On April 23, 2026, the Treasury Department announced that the IRS intends to revise Form 990 to shed more light on how tax-exempt organizations handle government grants, government contracts, and fiscal sponsorship arrangements. Treasury and the IRS say the goal is to make it easier to track how money moves in and out of exempt organizations and to confirm that public funds are being used for their intended purpose.
What’s changing, and what should nonprofits do about it now, before the planned Form 990 transparency revisions and proposed regulations arrive?
1. Government Grants and Contracts Will Get More Scrutiny
What’s Changed
The current Form 990 asks organizations to report government grants and contracts in fairly broad strokes. Under the planned Form 990 transparency revisions, organizations can expect to provide clearer, more granular reporting on the source and specific use of public funds.
Why it Matters to Nonprofits
If your organization receives federal, state, or local government money, you should expect your bookkeeping to need to answer harder questions than it does today. That means tighter grant tracking, clearer allocation of funds among programs, and documentation that ties dollars received to dollars spent on the purposes for which they were granted.
2. Fiscal Sponsorship Arrangements Will No Longer Fly Under the Radar
What’s Changed
Right now, a fiscal sponsor’s Form 990 generally does not require much detail about the projects it sponsors, and sponsored projects (which are not themselves separately recognized as tax-exempt) do not file their own Form 990 at all. Treasury has signaled that Under the planned Form 990 transparency requirements may require sponsors to identify sponsored projects directly and disclose who controls the funds and how they are used.
Why it Matters to Nonprofits
Fiscal sponsorship has become an increasingly popular way to launch a charitable project without going through the process of applying for exempt status. If your organization sponsors projects, this is a good time to review your fiscal sponsorship agreements to make sure they clearly document who controls sponsored funds, how spending decisions are made, and what oversight the sponsor exercises. Sponsors that cannot answer these questions today are going to have a hard time when the new reporting requirements land.
3. There Is Still Time, But Not Forever
Treasury and the IRS have indicated they intend to issue proposed regulations, with an opportunity for public comment, before finalizing any changes. That means the revised Form 990 will not appear overnight. But the direction is clear enough that organizations receiving government money or acting as fiscal sponsors should not wait for the final rule to get their house in order.
In the meantime, we recommend:
- Reviewing grant agreements and internal accounting systems to confirm you can trace government dollars from receipt to expenditure by specific grant or contract.
- Auditing existing fiscal sponsorship relationships to ensure written agreements accurately describe control over funds and decision-making authority.
- Watching for the proposed regulations and submitting comments if the requirements as drafted are unworkable for your organization’s size or structure.
Organizations that get ahead of these changes will find the eventual transition to a revised Form 990 far less disruptive than those that wait for a final rule to start asking questions.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form. This post is for general informational purposes and does not constitute legal advice.