The State of Nonprofit Transparency

Transparency is the bedrock of public trust in the nonprofit sector. Because nonprofits enjoy tax-exempt status — meaning they don't pay federal income tax — there is a social contract: in exchange for this benefit, organizations must disclose their finances to the public. The primary vehicle for this disclosure is IRS Form 990. But how well does this system actually work? The answer reveals a complex landscape of detailed disclosures, gaping loopholes, and a growing movement to bring sunlight to one of the largest sectors of the American economy.

What Is Form 990?

Form 990 is the annual information return that most tax-exempt organizations must file with the IRS. It's essentially a nonprofit's public tax return, and it contains a wealth of information:

• Revenue and expenses (Part VIII and Part IX)
• Assets and liabilities (Part X — Balance Sheet)
• Executive compensation (Part VII and Schedule J)
• Board members and key employees
• Program descriptions and accomplishments (Part III)
• Grants and contributions made (Schedule I)
• Related organizations (Schedule R)
• Political activities and lobbying (Schedule C)
• Foreign operations and grants (Schedule F)
• Land, buildings, and equipment details (Schedule D)

There are several versions, each with different levels of detail:

Form 990 (Full)

Required for organizations with gross receipts ≥$200,000 or total assets ≥$500,000. This is the gold standard of nonprofit disclosure — a 12-page core form with up to 16 supplemental schedules. A large hospital system's 990 can run to hundreds of pages. These filings provide the detailed financial data that makes meaningful analysis possible.

Form 990-EZ

Available for organizations with gross receipts <$200,000 and total assets <$500,000. This is a simplified four-page form. It provides basic revenue, expense, and asset information, but lacks the detailed schedules that make full 990s so informative. Executive compensation reporting is limited, and program accomplishments receive only brief treatment.

Form 990-N (e-Postcard)

For organizations with gross receipts ≤$50,000. This electronic filing contains almost nothing — just the organization's name, address, EIN, and a confirmation that it still exists. No financial data whatsoever. Yet this is what the majority of registered nonprofits file.

Form 990-PF (Private Foundations)

Required for all private foundations regardless of size. This is actually one of the most detailed filings in the nonprofit world — foundations must report every grant made, every investment held, and every expense incurred. The 5% minimum distribution requirement (discussed in our philanthropy article) makes this form particularly important for accountability.

Who Must File — and Who's Exempt

The filing requirements seem straightforward, but the exemptions create enormous gaps in public data:

Organizations Required to File

• 501(c)(3) public charities — the largest category, including most hospitals, universities, and social service organizations
• 501(c)(4) social welfare organizations — civic leagues and advocacy groups
• 501(c)(5) labor unions and agricultural organizations
• 501(c)(6) business leagues — trade associations, chambers of commerce
• 501(c)(7) social clubs
• Private foundations (Form 990-PF, regardless of size)
• Most other 501(c) subsections

Organizations Exempt from Filing

• Churches, synagogues, mosques, and integrated auxiliaries of churches — the single largest exemption
• Government-affiliated organizations
• Organizations included in group returns filed by a parent organization
• Certain religious orders and missions
• State institutions (public universities file differently)

The church exemption is by far the most consequential. It removes hundreds of thousands of organizations from public view entirely.

The Church Exemption Controversy

The most significant gap in nonprofit transparency involves religious organizations. Churches, synagogues, mosques, and other houses of worship are not required to file Form 990. This is a blanket exemption — regardless of size or revenue. A megachurch with $50 million in annual donations has the same filing obligation as a storefront church with $10,000: none.

With 199,983 religious organizations (NTEE X) in our database and $28.9 billion in reported revenue, the actual financial footprint of religious nonprofits is likely several times larger than what public data shows. The organizations that do appear in IRS data are those that voluntarily file or that are classified as religious nonprofits but aren't technically "churches" (such as religious publishers, broadcasters, or service organizations).

Arguments for the Exemption

• First Amendment protection: Government scrutiny of church finances could constitute excessive entanglement with religion
• Historical precedent: Churches have been exempt from taxation since the founding of the republic
• Congregational accountability: Members can hold their own church accountable through internal governance
• Administrative burden: Requiring 300,000+ small congregations to file would strain both IRS and church resources

Arguments Against the Exemption

• Abuse potential: Without mandatory disclosure, financial misconduct can go undetected for years or decades
• Megachurch scale: Organizations with budgets exceeding $50 million and staff of hundreds are not the "small congregations" the exemption was designed to protect
• Prosperity gospel concerns: Some televangelists and megachurch pastors live in extreme luxury funded by tax-exempt donations
• Equal treatment: A secular nonprofit running identical programs (food bank, homeless shelter) must file, while a church running the same programs need not
• IRS audit restrictions: The Church Audit Procedures Act (1984) imposes special requirements before the IRS can examine a church, making enforcement even harder

"The church exemption was designed for small congregations in an era before megachurches and televangelism. The landscape has changed, but the law hasn't." — Mark Owens, Tax Policy Center

What's Publicly Available vs. What's Hidden

For organizations that do file, the 990 provides remarkable transparency. Here's what you can learn:

Fully Public Information

• Total revenue broken down by source (contributions, program service revenue, investment income, etc.)
• Total expenses broken down by program, management, and fundraising
• Assets and liabilities — a complete balance sheet
• Compensation of officers, directors, trustees, key employees, and the five highest-compensated employees
• Names of all board members and key employees
• Grants made to other organizations (Schedule I)
• Program descriptions and accomplishments
• Political and lobbying activities
• Related organizations and transactions with interested persons

Information That's Redacted or Hidden

• Donor names and addresses on Schedule B (Contributor Information) — redacted from public copies for most organizations
• Trade secrets or proprietary information — rarely relevant, but organizations can request redaction
• Social Security numbers — always redacted
• Certain state-level supplemental filings that aren't included in the federal 990

The donor privacy protection on Schedule B is significant. While the IRS receives the names of major donors (those giving $5,000+ or 2% of total contributions), this information is not available to the public. This became a major legal issue in Americans for Prosperity Foundation v. Bonta (2021), where the Supreme Court struck down California's requirement that nonprofits disclose major donors to the state Attorney General.

State-Level Disclosure Laws

Federal 990 filings are just one layer of nonprofit transparency. States impose their own requirements, creating a complex patchwork:

Charitable Solicitation Registration

Approximately 41 states require nonprofits to register before soliciting donations from residents of that state. This means a national nonprofit may need to file separately with dozens of state agencies. Each state has its own forms, fees, and deadlines. The Unified Registration Statement (URS) was created to simplify this, but not all states accept it.

State Attorney General Oversight

State attorneys general serve as the primary regulator of nonprofits in most states. They can investigate complaints, audit organizations, and take enforcement action. However, capacity varies enormously:

• California: The Attorney General's Registry of Charitable Trusts requires annual filings and has an active enforcement division
• New York: The Charities Bureau reviews filings and has brought high-profile cases (including the dissolution of the Trump Foundation in 2018)
• Small states: Many have only one or two staff members overseeing thousands of nonprofits

Additional State Requirements

• Audited financial statements: Some states require independent audits for nonprofits above certain revenue thresholds
• Fundraiser registration: Professional fundraisers and fundraising consultants must register separately in most states
• Property tax exemptions: States and localities may require separate applications and ongoing reporting to maintain property tax exemptions

ProPublica's Role in Making Data Accessible

For decades, 990 data was technically "public" but practically inaccessible. The IRS would mail paper copies in response to requests, and organizations were required to provide copies on-site. For researchers and donors, accessing 990s at scale was nearly impossible.

This changed in 2013 when ProPublica launched its Nonprofit Explorer tool, making 990 data searchable online for the first time. The project was transformative:

• 2013: ProPublica begins digitizing and publishing 990 data
• 2016: After years of advocacy by ProPublica and others, the IRS begins releasing machine-readable 990 data (XML format) through Amazon Web Services
• 2017-present: The IRS releases bulk 990 data electronically, enabling platforms like GiveScope to build comprehensive databases

ProPublica's work demonstrated that nonprofit data had enormous public interest. Journalists used it to investigate executive compensation, hospital billing practices, foundation giving patterns, and political activity by tax-exempt organizations. The availability of bulk data spawned an ecosystem of nonprofit data platforms, including GuideStar (now Candid), Charity Navigator, and GiveScope.

"Before ProPublica, you essentially had to know which specific nonprofit you wanted to research and then request its specific filing. Now anyone can search, compare, and analyze across 1.9 million organizations." — Luke Rosiak, investigative journalist

IRS Enforcement Gaps

Having a transparency framework is meaningless without enforcement. And here, the picture is troubling. The IRS nonprofit enforcement apparatus has been systematically underfunded for decades:

The Numbers

• The IRS Tax Exempt and Government Entities (TE/GE) division oversees all 1.93 million nonprofits
• TE/GE staffing has been cut by approximately 30% since 2010
• The IRS conducts fewer than 3,000 examinations of exempt organizations per year — meaning any given nonprofit can expect to be examined roughly once every 640 years
• Automatic revocation (for failure to file for 3 consecutive years) is the primary enforcement tool — approximately 700,000 organizations have been revoked since the auto-revocation process began in 2010

What Falls Through the Cracks

• Self-dealing: Insiders using nonprofit resources for personal benefit is technically prohibited, but detection requires examination
• Excessive compensation: While 990s disclose executive pay, the IRS rarely challenges "reasonable compensation" determinations
• Private benefit and inurement: Nonprofits that primarily benefit insiders rather than the public can operate for years without scrutiny
• Political activity: 501(c)(3) organizations are prohibited from partisan political activity, but enforcement has been virtually non-existent since the IRS targeting controversy of 2013
• Sham charities: Organizations that exist primarily as tax shelters or vehicles for fraud can operate for years before detection

Dark Money and Donor-Advised Fund Transparency

Two of the most pressing transparency issues in the nonprofit sector involve the flow of money through organizations that obscure its origins or ultimate destination.

Dark Money in Politics

501(c)(4) "social welfare" organizations can engage in political activity (as long as it's not their primary purpose) without disclosing their donors. This has created a pathway for anonymous political spending:

• A wealthy individual donates to a 501(c)(4)
• The 501(c)(4) spends on political advertising or donates to super PACs
• The original donor's identity is never publicly disclosed

This "dark money" channel has channeled billions into U.S. elections. Organizations on both sides of the political spectrum use it. The Crossroads GPS network (conservative) and the Sixteen Thirty Fund (liberal) are prominent examples. While the 990 discloses the 501(c)(4)'s spending, it does not disclose who funded it.

Donor-Advised Fund Opacity

Donor-advised funds create a different transparency challenge. When a donor contributes to a DAF, the donation is reported as going to the DAF sponsor (e.g., Fidelity Charitable). When the DAF recommends a grant to an operating charity, the grant appears as coming from the DAF sponsor — not the original donor. This creates a "black box" effect:

• The receiving charity may not know who the original donor was
• The public cannot trace donations from source to destination
• DAF sponsors like Fidelity Charitable ($66.8B assets) and National Philanthropic Trust ($42.2B assets) hold enormous sums with no minimum distribution requirement
• Unlike private foundations, DAFs don't have to disclose individual grant recommendations on their 990s — only aggregate data

The result: over $200 billion sits in donor-advised funds, donors have already claimed their tax deductions, but there's no requirement or timeline for the money to reach operating charities. Some DAF accounts remain dormant for years or decades.

The Unclassified Problem

Another transparency challenge is the large number of unclassified organizations. In our data, 582,804 organizations fall into the "Unclassified" category (NTEE Z), generating $768 billion in revenue and holding $2.58 trillion in assets. These are organizations that haven't been properly categorized in the NTEE system, making it harder to analyze the sector accurately. When a quarter of all nonprofit revenue comes from organizations we can't even categorize, the transparency picture is incomplete by definition.

How Many Organizations Actually File?

Of the approximately 1,930,252 nonprofits in the United States, filing patterns vary significantly:

• Full Form 990: ~350,000 organizations — these provide detailed, analyzable data. Large organizations with substantial revenue — like the 45,164 health nonprofits generating $1.81 trillion — almost universally file full 990s.
• Form 990-EZ: ~250,000 organizations — basic but useful financial information
• Form 990-N: ~750,000+ organizations — essentially no data beyond confirmation of existence
• Exempt from filing: ~300,000+ churches plus government entities and certain other exempt organizations
• Form 990-PF: ~100,000+ private foundations — actually among the most detailed filings

This means roughly one-third of all registered nonprofits provide detailed financial information to the public. Another third provide minimal data. And the remaining third provide essentially nothing.

What Data Is Available for Those Who Do File

Thanks to efforts by the IRS, ProPublica, and organizations like ours, 990 data has become increasingly accessible. Platforms like GiveScope aggregate this data across all 62 states and territories and 29 NTEE categories tracked in our system.

For the organizations that do file full 990s, the data is remarkably rich. We can analyze revenue trends, asset growth, executive compensation, program spending, and more. The top organizations by revenue — from Kaiser Foundation Health Plan ($82.5B) to Cleveland Clinic ($17.2B) — provide detailed financial statements that rival public company disclosures.

Key analytical capabilities enabled by 990 data:

• Trend analysis: Comparing an organization's finances over multiple years
• Peer benchmarking: Comparing similar organizations by size, geography, or mission
• Compensation analysis: Evaluating executive pay relative to organizational size and category
• Efficiency metrics: Program spending ratios, fundraising efficiency, working capital
• Network mapping: Identifying related organizations, major grantees, and affiliated entities

Gaps That Remain

Despite improvements, significant gaps persist:

1. Timeliness: 990s can be filed up to 11 months after a fiscal year ends (5.5 months plus a 6-month extension). By the time data is digitized and publicly accessible, it can be 18-24 months old. Compare this to public companies, which report quarterly with 40-day deadlines.
2. Consistency: Unlike public companies with standardized financial reporting (GAAP + SEC rules), nonprofit 990s allow significant flexibility in how organizations report. Revenue classification, expense allocation, and program descriptions vary widely. This makes cross-organization comparison difficult.
3. Small organizations: The 990-N provides essentially no data. For the 750,000+ small nonprofits filing only e-Postcards, public insight into their finances is minimal.
4. Outcome data: 990s report financial information but not impact data. Knowing a food bank spent $10 million tells you nothing about how many people it fed or whether its programs are effective. There is no standardized outcome reporting framework for nonprofits.
5. Digital infrastructure: While the IRS now releases electronic data, the quality is uneven. OCR errors in scanned documents, inconsistent data entry, and format changes create challenges for data aggregators.

Recommendations for Donors

Given the current transparency landscape, here's how donors can make informed decisions:

1. Check the 990

Before making a significant donation, look up the organization on GiveScope, ProPublica Nonprofit Explorer, or Candid (GuideStar). Review revenue, expenses, executive compensation, and program descriptions. If a 990 isn't available, ask why.

2. Be Wary of Organizations That Don't Disclose

If an organization isn't required to file (like a church) or hasn't filed recently, it doesn't mean anything is wrong — but you should ask directly for financial statements. Legitimate organizations will provide them willingly.

3. Look Beyond the Overhead Ratio

As we discuss in our article on where donations go, the overhead ratio is a poor measure of effectiveness. Look at program descriptions, outcome claims, revenue trends, and executive compensation in context.

4. Check State Registrations

Verify that the organization is registered to solicit donations in your state. Many state charity registration databases are searchable online.

5. Be Cautious with DAF-Funded Organizations

If you donate through a donor-advised fund, remember that the receiving charity may not know who you are. If building a relationship with the organizations you support matters to you, consider giving directly — or at minimum, letting the charity know who recommended the grant.

6. Support Transparency Advocates

Organizations like ProPublica, the National Council of Nonprofits, and data platforms that make 990 information accessible are doing essential work. The infrastructure of nonprofit transparency doesn't maintain itself.

The Path Forward

Nonprofit transparency has improved dramatically over the past decade. Machine-readable data, free public access to 990s, and analytical platforms have made it easier than ever for donors, researchers, and journalists to examine how nonprofits operate. But closing the remaining gaps will require action on multiple fronts:

• Congress should consider requiring at least basic financial disclosure from large churches and religious organizations — perhaps those above $1 million in annual revenue
• The IRS needs adequate funding to process, digitize, and enforce 990 reporting requirements
• DAF reform — proposals to require minimum distributions from donor-advised funds or time limits on holding funds would improve the flow of charitable dollars
• Outcome reporting — developing standardized, voluntary outcome metrics could help donors evaluate effectiveness, not just finances
• Real-time data — moving from annual to quarterly or continuous reporting for the largest nonprofits would bring the sector closer to public company standards
• State harmonization — a unified state registration and reporting system would reduce burden on nonprofits and improve data consistency

The nonprofit sector manages $4.09 trillion in annual revenue and $10.5 trillion in assets — resources that belong, in a very real sense, to the public. Transparency isn't just nice to have. It's the mechanism by which the public can verify that this enormous social contract is being honored. The progress of the last decade is real and significant. The work that remains is equally important.