from serving on nonprofit boards.

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This disclosure rule goes directly to guilt by association.