The Form 990 Transparency Overhaul: What Every Nonprofit Should Know
Before a donor writes a check, before a foundation approves a grant, and before a prospective board member says yes, there’s a good chance they’ve looked at your Form 990.
For many nonprofits, it’s the most widely read financial document the organization produces.
So when Tre
asury announces that the form itself is going to change, it’s worth paying attention, even before the details are final.
On April 23, 2026, the U.S. Department of the Treasury announced a Form 990 transparency initiative. Under it, the IRS plans to revise Form 990 to provide clearer reporting on certain activities of 501(c)(3) organizations.
We’ve written before about IRS transparency efforts aimed at private foundations. This one is different. It reaches public charities directly.
Here’s what nonprofit leaders and finance teams should know.
First, What’s Actually Being Proposed?
According to Treasury, the planned revisions focus on two areas:
Government contracts and grants: clearer reporting on where public funding comes from and how it’s used once it reaches a tax-exempt organization
Fiscal sponsorship arrangements: more visibility into who operates a sponsored project, who controls its funds, and how that money is spent
Just as important is what hasn’t happened yet.
There’s no revised form. No draft schedule. No effective date.
Treasury and the IRS have said they expect to publish proposed regulations and provide an opportunity for public comment before any reporting changes are finalized, and that they’ll consider administrative feasibility, proportionality, and reporting burden along the way.
You’ll likely see plenty of commentary online filling in details the Treasury hasn’t announced. Keep the two separate. What’s been officially stated is what your organization should plan around.
Does This Touch Your Organization?
If your nonprofit has $3 million or more in revenue, there’s a good chance at least one of these applies:
You receive federal, state, or local grants or contracts, either directly or passed through another organization
You pass government funds through to subrecipients or partners
You serve as a fiscal sponsor for one or more projects
You are a sponsored project, or you work closely with one
For these organizations, the question isn’t whether to pay attention.
It’s whether your current records could easily answer the kinds of questions a revised Form 990 is likely to ask.
Your 990 and Your Audit Should Tell the Same Story
From an audit perspective, this is the part we’d want every leadership team to hear.
Government grant revenue, contract revenue, and amounts held or passed through on behalf of others already appear in your audited financial statements. If a revised 990 asks for more detail on those same items, the cleanest path is reporting that ties directly back to your general ledger and your audit.
When those numbers don’t line up, explaining the difference later is a lot harder than reconciling it now.
Fiscal Sponsorship Is an Accounting Question, Too
Fiscal sponsorship often gets treated as a legal arrangement that’s settled once the agreement is signed.
However, how the arrangement is structured affects how activity gets recorded. That includes whether the sponsor owns the project outright or primarily passes funds through to an independent group.
If the written agreement, the way money actually moves, and the way it’s recorded don’t match, that’s worth resolving now, regardless of what the final form requires.
And if your organization is the sponsored project, you have a stake in this too.
Where Organizations Can Get Caught Off Guard
The issue usually isn’t that something is wrong.
It’s that documentation that worked fine informally may not hold up once more people are looking at it.
Common examples include:
Sponsorship agreements that are outdated, unsigned, or missing, or that no longer reflect how the relationship works
Government grants tracked only in program files, rather than in a schedule that ties to the general ledger by funding source
Pass-through funding that isn’t clearly identified, making it hard to show where public dollars ultimately went
Inconsistent labels between the audit and the 990, such as revenue called a grant in one place and a contract in another
Board members who haven’t seen the 990 before it’s filed, even though their governance practices are summarized on it
Five Questions to Ask Before the Proposed Rules Arrive
1. Can we list every government grant and contract we have?
That means funder, award amount, period, whether it’s direct or pass-through, and where it’s recorded in the general ledger. If that list doesn’t exist in one place, start there.
2. Are our fiscal sponsorship agreements current and signed?
Pull out every one. Confirm each reflects how funds are actually received, controlled, and spent today.
3. Does our 990 tie to our audited financial statements?
Ask your finance team to walk through how this past year’s government revenue and sponsored-project activity on the 990 connects to the audit.
4. Does our board know what’s been announced, and what hasn’t?
A short, calm update over the US Treasury’s announcement goes a long way toward preventing unnecessary worry.
5. Who’s watching for the proposed regulations?
When they’re published, your organization will have a chance to weigh in. Sector associations often coordinate comments, too. Make sure someone on your team owns keeping an eye out for this comment period.
Frequently Asked Questions
Does the Form 990 transparency initiative change our 2026 filing?
Not based on what has been announced. The Treasury has not released a revised form or an effective date, and it plans to publish proposed regulations and take public comment before any changes are final. For now, continue filing under the current Form 990 instructions and watch for the proposal.
What is a fiscal sponsor, and why is the IRS focusing on it?
A fiscal sponsor is a tax-exempt organization that receives and manages funds for a project or group that doesn’t have its own exempt status. The Treasury said these arrangements can make it harder to see who runs a project, who controls its funds, and how the money is used, so it wants clearer reporting.
Does this cover state and local grants, or only federal funding?
Treasury’s announcement refers to government contracts and grants and the use of public funding, but it doesn’t yet spell out which levels of government will be covered. That detail should come with the proposed regulations. In the meantime, tracking all government funding in one schedule is the safest approach.
Can our nonprofit comment on the proposed Form 990 changes?
Yes. The Treasury and the IRS have said there will be an opportunity for public comment. When proposed regulations are published in the Federal Register, they include instructions and a deadline for submitting comments. Many nonprofit associations also coordinate sector-wide comments.
Get Ready Without Overreacting
The move toward more Form 990 transparency is a “get ready” moment, not a “file differently tomorrow” moment.
Organizations with clean grant tracking, current sponsorship agreements, and a 990 that ties to their audit will likely find the transition manageable. Organizations relying on informal arrangements and institutional memory may find it more demanding.
The difference is time. And right now, there’s still plenty of it.
At BryMar CPA, LLP, Form 990 preparation and financial statement audits are core to our work with nonprofits. That gives us a practical view of where an organization’s government funding and fiscal sponsorship reporting stands today.
As part of an audit, we help leadership teams understand how these areas show up in their financial statements and identify documentation or classification issues worth addressing early. For organizations that want a lighter-touch look, a financial statement review can be a helpful step.
Know what’s been announced. Know where your records stand. Start the conversation before the proposed rules arrive.
Connect with the BryMar team to talk through what the
Treasury’s Form 990 initiative could mean for your organization.
About the Author
Sandy Martinez-Bulosan, CPA, CFE, is Co-Founder and Partner of BryMar CPA, LLP. She brings audit expertise and a Certified Fraud Examiner background to client engagements and team leadership, connecting technical guidance with the people behind the work, from nonprofit leaders to professionals just beginning their careers.
Sources
