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States sue to learn why Trump changed IRS donor-reporting rules

New York and New Jersey have sued to find out why President Donald Trump’s administration scrapped an Internal Revenue Service rule requiring some tax-exempt organizations to disclose their donors.

The change, announced in July 2018, eliminates from federal and state filings a category of information the states rely on to identify potential self-dealing transactions, criminal conduct and other risks in the nonprofit sector, New York Attorney General Letitia James said in a statement Monday.

James and her New Jersey counterpart, Gurbir Grewal, both Democrats, sued the IRS and the Treasury Department in federal court in Manhattan, accusing them of failing to respond to a federal Freedom of Information Act request filed in October. The FOIA sought to learn the reasoning for the change, which was allegedly made without the required period of public notice.

The IRS had no immediate comment on the suit.

The change doesn’t apply to 501(c)(3) tax-exempt groups such as public charities and private foundations, James said, but does apply to thousands of 501(c)(4) groups, such as social welfare organizations, labor unions and business groups.

James and Grewal have statutory oversight of nonprofits in their states. James’s office has a lawsuit pending against Trump’s personal charity over alleged self-dealing. She is also investigating the nonprofit status of the National Rifle Association. Monday’s lawsuit is unrelated.

President Donald Trump speaks during a roundtable discussion on the economy and tax reform in Burnsville, Minnesota.
U.S. President Donald Trump speaks during a roundtable discussion on the economy and tax reform in Burnsville, Minnesota, U.S., on Monday, April 15, 2019. Photographer: Angus Mordant/Bloomberg