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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

  • Heavy redesign of Form 990

  • Related changes to Form 990-EZ

  • New “Electronic Postcard” for very small exempt organizations


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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


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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


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2008 Core Form . . .

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


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2008 Core Form . . .

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


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The Schedules . . .

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


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The Schedules . . .

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


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The Schedules . . .

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


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Small Organizations . . .

Filing Requirement Phase-In


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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.


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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


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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


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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


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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


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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)


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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.


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Compensation . . .

  • Greatly expanded over prior years

  • Non-charities must now disclose 5 highest-paid employees (over $100,000)

  • “Key employee” definition expanded significantly


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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)


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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


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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


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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


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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


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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


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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


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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


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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.”


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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


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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


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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.


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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.


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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)


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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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