According to Reuters, nonprofits may soon face more reporting requirements as the IRS updates Form 990. There will likely be closer attention on fiscal sponsorships and donor transparency. 

Matthew Petroski, a tax partner at Armanino, said the changes are meant to make the use of charitable funds more transparent, but they could also create more paperwork for nonprofits. The main focus will probably be on fiscal sponsorships, where smaller projects use the tax-exempt status of a larger nonprofit. 

“For a lot of organizations, the fiscal sponsor arrangements have been great,” Petroski said, noting these arrangements often help new initiatives launch before obtaining their own 501(c)(3) status. However, lawmakers have expressed concerns about limited transparency in reporting sponsored projects on Form 990. 

Petroski pointed out that more disclosure rules could mean much more work for bigger sponsoring groups, especially community foundations that run many programs. “Ultimately, there’s a cost,” he said. 

The IRS might also take a closer look at foreign funding for U.S. nonprofits, as policymakers keep debating donor disclosure rules and concerns about political activity in charities. 

For now, Petroski suggests that organizations hold off on big changes until the new rules are announced. He recommends keeping good records and documentation, especially for those working with fiscal sponsorships. 

“Just be open and pay attention, and be ready,” Petroski said.