The Form 990 has long served as a critical tool for transparency in the nonprofit sector, providing donors, regulators, and the public insight into tax-exempt organizations.
On April 23, 2026, the U.S. Department of the Treasury announced a new initiative to redesign Form 990. This redesign aims to improve transparency, strengthen tax administration, and provide clearer reporting on fiscal sponsorship arrangements and the use of government funds.
These updates are part of broader efforts to ensure accountability, reduce misuse of federal grants, and clarify reporting for Section 501(c)(3) organizations.
Why Treasury Updated Form 990
Treasury identified the need to:
- Enhance visibility into government-funded activities
- Clarify fiscal sponsorship arrangements
- Detect misuse of federal funds and prevent fraud
- Improve the quality of reporting for public oversight
Recent initiatives include Treasury investigations into organizations receiving government funding, IRS whistleblower reporting tools, and additional guidance on political activity and compliance with the Johnson Amendment.
Historical Context
The last major overhaul of Form 990 occurred in 2008, incorporating statements into schedules and providing narrative explanations of activities, political engagement, and related entities. The redesign improved transparency and compliance while minimizing filing burdens.
Potential Changes in the 2026 Redesign
Treasury has not released a draft yet, but expected updates may include:
- Enhanced revenue classification on Part VIII to clarify funding sources
- Expanded reporting on Part III regarding the use of public funds
- Detailed disclosure of fiscal sponsorship arrangements
- Separation of government grants versus contracts in Schedule A
- Clarification of instructions across Part IV and Part V
Legislative Considerations
Certain proposals, such as restricting fiscal sponsorships or requiring disclosure of foreign contributions, would likely require Congressional action. These changes could impact organizations receiving substantial government funds or operating sponsored projects.
Recommended Actions for Tax-Exempt Organizations
Nonprofits should proactively prepare by:
- Creating clear contracts and policies for fiscal sponsorships
- Distinguishing grants from contracts for reporting purposes
- Documenting the use and oversight of all government funds
- Updating governance policies to enhance accountability
- Maintaining precise program descriptions and fund allocations
The Treasury’s proposed Form 990 redesign underscores the ongoing focus on transparency and accountability for tax-exempt organizations.
Nonprofits with government funding, complex programs, or fiscal sponsorships should anticipate enhanced reporting requirements.
By proactively implementing policies and documentation practices, organizations can ensure compliance, improve oversight, and maintain public trust in the coming updates.
