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In late April 2026, the Department of the Treasury and the IRS announced a forthcoming initiative to modernize Form 990 reporting for tax-exempt organizations. The stated aim is greater transparency and stronger oversight — especially regarding disclosure of government grants and contracts and fiscal sponsorship arrangements, which Treasury described as higher-risk areas for misuse of funds and reduced public accountability.
Grant Thornton insight:
While framed as a future reporting effort (with proposed guidance expected to be released for public comment), the announcement signals a broader shift: Form 990 is increasingly viewed not only as an informational return but also as a tool for enforcement and public oversight. Organizations with complex structures or significant public funding should track these developments now, well before any new requirements take effect.
Treasury indicated that revisions are likely to seek clearer insight into how tax-exempt organizations receive, control and deploy funds, particularly in (1) government grants and contracts and (2) fiscal sponsorship arrangements. Although fiscal sponsorships can be legitimate and long-standing, Treasury’s framing reflects heightened interest in who exercises actual control, how funds are monitored and how accountability is documented and disclosed.
This announcement reinforces federal expectations for transparency and board/executive accountability in the tax-exempt sector, particularly when public funds or tax-advantaged donations are involved. It also aligns with broader oversight trends focused on tracing the flow of funds through nonprofits, including pass-through and inter-entity arrangements.
Grant Thornton insight:
The result may be a reduced tolerance for generalized or boilerplate narrative disclosures about governance, control, and funding flows — even when an organization’s structures are compliant. It is also likely to increase scrutiny from the IRS and external stakeholders such as funders, regulators, media, watchdog groups, as disclosures become more detailed and comparable.
This announcement represents an inflection point in how Form 990 is positioned within the regulatory framework. Organizations should anticipate a future in which Form 990 plays a more central role in transparency, public accountability and enforcement and should take proactive steps to ensure disclosures are accurate, specific and defensible.
Specific actions to take include:
- Inventory Form 990 disclosures tied to government funding, fiscal sponsorships and inter-entity relationships.
- Confirm disclosures clearly describe who controls funds, who makes decisions and how oversight and segregation/monitoring operate in practice
- Align tax filings with governing documents, policies and actual operations, and update documentation where it is weak or outdated
- Prepare for higher compliance effort and stakeholder attention as expectations become more explicit
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