IRS proposal would force nonprofits to disclose fraud or terrorism convictions of leaders
IRS Weighs Mandate Requiring Nonprofits to Report Leaders' Criminal Convictions
Wertynews.com – According to sources with direct knowledge of internal deliberations, the Trump administration is considering a rule that would compel tax-exempt organizations to report, on their yearly tax returns, whether senior officers have been found guilty of specific financial crimes or terrorism-related offenses. The sources, who requested anonymity because they lacked authorization to speak publicly, told CBS News the requirement would be embedded in Form 990, the annual filing every nonprofit submits to the Internal Revenue Service.
Scope of Required Disclosures
The convictions subject to reporting would span a defined set of offenses: providing material support to terrorists, fraud, money laundering, securities fraud, tax evasion, theft, and civil judgments arising from enforcement actions brought by the Securities and Exchange Commission or state securities regulators. The proposal, sources indicated, would reach back only ten years from the filing date. Officials have not finalized any language, and this measure represents one of at least two revisions to Form 990 currently circulating through the Treasury Department and the IRS. A separate proposal, announced in April, would impose additional disclosure obligations on nonprofits that receive government funding.
Notably, the rule would not require organizations to name the specific officer, director, or trustee who carried the conviction. Federal law does not bar individuals with felony records from serving on a nonprofit board.
Stated Rationale and External Reactions
Government officials framed the initiative as a mechanism to pressure tax-exempt groups into distancing themselves from leaders with such records, while giving donors the information needed to direct their contributions wisely, the sources explained.
"No one has a right to privacy of their criminal record," said Tom Jones, an ally of President Trump who leads the conservative American Accountability Foundation nonprofit. "If your board members are convicted criminals, I am hard pressed to understand why you have a problem with that being publicized. You should have to explain why those people are on your board."
A Treasury Department spokesperson characterized the agency's work as considering "a range of measures to strengthen accountability for nonprofit organizations" and affirmed that the department "will continue to follow the money to ensure tax-exempt status is not exploited to facilitate illicit activity."
Internal IRS Skepticism
Multiple sources familiar with internal conversations reported that some IRS officials have privately questioned the conviction-related proposal. Their concerns centered on what the agency could lawfully do with the collected information, how the measure connects to actual tax-law enforcement, and whether it functions as a form of political targeting likely to invite legal challenges, including arguments grounded in free speech protections.
"This disclosure rule goes directly to guilt by association," said Roger Colinvaux, a law professor at the Catholic University of America and former counsel to the nonpartisan Joint Committee on Taxation in Congress. "There's no federal law that says a nonprofit cannot have a convicted felon on their board. It could just create a stigma and chill association. This would reach deeply into American civil society."
Enforcement Mechanics and Broader Context
One source with direct knowledge of the proposal drew an analogy to the material disclosures publicly traded companies must furnish so that investors can make informed decisions. The same source noted the proposal could accelerate IRS efforts to suspend or revoke tax-exempt status when nonprofits fail to report leaders' convictions. Because the officials who sign Form 990 must attest to its accuracy under penalty of perjury, verifying whether board members have undisclosed criminal records would be a comparatively straightforward task for the agency, the source added.
The disclosure initiative unfolds against a wider backdrop of administration actions aimed at left-leaning nonprofits. President Trump signed a national security memorandum last year directing the IRS to refer groups believed to be financing "domestic terrorism" to the Justice Department. In March, CBS News first reported that the FBI and IRS Criminal Investigation had joined forces to establish a "command post" charged with investigating possible links between nonprofits and terrorism. That followed a directive from then-Attorney General Pam Bondi late last year for law enforcement action.
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