Key Takeaways:
- Proposed Form 990 changes could require nonprofits to provide more detail on government funding and fiscal sponsorship arrangements.
- Treasury aims to improve oversight and identify potential misuse of charitable resources through enhanced reporting.
- Nonprofits should review governance, funding documentation, and reporting processes ahead of possible new requirements.
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The U.S. Department of the Treasury announced a major transparency initiative on April 23, 2026, that could lead to expanded reporting requirements for tax-exempt organizations.
While formal proposals have not yet been released, Treasury officials have indicated that future revisions to Form 990 may require nonprofits to provide more detailed information about certain funding arrangements and how funds are used. The stated goal is to increase transparency, improve oversight, and, ultimately, help the IRS identify potential misuse of charitable resources.
For nonprofit leaders, now is a good time to evaluate whether existing governance, documentation, and reporting processes are prepared for a more detailed reporting environment in the future.
Areas Likely to Receive Greater Attention
Treasury officials have identified two areas they believe warrant additional visibility:
Government Contracts and Grants
Future reporting requirements could require nonprofits to provide more detail about the public funding they receive and how funds are ultimately used.
Organizations that receive federal, state, or local government funding may want to review how grant expenditures, program costs, and supporting documentation are currently tracked and maintained.
Fiscal Sponsorship Arrangements
Under the new requirements, fiscal sponsorships may also face increased reporting requirements.
Treasury officials have suggested that nonprofits could also be asked to provide additional information about sponsored projects, including who controls the funds and how those funds are being used. Organizations involved in fiscal sponsorship arrangements should consider whether their agreements, governance structures, and documentation practices clearly support those relationships.
Why Treasury Is Pursuing These Changes
According to Treasury, the initiative is intended to support three primary objectives:
1. Increased Transparency
Treasury officials have emphasized that tax-exempt status doesn’t eliminate accountability. The initiative is designed to provide regulators and the public with greater visibility into how nonprofit organizations receive, manage, and deploy their funds.
2. Improved Detection of Misconduct
The announcement follows a recent whistleblower initiative focused on identifying the potential misuse of federal funds, self-dealing arrangements, and improper payments to insiders. Treasury believes more structured reporting could help identify these potential issues earlier.
3. More Efficient Oversight
The IRS is also looking to improve its ability to identify higher-risk filings through automated analysis. More detailed and standardized reporting could allow the agency to focus enforcement efforts where the risks appear greatest.
What Nonprofits Should Do Now
Although the proposed changes are still in the early stages, nonprofit organizations don’t need to wait for final regulations to begin preparing. Nonprofit leaders should proactively review their donor documentation supporting government grants and contracts, fiscal sponsorship agreements and oversight processes, governance and internal control practices, Form 990 reporting procedures, and policies related to transparency and financial accountability.
Organizations that take a proactive approach now may be better positioned to adapt if additional reporting requirements are ultimately adopted.
Looking Ahead
Treasury and the IRS are expected to release proposed regulations and open a public comment period before any changes become final. While the details remain uncertain, the direction is clear: regulators are seeking greater transparency into how nonprofits receive, manage, and report their funding. Organizations that strengthen governance, documentation, and reporting practices will likely be better prepared.
How MGO Can Help
As regulatory expectations evolve, nonprofits face increasing pressure to demonstrate transparency, accountability, and strong governance practices.
MGO’s Nonprofit Organizations team helps nonprofits assess Form 990 reporting obligations, strengthen governance frameworks, evaluate fiscal sponsorship arrangements, and improve documentation for grants and contracts. Our professionals support compliance, internal controls, and readiness efforts to help organizations adapt to evolving regulatory expectations. Contact us to learn more.