What potential Form 990 changes could mean to tax-exempt organizations
- Expanded Form 990 reporting requirements may be coming: The Treasury department has announced plans to revise Form 990 for the first time in nearly two decades, with an emphasis on improving transparency, strengthening tax administration and increasing oversight of tax-exempt organizations — especially 501(c)(3)s that receive government funding or participate in fiscal sponsorships.
- Government funding disclosures could become more detailed: Proposed changes may require nonprofits to report not only the receipt of government grants and contracts, but also how those funds are specifically used, adding a new layer of accountability and public transparency around governmental funding.
- Fiscal sponsorship arrangements may face greater scrutiny: Organizations involved in fiscal sponsorships could be required to disclose who operates sponsored projects, who controls the funds and how funding is used to address concerns about fraud, misuse of funds and activities outside an organization’s exempt purpose.
Tax-exempt organizations may soon face increased reporting requirements on their annual Form 990 filing. On April 23, 2026, the U.S. Department of the Treasury announced plans to revise the Form 990. This would be the first major change to the form in nearly 20 years. The release cited several objectives, including improved transparency, strengthened tax administration and clearer reporting on certain activities.
What organizations are most impacted by changes to Form 990
Organizations exempt from tax under Internal Revenue Code section 501(c)(3) would be the most impacted. Particularly those that:
- Receive government grants
- Have government contracts
- Participate in fiscal sponsorship arrangements
What’s prompting Form 990 changes?
Given the recent increased scrutiny around governmental funding (and ongoing scrutiny of tax-exempt organizations as a whole), it is no surprise that the reporting of governmental funding is on the list of revisions for Form 990.
Currently, government grants are reported separately from other types of contributions, gifts and grants on the Form 990 Statement of Revenue. Grants that exceed certain thresholds may also be reported on Form 990 Schedule B (which is submitted to the IRS but is not open for public inspection).
There is currently no requirement on Form 990 to show how specific governmental funds are spent. This is among the proposed changes to increase transparency and accountability related to governmental funding. It is worth noting that other government agencies require reporting on the use of government funds, such as the Office of Management and Budget’s Uniform Guidance rules.
What are the impacts on fiscal sponsorship arrangements?
Fiscal sponsorship arrangements are another area of concern noted by the Treasury Department. Tax-exempt organizations are often approached by individuals or groups who want to conduct a charitable activity but don’t have the means or long-term goals that warrant creating a new tax-exempt organization. Existing organizations may choose to sponsor these activities. While there are many well-intentioned individuals or groups seeking fiscal sponsorship arrangements (and well-intentioned tax-exempt organizations that agree to sponsor them), such arrangements can harbor fraud and abuse if the fiscal sponsor is not actively involved in the activity and the stewardship of the funds.
Further, tax-exempt organizations may find themselves in situations where their conduct falls outside the purposes for which they were granted tax-exempt status, leading to myriad issues for the organization itself. Currently, there is no required reporting for fiscal sponsorship arrangements on Form 990. Proposed reporting changes would require disclosure of who is operating the project, who controls the funds and how the funds are used.
No timeline was provided for these potential changes, but proposed regulations are expected to be published. A period for public comment will be available before the regulations are finalized.
How should tax-exempt organizations prepare for Form 990 changes?
Actions tax-exempt organizations can take to help ensure they are ready for these potential Form 990 revisions include:
- Review how government grants and contracts are tracked, so your organization can clearly demonstrate the source, purpose and use of public funds.
- Enhance internal reporting processes to support potential new disclosures on how specific government funds are spent and allocated across programs and activities.
- Evaluate fiscal sponsorship arrangements and maintain clear documentation identifying who operates sponsored projects, who controls project funds and how those funds are used.
- Confirm that organizational activities, funding practices and public disclosures are consistent with the organization’s exempt purpose and mission.
- Strengthen board oversight, internal controls and fund stewardship procedures to address heightened scrutiny around transparency, accountability and misuse of charitable assets.
- Assess whether current accounting and compliance systems can support the more detailed reporting requirements.
How Wipfli can help
At Wipfli, we help organizations manage the financial responsibilities that come with maintaining tax-exempt status. We will be actively monitoring these potential Form 990 changes and are happy to address any questions or concerns you have about the potential impact on your organization. Start a conversation.
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