Foundations normally take a 6-month grace period to file their annual PF-990 tax form. Then there’s the possibility of filing extensions. So information about foundations can take two years in a normal year to be uploaded to the places that we normally find them, in free services like ProPublica’s Nonprofit Explorer, impala, and the Internal Revenue Service’s own website as well as fee-based services like Guidestar/Candid.
And by a “normal year” I mean prior to 2009. Because since 2009, things have rapidly gone downhill at the IRS. From 2009 through 2020, budget cuts resulted in a 36% reduction in the number of revenue agents, a 44% reduction in the number of revenue officers, and a 25% reduction in the number of special agents at the IRS.
Post 2020, things got even worse: Andrea Suozzo reporting for ProPublica wrote in December:
In a letter to Congress in June, the Treasury Department pointed to historic staffing shortages: “The IRS has been stretched thin at a time when its workforce, already depleted to 1970s levels, has been battling personal and familial health challenges posed by the pandemic.”
If that’s not bad enough, the 2023 report from the IRS outlined that 60% of the IRS employees plan on retiring in the next six years.
Last week former IRS Commissioner John Koskinen commented in a podcast with Government Executive that only 17% of people calling into the IRS last year with a question actually made contact with a person on the other end of the phone. Less than 1 in 5 people with questions got through to the IRS! Yikes. And they don’t anticipate that 2023 success rates for calls will be much higher.
Now, none of us probably think of the IRS as a cuddly organization, but on an institutional level it’s a critical resource for nonprofits needing to get reliable information about potential funders. And for donors wanting to get information about nonprofits. More on that in a minute.
It turns out that because of this funding/staffing shortfall, the IRS is w-a-y behind on uploading 990s to their website. ProPublica reports that the slowdown at the IRS started two years ago, and it is behind on releasing nearly half a million 990s.
What does this mean for the services that rely on the IRS uploading data in a timely manner? Impala’s co-founder and CEO Shahar Brukner says this:
The entire sector is affected by this issue, but importantly, nonprofits end up carrying the heaviest burden because it directly affects their ability to fundraise effectively. On top of this, it also means that funders end up asking nonprofits for significantly more information during the due diligence process – information that could have been easily found if their most recent 990 was made available by the IRS. While work-arounds do exist (for example, nonprofits send funders a more recent 990 or update their impala profile), this isn’t a scalable solution. The simple fact is that until this issue is resolved, hundreds of thousands nonprofits and foundations will continue to go without basic information they need and rely on on a daily basis.”
It’s not just an issue of nonprofits researching prospective funders, either.
In a recent keynote address at the Nonprofit PRO conference, Vanguard Charitable’s Research & Strategy Group manager Vicky Kelberer mentioned that the back-end information that donor advised fund (DAF) sponsors like Vanguard, Fidelity, and the Boston Foundation rely on to help guide their DAF donor clients is sourced directly from this IRS data through Candid.
If the available data on the nonprofit you work for is two years old it’s not helping potential DAF donors find and support your nonprofit, either.
This worries the National Association of State Charity Officials for other reasons. In their open Get-A-Move-On letter to the IRS in November of last year, NASCO wrote:
“For charity regulators, the Form 990 series not only helps ensure transparency and accountability, but also provides vital information for state investigations into potential fraud and misuse of charitable resources. It is critical that the availability of that data be timely.”
And there’s more.
Timely access to 990 information can be key to solving huge current issues that we face together as a nation. An absolutely fascinating article by the Stanford Social Innovation Review detailed really interesting ways that researchers are using open 990 data to solve real world problems. For example: Russell James, Director of Graduate Studies in Charitable Planning at Texas Tech University used open 990 data to discover that when nonprofits encourage donors to give noncash gifts as well as cash donations, contributions to those organizations increase over time.
But bringing it back to the practical:
How might nonprofits workaround this issue for now?
If you’re researching foundations for funding, you should always go directly to the foundation’s website to see if they’ve posted updates on their giving or funding priorities.
Also check free resources like impala that crowd-source data directly from nonprofits, grant-making foundations, and community foundations (as well as pulling in 990 data direct from the IRS), so you may find up-to-the-minute information on the foundation you’re searching there.
And if you want to help DAF sponsors and donors find your nonprofit, it pays to keep your website up to date and, like Vicky Kelberer says, build and foster personal relationships with local community foundations so they know who you are and what your nonprofit does for your community or region.
FOR MORE INFORMATION:
GovExec Daily podcast, January 19, 2023: “The IRS Has More Things to Do and Less Staff to Do Them.” Interview with Former Commissioner of Internal Revenue John Koskinen. https://www.govexec.com/workforce/2023/01/irs-has-more-things-do-and-less-staff-do-them/381927/
National Association of State Charity Officials update, November 29, 2022: “NASCO submits comments to the IRS regarding Tax-Exempt Organization Forms”. https://www.nasconet.org/2022/11/nasco-submits-comments-to-the-irs-regarding-tax-exempt-organization-forms/
NonprofitPRO, December 6, 2022: “6 Steps to Establishing a Donor-Advised Fund Strategy” by Gabby Houck and Jessie Farrigan. https://www.nonprofitpro.com/article/6-steps-to-establishing-a-donor-advised-fund-strategy/
ProPublica article, December 22, 2022: “The IRS Hasn’t Released Nearly Half a Million Nonprofit Tax Records” by Andrea Suozzo. https://www.propublica.org/article/irs-hasnt-released-nearly-half-million-nonprofit-tax-records
Wiley Online Library: “Cash is not king for fund-raising: Gifts of noncash assets predict current and future contributions growth” by Russell N. James III. First published: August 20, 2018. https://onlinelibrary.wiley.com/doi/10.1002/nml.21334
Stanford Social Innovation Review, Sep. 8, 2022: “Unlocking the Potential of Open 990 Data” by Cinthia Schuman Ottinger & Jeff Williams. https://ssir.org/articles/entry/unlocking_the_potential_of_open_990_data#
 (Robert A. Warren and Timothy J. Fogarty, “More Tax Cops Are Needed to Close the Tax Gap,” Tax Notes Federal, vol. 172, pp. 1763-1770, 2021
 Full disclosure, I’m on the development advisory committee for impala. I receive no compensation from impala. I just think it’s a cool tool.