Whether they are paid lavishly or barely above the minimum wage, Americans usually prefer not to tell others how much they earn. Some people cannot keep their pay entirely private, because their position is subject to public disclosure requirements, such as those that apply to non-profits. The Internal Revenue Service recently issued the first revisions of the compensation disclosure rules for non-profits in 30 years, and that is upsetting some people — especially in trade associations such as the National Football League — whose pay stubs will be exposed to the world for the first time.
The controversy surrounds the Form 990, an annual document through which non-profits — as a condition of remaining tax-exempt — have to disclose extensive information about their finances, including top-level compensation. After being submitted to the IRS, the 990s are made available on the web through sites such as Guidestar and the Foundation Center. The transparency is meant to discourage excessive spending on internal expenses rather than the group’s stated mission.
Currently, non-profits must disclose the compensation of officers, board members and “key employees” (such as an executive director) as well as the pay of the five highest-paid employees who do not fit those categories and who earn above $50,000. The IRS, which oversees non-profits, now wants non-profits to reveal the names and salaries of up to 20 key employees (more broadly defined) earning more than $150,000 as well as the five-highest paid other employees earning above $100,000.
Trade associations — previously not subject to the disclosure rule relating to highly compensated non-key employees — are doing most of the grousing about the new guidelines. The National Football League, which now reveals the salary of only one employee: its Commissioner, is leading the charge against the new IRS rules, saying the added disclosure is not appropriate for organizations that don’t take tax-deductible contributions from the public.
While you’d expect that a professional sports organization might be trying to conceal bloated pay levels, Joe Browne, the NFL’s executive vice president for communications and public affairs, recently strained to suggest to the New York Times that the problem was the opposite: “I finally get to the point where I’m making 150 grand, and they want to put my name and address on the form so the lawyer next door who makes a million dollars a year can laugh at me.”
Working with the American Society of Association Executives, the NFL has begun lobbying Congress for legislation that would allow trade associations to redact the additional salary information from the public version of the 990 (the way charities are allowed to remove information on their largest contributors).
While it is true that trade associations don’t receive donations from the public, they are still tax-exempt, which means that they should give up the financial privacy enjoyed by other private entities. Besides, even the new rules would require that trade associations disclose a lot less salary information than another non-charity type of non-profit: labor unions.
Under the Labor-Management Reporting and Disclosure Act of 1959, unions must file annual forms called LM-2s that, among other things, list the salaries not only of officers but all employees. The U.S. Department of Labor makes the forms available on the web and also provides a search engine that allows you to enter the name of any individual and easily find his or her compensation. How would trade associations feel about that level of mandatory transparency?