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Tuesday, August 20, 2019

New E-Filing Requirement Is A Major Win For Nonprofit Sector


The Taxpayer First Act of 2019, which was signed into law on July 1, 2019, will require all tax-exempt organizations required to file a Form 990-series return to e-file their return. This rule goes into effect with calendar year 2020 form filings; organizations with fiscal years beginning after July 2nd, 2019, will be required to file electronically with their 2020 returns, which would be for fiscal year ending 2021 for those organizations.

Here’s why this is a big win for the nonprofit sector…

This new law continues a trend of nonprofit data becoming more open and available for public consumption and analysis. When Charity Navigator first launched in 2002, our analyst team reached out to each of the 1500 charities we initially rated to ask them for a paper copy of their tax form, which we then copied by hand into our database. This process was later improved by the IRS making image files of the 990 available to the public in bulk, which meant we could ditch the filing cabinets full of 990s; however, we still had to enter the numbers into our database manually. The lack of machine-readable data made any large-scale analysis of the nonprofit sector much, much more difficult, as there simply was no easy way to analyze a large quantity of data at once.

The IRS took a major step forward in 2016 when it began releasing electronic data via Amazon Web Services’ Public Datasets Program. For the first time, machine-readable data was available to anyone who wanted it. Through the efforts of a consortium of nonprofits and researchers called the Nonprofit Open Data Collective, this dataset is now more easily processed and searched. And, the group continues to find new and better ways to surface and analyze 990 data so that researchers, academics, and organizations like Charity Navigator can continue to learn more about the nonprofit sector.

However, until now, the AWS public data only covered electronically filed 990s; organizations whose 990s were filed by paper mail were not captured in the data set and remained unreadable by machines. This limited the ability to draw conclusions on the nonprofit sector as a whole, as a large chunk of data representing thousands of nonprofits was not included in any analysis done using the AWS dataset.

The new law requiring electronic filing of the Form 990 rectifies this. For the first time, we will have the ability to parse and analyze the entirety of the 990-filing portion of the nonprofit sector. Researchers and analysts will have a massive trove of data to work with and will be able to look at sector characteristics and trends that were impossible to parse just a few years ago. Meanwhile, more granular analysis (such as the ratings we do at Charity Navigator) will become more efficient, and we will be able to incorporate more and better data into our rating methodology than ever before. 


Written by Kevin Doyle, Senior Program Analyst at Charity Navigator. Kevin helps manage the team responsible for reading and evaluating charity tax forms, so really he’s just looking out for their sanity when advocating for more interesting 990 content.

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