IRS to Revise Nonprofit Tax Returns

The US Treasury and Internal Revenue Service plan to revise Form 990, the tax return filed by nonprofit organizations. Organizations that receive public funds or tax-deductible donations must already show who controls the money and where it is used, but the new changes will focus on making an organization’s use of funds from government contracts, government grants, and fiscal sponsorships more transparent.

In its April 23, 2026, press release, the Department of the Treasury stated, “Government grants and contracts can involve substantial public funds. Clearer reporting in these areas can help the IRS and the public better understand the sources and uses of that funding, support proper revenue classification, and reduce the risk of fraud, abuse, and misuse of taxpayer dollars.”

Because government contracts and grants involve substantial use of public funds, some in Congress have expressed concern about waste, abuse, and personal enrichment in nonprofits receiving these funds. Fiscal sponsorships allow nonprofit organizations to support charitable projects and initiatives but also allow an organization to obscure who is actually operating a project, who controls the funds, and how the funds are used, also of concern to Congress.

The key reasons for the Form 990 revisions include:

• Increased transparency: The revised form will closely scrutinize funding sources with the goal of revealing sources that some organizations may be currently hiding.
• Improved oversight: The new form will give the government additional tools for oversight of nonprofits, making these organizations more accountable for how they use public funds.
• Revealing misuse of funds: Reporting will be more rigorous for organizations receiving government grants, contracts, and fiscal sponsorship arrangements with the aim of detecting fraud and abuse.
• Foreign and dark money concerns: The form revisions will address concerns over hidden foreign donors and foreign governments using US nonprofits to fund political or “extremist” activity.

Along with the revisions to Form 990, the IRS also plans to increase the use of AI in audits to analyze inconsistencies in filings. The more detailed reporting will make inconsistencies easier to find.

Major revisions to Form 990 were made in 2008, expanding the nine-page form to a densely packed 12 pages with 16 associated schedules. The Treasury and IRS expect to publish proposed regulations and provide an opportunity for public comment before any of the new changes to the form are finalized. We don’t have a timeline or any specific information about what changes to expect yet, but we are monitoring developments closely and will let you know once the proposed regulations are released. In the meantime, contact one of our tax professionals if you have any questions.