IRS Lifts the Curtain: New 990 Initiative Puts Nonprofit Funding in the Spotlight

On April 23, 2026, the Department of the Treasury posted a press release on its website titled “Treasury Announces Form 990 Transparency Initiative to Expose Hidden Funding and Strengthen Oversight.”

The press release states that the IRS intends to revise the Form 990 used by not-for-profit organizations. The stated intent of this revision is improving transparency, with an emphasis on government contracts, government grants, and fiscal sponsorship arrangements. Per the release, the changes are intended to detect misconduct and hold those responsible accountable.

Key Takeaways

• The Department of the Treasury posted a press release on April 23, 2026, stating the IRS intends to revise Form 990 reporting to increase transparency and strengthen oversight.
• The reporting revisions are expected to make it easier for the IRS and the public to track how money flows in and out of tax-exempt organizations and to confirm government funding is being used for its intended purpose.
• The current Form 990 does not require sponsors to disclose details about their fiscal sponsorship arrangements, and sponsored projects do not file their own Form 990. Consequently, the broad goal of these future revised 990 reporting requirements would be to increase transparency related to inter-group cash flow.
• Organizations affected should begin reviewing documentation, governance, and reporting processes so they are prepared when the Department of the Treasury and the IRS release the proposed regulations and invite public comments.

Government Contracts and Grants

Many nonprofits receive money from the government in the form of government contracts and grants. This funding can be significant and is sourced through taxpayer dollars. Under current Form 990 reporting requirements, it can be difficult for the IRS and the public to track how public money flows in and out of tax-exempt organizations. The reporting revisions are expected to focus on making sure government funding is being used for its intended purpose.

Fiscal Sponsorship Arrangements

Broadly speaking, a fiscal sponsorship is when an established nonprofit lends its tax-exempt status to another group or project that is not exempt from federal income tax. This group essentially operates under the nonprofit’s umbrella and can raise funds, carry out activities, and benefit from the sponsor’s tax-exempt status without being a registered nonprofit itself.

While fiscal sponsorships have a legitimate use, they do come with a transparency gap. The current Form 990 does not require sponsors to disclose details about these arrangements, and sponsored projects do not file their own Form 990. Consequently, the result has historically been a transparency “black hole” where it can be challenging to decipher who is running things and where the money goes. The broad goal of these future revised 990 reporting requirements would be to require more transparency related to inter-group cash flow and to strengthen oversight.

What Happens Next

According to the press release, the Department of the Treasury and the IRS plan to release proposed regulations and invite public comments before updating any Form 990 reporting requirements. No specific date as to when public comments will be requested has been announced at this time.

What Your Organization Should Do Now

If your nonprofit receives government contracts or grants or is involved in fiscal sponsorship arrangements, this is a good opportunity to review your current documentation, governance practices, and reporting processes so you are prepared when proposed rules are released.

With known changes on the horizon, it is vital to stay informed about future developments and reporting requirements.

Our Not-for-Profit team is closely monitoring this proposed revision. If you have questions about how to prepare for this change or other concerns about the challenges facing not-for-profit organizations, contact a member of the team below.