Article
Updated: April 24, 2026
Published: April 24, 2026
Deep Master
Tax Senior Manager
The U.S. Department of the Treasury has announced plans for the IRS to revise Form 990 to enhance transparency and strengthen oversight of tax-exempt organizations. The proposed changes focus on improving reporting around government funding and complex arrangements such as fiscal sponsorships.
For nonprofits, particularly organizations who are exempt under section 501(c)(3), this development signals heightened scrutiny and a shift toward clearer accountability in how funds are received, managed, and disclosed. Organizations should begin evaluating current reporting practices to ensure they are prepared for more detailed compliance expectations.
On April 23, 2026, the U.S. Department of the Treasury announced an initiative to revise Form 990, with the goal of increasing transparency and strengthening tax administration for tax-exempt organizations under section 501(c)(3).
These proposed changes are designed to provide clearer reporting on key areas such as government grants, contracts, and fiscal sponsorship arrangements, areas where large amounts of public and tax-advantaged funding are often involved. The initiative reflects a broader push to detect misconduct, reduce misuse of funds, and reinforce accountability across the nonprofit sector. While specific changes have not yet been finalized, the direction is clear, and organizations that delay preparation may face compressed timelines to adapt once new reporting expectations are implemented.
Government grants and contracts can involve significant public resources, making transparency in these areas a priority for regulators. The Treasury has emphasized that improved reporting will help both the IRS and the public better understand how nonprofit organizations receive and use funding.
Clearer disclosures are also expected to:
This reflects a growing expectation that nonprofits must provide greater visibility into their financial activities.
Federal leadership has reinforced that tax-exempt status carries responsibility. Organizations that benefit from public funding or tax-deductible contributions are expected to demonstrate transparency in both governance and financial management.
The message is clear: complex structures or unclear reporting will face increased scrutiny, particularly if they obscure how funds are controlled or used.
One of the key areas under review is fiscal sponsorship. While these arrangements are widely used and legitimate, concerns have been raised that they can sometimes make it difficult to determine:
Enhanced reporting requirements aim to bring greater clarity to these arrangements and reduce the risk of misuse or misrepresentation.
Treasury and the IRS are expected to issue proposed regulations that will include further guidance such as updated drafts of the Form 990 as well as updated form instructions, A period for public comment will follow before any changes are finalized. In developing the rules, regulators will consider factors such as administrative feasibility, proportionality, and reporting burden on organizations.
This means nonprofits still have time to prepare, but waiting until final rules are issued may increase compliance risk.
Even before formal changes take effect, organizations can take practical steps to prepare:
Taking these steps early can help organizations avoid disruption once new requirements are implemented.
The Treasury’s Form 990 transparency initiative represents a significant step toward increased oversight of nonprofit organizations. As reporting expectations evolve, nonprofits will need to demonstrate not only compliance, but also clear accountability in how they manage and disclose funds. Organizations that begin planning now will be better positioned to implement changes smoothly, while those that delay may face increased compliance risk, resource strain, and potential scrutiny once enhanced reporting requirements are in place.
The direction of regulatory oversight is clear: greater transparency, stronger accountability, and increased scrutiny of financial practices. This is not just a future compliance change-it is an early signal for nonprofits to strengthen transparency practices now. Nonprofits that proactively strengthen their reporting processes and internal controls will be better positioned to adapt to these changes and maintain stakeholder trust.
To learn how Han Group can support your organization in preparing for upcoming Form 990 changes and strengthening compliance and transparency: