The Federal District Court for the Northern District of California ruled this week that the IRS must turn over the original, machine-readable versions of nine tax returns filed with the IRS to Plaintiff PublicResource.org. (Disclosure: I filed affidavits in the case on behalf of PublicResource and its demand to make these returns available).
By law, non-profit tax returns are required to be made public. However, despite the fact that a large percentage of these returns are filed in a digital, machine-readable electronic format (MeF), the IRS makes it a practice to print out the returns and scan them back in so that the resulting file is an image file. Dr. Daniel Goroff and I describe this process (and the asserted rationale for it) in detail in the report “Information for Impact: Liberating Nonprofit Sector Data” we produced on opening up 990 tax returns for the Aspen Institute Program on Philanthropy and Social Innovation in 2013.
But releasing 990 data in machine readable format is a national priority. A comprehensive source of high-quality data on nonprofits, structured to allow comparisons and analyses across different organizations in the sector, would greatly enhance and accelerate research about the sector and make it possible to:

1. Do more extensive, in-depth empirical research on the sector as a whole, including sector-wide issues such as the impact of the economic downturn on nonprofits, the geographic distribution of nonprofit services, and the efficiency of the nonprofit sector in delivering services;
2. Combine the 990 data with other datasets, such as those on government spending, to better understand the relationship between public and private dollars in providing social services;
3. Query the data to address issues relating to specific nonprofits, such as gaining greater insight into 501(c)(4) organizations that engage in lobbying or finding trends and outliers in executive compensation;
4. Recognize fraud early, anticipate abuses, and target enforcement more efficiently and effectively; and
5. Enable more people and organizations to analyze, visualize, and mash up the data, creating a large public community that is interested in the nonprofit sector and can collaborate to find ways to improve it.

With the IRS now ordered to put the processes in place to release these electronically-filed returns electronically, the hope is that the marginal cost for releasing all electronically filed returns (even if some of the returns are still filled out by hand and filed on paper) will have dropped to close to zero. Opening up these returns for analysis is the best way for us to gain insight into the all-important philanthropic sector.
Further Reading:
Court Orders IRS to Release Computer-Readable Charity Tax Forms by Suzanne Perry (Jan 29, 2015)
John Oliver: Last Week Tonight (A great example of what you can do with open 990 tax data) (Sep 21, 2014)
IRS Won’t Fix Database of Nonprofits So It Goes Dark by Cory Doctorow (June 16, 2014)
IRS Turn Over a New Leaf: Open Up Data by Beth Simone Noveck with Stefaan Verhulst (May 23, 2013)
Liberating 990 Data by Beth Simone Noveck (Feb 4, 2013)
Charity Tax Data Are Too Valuable Not to Have in Digital Form by Cinthia Schuman Ottinger (March 10, 2013)
Information for Impact: Liberating Nonprofit Sector Data by Beth Simone Noveck and Daniel Goroff (Jan 2013)