Preparers of Form 990 should take care not to disclose information which might compromise the safety or privacy of an individual.
In years past, the IRS asked exempt organizations to disclose the names and addresses of officers and directors. Most professional preparers sensitive to the privacy of their clients declined to use personal addresses, and instead listed the organization’s address for each officer, director or key employee. With the increase in identity theft today, the IRS no longer requests addresses for officers, directors and key employees. Instead, it simply asks (Part VI, Section A, Line 9) whether there are any officers, directors, or key employees that cannot be reached at the organization’s mailing address. If “yes,” the IRS asks that the person’s name and address be provided in Schedule O. It is hard to imagine a scenario where an organization would need to answer “yes” to that question.
Another common place where personally identifying information of individuals might be improperly disclosed is on Schedule O or Schedule I of Form 990 regarding grants, scholarships, or financial assistance paid to individuals. The IRS requires that grants and scholarship awards be disclosed on the Form 990. However, the phone numbers, addresses and social security numbers of the recipients do not have to be disclosed and should not be disclosed on Form 990 since it is a publicly available document.
An article in The Courier, a newspaper in Findlay, Ohio, reported in March 2016 an alarming story of a charitable organization printing hundreds of social security numbers of grant recipients on its Form 990 over a number of years. The Courier found that Associated Charities of Findlay disclosed the social security number of at least 1,000 charitable beneficiaries on its 2012 Form 990.
According to the article in the Courier:
Associated Charities, headquartered in the Family Center, 1800 N. Blanchard St., has helped needy individuals and families in Findlay and Hancock County for 102 years. It typically provides cash vouchers to pay for emergency shelter, utilities, clothing, repairs, medicine, and doctor or dental visits. Since its founding, Associated Charities has provided over $4 million in aid to over 100,000 individuals and families, it said.
If you did the math on that, you’d find it works out to an average donation of $40 per individual or family, or about $40,000 per year in total given away over the 102 years the charity has been in existence. So, we’re not talking about big donations. Nevertheless, someone made the decision to disclose the social security numbers of the needy individuals who received small amounts of cash assistance from Associated Charities, as though these poor folks don’t already have enough problems.
Instead of admitting their error and lack of judgment, and perhaps an ethical failure as well, both the organization and its CPA firm doubled down on their violations of privacy of thousands of individuals, asserting that they broke no laws, while promising that they will stop publishing social security numbers on future returns.
Rather than being a malicious act, this violation of privacy most likely resulted from a desire to comply with the IRS’s extensive documentation and disclosure requirements related to grant-making and scholarships. The IRS has devoted an entire schedule to the disclosure of recipients of grants, scholarships and other financial assistance. The instructions that come with Form 990 and Schedule I are lengthy. Nevertheless, the IRS makes it abundantly clear that names, addresses and social security numbers of individual recipients of assistance must not be disclosed on Form 990.
Form 990-EZ instructions indicate that grants only need be disclosed if a grant to a particular individual, family, or organization exceeds $5,000. Even then, personal identifying information such as names, addresses and social security numbers for individuals should not be disclosed.
Form 990 requires more extensive disclosures. All grants, scholarships and assistance to individuals must be disclosed if the total awards to all recipients exceed $5,000. Still, no personally identifying information should be disclosed with regard to individuals. Grants and scholarships and other financial assistance can be sub-totaled according to type of assistance.
Form 990-PF does not require that an individual recipient’s address be disclosed. Nor does it require that an individual recipient’s name be disclosed unless the recipient is a disqualified person with respect to the foundation making the donation, or has received assistance from the foundation totaling more than $1,000 during the year.
Before disclosing information on Form 990-EZ, Form 990, or Form 990-PF, be sure to read the form instructions carefully and when it comes to disclosing personal information, ask: Am I required to disclose this on the return? Is this sensitive information?