Using Form 990 as a Fundraising Tool

September 15, 2009

Tax-exempt and nonprofit organizations can now find a marketing opportunity in an unusual place, their tax return. It’s no secret that people generally hate filling out tax returns almost as much as they hate paying their actual taxes (click here to see an amusing letter sent to the IRS by a disgruntled taxpayer). So it may come as a surprise to many tax-exempt and nonprofit organizations that they can use their well prepared tax returns for an important purpose – fundraising.

Many donors use the website to access the most recent Form 990, which are the annual tax returns filed by tax-exempt organizations. This can help guide donors in assessing organizations for charitable contributions. Recently the IRS has changed Form 990 enabling it to serve as a powerful public relations tool.

For example, in Part I, Line 1, the preparer is directed to,"[b]riefly describe the organization’s mission or most significant activities". This gives the preparer a great opportunity to use positive, inspirational and persuasive language to sell the organization to potential donors. Also, this portion of the tax return will likely be the first entry a potential donor may read, thus it’s important to utilize this properly to promote your organization’s mission. The usual droll prose used to fill out most tax returns should be avoided and, because it is a tax return, don’t stretch the truth.

In Part III, Line 4 the preparer must describe how the organization’s three largest programs serves its tax exempt purpose. This is another great opportunity to describe and promote exactly how the organization fulfills its mission. The description of programs should be in depth and as specific as possible. Consider answering these questions when filling out Part III, Line 4:

  • Who was helped? 
  • How many people were helped? 
  • How many volunteers were used? 
  • How much money was raised and disbursed? 
  • Are there any statistical results? 

Give the potential donor confidence that his money will be well used.

Also note that in Part X, Line 1, it asks for the amount of money an organization is keeping as cash in a non-interest-bearing account. If this entry reflects a large sum of money, it gives potential donors the impression that the organization is merely sitting on the money it receives instead of using it to fulfill its mission. As a practical matter, it’s best to structure the organization’s finances so that little or no money should appear in this portion of the tax return.