The IRS is having trouble regulating small nonprofits, but new open data releases could help

In the 2010s, governments from the federal to local levels made great strides in embracing open data and transparency. Now it’s time for nonprofits, many of which are funded with taxpayer dollars, to do the same.

Last week, in accordance with a January 2015 court ruling, the IRS began electronically publishing nonprofit tax forms, called Form 990s, through Amazon Web Services‘ Public Data Sets function.  The data releases include 990s filed by small nonprofits (990-EZs) and those filed by private foundations (990-PFs) — documents that include data on fundraising expenses, executive pay and more.

That information was previously available in PDF form, but these releases have been published “in bulk and in a machine-friendly format,” according to Chronicle of Philanthropy.

“This is a huge victory for the IRS,” open government advocate Carl Malamud told the Sunlight Foundation. “The service stepped up to the plate and has squarely faced the issue of privacy breaches in public nonprofit returns and are now releasing machine-processable XML data for those returns.”

The IRS’s move to publish tax data is well-timed. It’s a shift in accountability of sorts to the public, possibly for the right reasons: The IRS is having trouble regulating and assisting smaller nonprofits.

Earlier this month, a report published by the Advisory Committee on Tax Exempt and Government Entities (ACT) found the IRS’ Exempt Organizations office unprepared to carry out its responsibilities. Staff cuts (13.5 percent from 2009 to 2015), the report reads, have led to a decrease in audits and a reduction in the abilities of the office to offer assistance to smaller nonprofits filing 990-EZs.

It’s a “major impediment to effective regulation of the sector,” the report concludes. “These small- and medium-size organizations are less likely to consult accountants when they have tax form filing questions … and are more likely to rely upon free, publicly available resources.”

With the data releases, there will now be a keener public eye on the finances of nonprofits while the IRS improves operations within its Exempt Organizations office. More accessible nonprofit tax data means fraudulent activities like those at East Division Crime Victims Services and Juniata Community Mental Health Clinic will be all the more difficult to cover up.