North Carolina Law Review

University of North Carolina School of Law

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Are Gray Skies Clearing Up? Shedding Light on Nonprofit Governance in the Wake of Revamped IRS Form 990

December 15, 2016

95 N.C. L. Rev. 235 (2016) 


Unfortunately, director abuse of nonprofit funds is not extraordinary. In 2015, public scandals implicating nonprofit directors surfaced nationwide. As executives and commentators have noted, the wrongdoing in these and myriad other cases is partially attributable to a lack of good governance procedures and a dearth of transparency. While the current nonprofit governance reporting scheme deserves some blame for this lack of transparency, the Internal Revenue Service (“IRS”) has recently taken positive transparency-inducing steps. In 2008, recognizing the inability of existing deterrents to satisfactorily reduce bad governance and in light of increasingly public nonprofit scandals, the IRS addressed the nonprofit governance issue by enhancing reporting requirements contained in IRS Form 990 (“Form 990” or “990”). While some viewed the enhanced 990 as an unfortunate usurpation of directors’ business judgment, most observers generally welcomed the changes as a signal that nonprofit boards were going to be more thoroughly scrutinized. However, in the years following 990’s enhancement, the heightened examination of nonprofit governance has produced mixed results.


This Recent Development argues that while enhancing the reporting requirements in Form 990 was a step in the right direction, the IRS and state governments should do more to illuminate nonprofit governance practices.  



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