The U.S. Department of the Treasury announced a major Form 990 transparency initiative on April 23, 2026, aimed at increasing oversight and uncovering hidden funding in the nonprofit sector. The primary goals of the proposed revisions are to better detect fraud, abuse, misuse, and “extremist activity” by requiring more detailed disclosures from tax-exempt organizations.

Key Areas of Enhanced Reporting

The proposed revisions to Form 990 will focus on two specific areas Treasury officials say may currently be used to obscure financial activities:

  • Government Contracts and Grants: Organizations may be required to provide clearer reporting on the sources and specific uses of public funds; and
  • Fiscal Sponsorship Arrangements: New requirements may force nonprofits to identify sponsored projects directly, disclose who controls those funds, and how those funds are used.

Objectives of Enhanced Reporting

  • Public Accountability: Treasury Secretary Scott Bessent stated that “tax-exempt status is not immunity from scrutiny” and emphasized that directors and officers could face legal liability for misusing charitable structures.
  • Detection of Misconduct: The initiative follows a recent Whistleblower Alert calling for tips on the misuse of federal funds, self-dealing, and improper payments to insiders.
  • Resource Allocation: By generating “structured data,” the IRS aims to use automated analysis to identify high-risk filings more efficiently.

Next Steps for Nonprofits

Treasury and the IRS expect to publish formal proposed regulations and will open a public comment period before any proposed changes are finalized. In the meantime, nonprofit leaders should proactively review their donor documentation and governance relationships to prepare for increased transparency requirements.

Potential Timing of Implementation

While the IRS and Treasury Department have signaled that revisions to Form 990 are being considered, the proposed changes are not expected to take effect immediately. Before implementation, the revisions would still need to move through the formal regulatory and public comment process, which can take considerable time.

Even if the IRS moves unusually fast, the absolute earliest tax year that could be affected is Tax Year 2027 (filed in 2028). Based on historical IRS timelines for significant Form 990 updates, tax policy experts and nonprofit professionals may expect any major reporting changes to be phased in over the next several years.  This change is estimated to most likely be delayed until Tax Year 2028 or later to give organizations adequate time to adapt.  However, organizations should continue monitoring developments closely, as additional guidance and draft reporting requirements could begin emerging throughout 2026 and 2027.

An Opportunity to Prepare Ahead

Although the final scope and timing of the changes remain uncertain, this is an important opportunity for nonprofit organizations to proactively strengthen their internal processes and documentation practices now.

Organizations that begin evaluating recordkeeping procedures, grant tracking, governance reporting, internal controls, and compliance workflows today may be better positioned to adapt smoothly once new reporting requirements are finalized. Taking steps early can also help reduce future administrative burden, improve transparency, and strengthen overall operational readiness in an increasingly compliance-focused environment.

Rather than waiting for formal implementation, nonprofit leaders may benefit from treating this period as a chance to assess where processes can be improved and where additional structure or oversight may be needed moving forward.