IRS Ordered to Release Computer-Readable Charity Tax Forms

IRS Ordered to Release Computer-Readable Charity Tax Forms

In a ruling in response to a lawsuit filed by an open-records advocacy group, a U.S. district judge has ordered the Internal Revenue Service to release tax returns of nonprofit organizations in machine-readable digital format.

The ruling is a victory for Public.Resource.Org, which has sought to end the agency's practice of converting all Form 990s into PDF images, which renders the files useless for keyword searching and sophisticated data analyses. Public.Resource.Org founder Carl Malamud has long argued that data about a sector that boasts a million and a half tax-exempt organizations and more than $1.5 trillion in revenue should be made readily available to the public at no cost.

In his ruling (9 pages, PDF), Judge William Orrick of the U.S. District Court of the Northern District of California, rejected the IRS's argument that producing the nine Form 990s as requested by Public.Resource.Org under the Freedom of Information Act would cost $6,200 and create a significant burden on an already overstretched agency. "The fact that an agency may be under significant financial distress because it is underfunded does not excuse an agency's duty to comply with the FOIA," wrote Orrick. “It is worth noting that the ‘one-time expenses’ related to developing a protocol and training staff may well be recouped if the IRS receives and responds to other modest requests for Form 990s  [Modernized E-file (MeF)] in the future.”

The ruling gives the IRS sixty days to produce the Forms 990 in machine-readable format for the nine nonprofits named in the lawsuit — all of which had submitted their returns electronically — or to file an appeal. A spokesperson for the U.S. Justice Department, which represented the IRS in court, told the Chronicle of Philanthropy that government lawyers were reviewing the ruling.

Cinthia Schuman Ottinger, head of the Aspen Institute's Nonprofit Data Project, told the Chronicle the ruling adds momentum to efforts to enact legislation requiring all nonprofits to file Forms 990 electronically — a mandate that now applies only to certain types of organizations — and make them publicly available in machine-readable format. The Obama administration is expected to include such a proposal in its new budget, to be released on Monday. "Malamud's suit recognizes that this is an antiquated system and is going to help take the system into the digital age," said Schuman Ottinger.

"Public.Resource.Org v. United States Internal Revenue Service: Order on Cross-Motions for Summary Judgment." U.S. District Court, Northern District of California 01/29/2015. Suzanne Perry. "Court Orders IRS to Release Computer-Readable Charity Tax Forms." Chronicle of Philanthropy 01/29/2015.