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What’s New for Form 990. Heavy redesign of Form 990 Related changes to Form 990-EZ New “Electronic Postcard” for very small exempt organizations. New 990 Overview. Redesigned for 2008 and later First major revision since 1979 11 page, 11-part CORE form 16 Schedules: A – O, and R

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what s new for form 990
What’s New for Form 990
  • Heavy redesign of Form 990
  • Related changes to Form 990-EZ
  • New “Electronic Postcard” for very small exempt organizations
new 990 overview
New 990 Overview
  • Redesigned for 2008 and later
  • First major revision since 1979
  • 11 page, 11-part CORE form
  • 16 Schedules: A – O, and R
  • NO MORE WHITE PAPER SCHEDULES! Explanations go on Schedule O or on Form sections.
  • Phased-in filing requirement: smaller orgs may file a slightly-revised Form 990-EZ.
  • Draft 2009 990 shows little change from 2008
why oh why
Why, oh Why?
  • Significantly expanded compensation section
  • New and extensive questions on governance policies and practices
  • Requires greater detail regarding foreign activities, fundraising and gaming, grants and assistance, related parties and organizations
2008 core form
2008 Core Form . . .

Core Form 990 Parts I through V . . . 2008 Compared with 2007

2008 core form5
2008 Core Form . . .

Core Form 990 Parts VI through XI . . . 2008 Compared with 2007

the schedules
The Schedules . . .

990 Schedules A - G . . . 2008 Compared with 2007

the schedules7
The Schedules . . .

990 Schedules H - N . . . 2008 Compared with 2007

the schedules8
The Schedules . . .

990 Schedules O - R . . . 2008 Compared with 2007

small organizations
Small Organizations . . .

Filing Requirement Phase-In

form 990 ez
Form 990-EZ . . .
  • Essentially the same as 2007, BUT . . .
  • Some information previously reported on attachments will now go on schedules.
  • 990-EZ filers may have to file one or more new Schedules: A, B, E, E, G, L, and N.
new form 990 instructions
New Form 990 Instructions . . .
  • New instruction features make transition and preparation easier:
    • Instructions are written in a more “user-friendly” format
    • Core 990 section “sequencing list” outlines the order in which the form should be prepared
    • New IRS Glossary of key terms
    • New compensation section includes comprehensive table to help with proper classification of every conceivable form of compensation or benefit
  • The 2009 instructions are expected to be expanded and more detailed – so if you’ve already done a 2008 return, don’t necessarily expect things to be the same for 2009
the biggest changes
The Biggest Changes . . .
  • The new 990 has caused an uproar in the exempt and practitioner communities
  • The two sections drawing the biggest interest:
    • Part VI – Governance, Management and Disclosure
    • Part VII – Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors
governance policies
Governance Policies . . .
  • Suggested written policies:
    • Conflict of interest policy for board members, officers, senior staff, consistently monitored
    • Whistle-blower policy (Sarbanes-Oxley)
    • Document retention and destruction policy (Sarbanes-Oxley)
    • Investment and/or joint venture policy
    • Gift acceptance policy (review of nonstandard donations; Sch M)
    • Compensation policies: salary and benefits (“rebuttable presumption” standards), payment of “perks” (Sch J)
    • Parent-subordinate consistency policy
governance procedures
Governance Procedures . . .
  • Suggested procedures:
    • Contemporaneous documentation of board and committee meetings
    • Full board review of Form 990 prior to submission to IRS
    • A board composition reflecting broad public interest, and minimizing potential for misuse:
      • Independent members
      • A minimum of members with family or business relationships
      • Full disclosure of business and family relationships
public disclosures
Public Disclosures . . .
  • Form 990 and Form 1023 or 1024 (this actually is mandatory), and how disclosed
  • Form 990-T, charities (also mandatory)
  • Governing documents, conflict of interest policy, financial statements (audited or unaudited)
this is very important
This is VERY IMPORTANT!!
  • Some questions asked in the governance section require policies to be in place by end of your tax year – if a “yes” answer is desired.
  • Organizations are NOT REQUIRED to have these policies in place! But organizations need to carefully consider each suggested policy and procedure, weigh its usefulness, and construct a reasonable explanation for each answer . . . remembering that Form 990 is a public document.
compensation
Compensation . . .
  • Greatly expanded over prior years
  • Non-charities must now disclose 5 highest-paid employees (over $100,000)
  • “Key employee” definition expanded significantly
who gets reported
Who Gets Reported?
  • All officers – at a minimum, those officers statutorily defined by state law
  • De facto officers – chief management official (CEO, EVP, etc) and chief financial official (CFO, VP Finance, etc.)
  • Directors or trustees with voting rights who served at any time during the year
  • Key Employees
  • 5 Highest Paid employees (> $100,000)
who is a key employee
Who is a “Key Employee?”
  • Three-prong test:
    • Reportable compensation from reporting and related organizations > $150,000
    • Responsibility test:
      • Responsibilities, powers, influence over whole organization similar to officers, directors, trustees, OR
      • Manages segment of => 10% of activities, assets, income, or expenses, OR
      • Has or shares authority over => 10% of capital expenditures, operating budget, or employee compensation
    • One of top 20 such persons, ranked by reportable compensation
what gets reported
What Gets Reported?
  • Reportable compensation from the reporting organization and related organizations
    • Amount in Box 5 of Form W-2 or Box 7 of Form 1099-MISC
    • For the calendar year ending within the tax year
  • Other compensation from the reporting organization and related organizations
    • Deferred compensation that’s not taxable
    • Certain nontaxable benefits
details details
Details, Details . . .
  • ALL reportable compensation of the reporting organization must be included
  • Reportable compensation from related organizations is included if it is $10,000 or more
  • Other compensation is generally subject to a $10,000-per-item floor, except for 5 items that must be reported, regardless of amount
formers
Formers . . .
  • Part VII also requires the reporting of “formers”
    • Officers and key employees:
      • Performed services during the tax year
      • Received > $100,000 reportable compensation
      • Officer or key employee within the last 5 years
    • Directors and Trustees:
      • > $10,000 reportable compensation
      • Paid in capacity of former director or trustee
      • Former director or trustee within the last 5 years
formers23
Formers . . .
  • Former 5 highest paid employees: tricky!
    • > $100,000 reportable compensation
    • Change in position: employed in a different position, or by a related organization, or gone from the organization BUT was a “5 highest paid” during the past 5 years
    • Reportable compensation would place him or her within the current year’s “5 highest paid”
    • 5-year look-back rule does not apply to non-charitable organizations if they did not have the 5HP requirement in a look-back year
schedule j
Schedule J . . .
  • Thought you were done with compensation reporting? Nope.
  • Schedule J is in addition to Part VII.
  • Some Part VII individuals are subject to expanded compensation reporting requirements:
    • ALL “formers”
    • Reportable + other compensation > $150,000
    • Paid by an unrelated org for organization services
compensation questions
Compensation Questions . . .
  • Questions generally apply only to persons listed in Part VII:
    • List and explain “perks” - first class or charter travel, discretionary spending account, housing allowance, club dues, personal services, more
    • Explain how CEO/Executive Director’s compensation is determined
    • Explain severance payments, “change in control” payments, equity-based compensation arrangements
compensation questions26
Compensation Questions . . .
  • 501(c)(3) and (4) organizations get special questions relating to private inurement potential:
    • Payment or accrual of compensation contingent on organization revenues
    • Payment or accrual of compensation contingent on organization net earnings
  • 501(c)(3): “. . .no part of the net earnings of which inures to the benefit of any private shareholder or individual . . .”
  • 501(c)(4): “ . . . and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.”
expanded reporting
Expanded Reporting . . .
  • The rest of Schedule J involves expanded reporting
  • W-2 or 1099 compensation is broken into components
  • ALL reportable and other compensation is included – no minimums
  • Includes deferred compensation, nontaxable benefits, previously reported compensation
also pay attention to
Also Pay Attention to . . .
  • Schedule C:
    • Pointed questions designed to uncover improper political activity, excessive lobbying
    • Expanded PAC contributions reporting
  • Schedule D: if an organization has a FIN 48 footnote in its audited financials, it must be reprinted word-for-word
  • Schedule L: hugely expanded version of “related party” questions in previous 990s
  • Schedule R: report transactions with certain related organizations, disregarded entities, partnerships, corporations
990 e postcard
990 “e-Postcard”
  • In the past, orgs with less than $25,000 filed nothing with the IRS.
  • Now, an “e-postcard” is required of all organizations with less than $25,000 in annual gross receipts.
  • Thus, if you’ve got an EIN, you now need to file something with the IRS each year.
990 e postcard30
990 “e-Postcard”
  • For December 2009 CYE orgs, due date is May 15, 2010.
  • Fiscals: due by the 15th day of the fifth month after the end of the fiscal year.
  • Any organization that fails to file a required e-postcard for three years in a row will AUTOMATICALLY lose its tax exempt status.
990 e postcard31
990 “e-Postcard”
  • What information should you have handy:
    • EIN
    • Tax year
    • Legal name and mailing address
    • Any “DBA” names used
    • Name and address of a principal officer
    • Web site (if there is one)
    • Make sure gross receipts are normally less than $25K
    • Termination/liquidation information (if applicable)
990 e postcard32
990 “e-Postcard”
  • Well, OK, how do you file this thing, anyway?
    • Can ONLY by submitted electronically.
    • Go to ePostcard.Form990.org
    • This site is hosted by the Urban Institute – this is ok, they’re an IRS “trusted partner.”
    • Follow the instructions.
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