The U.S. Department of the Treasury  announced that the IRS plans to revise Form 990, the annual information return filed by most tax-exempt organizations, with the goal of improving transparency, strengthening oversight, and enhancing accountability within the nonprofit sector.

While Form 990 has long included governance-related disclosures, Treasury officials indicated that current reporting does not always clearly show who controls funds, who makes key decisions, and how oversight is exercised, particularly in organizations with complex structures or multiple related entities.

Emphasis on governance and oversight

Treasury’s announcement reinforces a broader shift toward viewing tax-exempt status through the lens of demonstrable accountability, particularly where public funding or tax-advantaged contributions are involved. Rather than introducing entirely new concepts, the anticipated revisions signal a move toward greater clarity in how organizations report governance, control, and oversight in practice.

Areas expected to receive greater scrutiny

The announcement highlighted several areas where governance and transparency concerns most often arise, including fiscal sponsorship arrangements, government grants and contracts, and the flow of funds through related organizations or sponsored projects.

In these structures, regulators are increasingly focused on whether boards and officers can clearly demonstrate where decision-making authority resides, how funds are controlled, and how oversight is exercised in practice.

Treasury officials noted that enhanced transparency may lead to increased scrutiny of directors and officers. This underscores the importance of active board oversight, well-documented governance policies, and consistency between how an organization operates and what it reports on Form 990.

The IRS expects to issue proposed regulations and solicit public comment before finalizing any revisions.  “Treasury and the IRS will consider administrative feasibility, proportionality, and reporting burden as the proposal is developed,” the announcement states.

Recent legislative developments

Since Treasury’s announcement, the House Ways and Means Committee has advanced several tax-exempt organization proposals that would increase reporting and disclosure requirements in certain areas, including fiscal sponsorship arrangements and foreign contribution reporting. While these proposals have not been enacted, they reflect a broader policy trend toward increased transparency, accountability, and oversight within the exempt organization sector. Together with Treasury’s planned Form 990 revisions, these developments suggest organizations should continue monitoring governance, documentation, and reporting practices as the legislative and regulatory landscape evolves.

What does CohnReznick think?

Even before final rules are issued, early signals suggest organizations should consider a targeted governance “readiness” review, particularly in areas tied to oversight, control, and transparency:

• Governance: Clear board roles, documented approvals, active oversight
• Control of funds: Defined authority, visibility across entities, alignment of structure and operations
• Documentation: Substantive minutes, key policies, support for major transactions
• Form 990: Disclosures align with actual practices; clarity on related entities
• Focus areas: Fiscal sponsorships, government funding, multi-entity structures

Contact Paul Ballasy or Rebecca Lyman (TANGO Partner Representatives from CohnRenzick) if you would like assistance with this readiness review