It's Go Time: Form 990 Changes Are Live
March 1, 2009By James D. Cole, CPA Nonprofit organizations are once again faced with changes in Internal Revenue Service (IRS) reporting requirements. Professional service advisors and any organization with a tax exemption from the IRS should pay attention. The motivation for the changes is probably best described by quoting the explanation in the IRS’s August 2008 announcement: "The revised form will give the IRS and the public a much better view of how exempt organizations operate,” IRS Commissioner Doug Shulman stated. “The improved transparency provided by these changes will also benefit the tax-exempt community.” The changes to the Form 990 series, the first significant revisions in almost 30 years, also include a modification of the eligibility for filing certain forms. In essence, the IRS has changed which form entities will use and also the design of those forms. Changes to the Form 990-EZ Most importantly, as outlined later in this article, many more organizations will file the revised Form 990-EZ. This will provide relief, although temporary to some, to these organizations from the additional requirements of the new Form 990. Unlike Form 990, which received a major redesign, the Form 990-EZ is relatively unchanged. The new Form 990-EZ includes several new schedules from the redesigned Form 990, which are intended to replace previously unstructured attachments that were required in previous Form EZ filings. The new form consists of a four-page core form that must be completed by every organization required to file Form 990-EZ. The revised Schedule A, Public Charity Status and Public Support, is accompanied by a new Part VI, to be completed by all section 501(c)(3) organizations. Other key changes that should be investigated further include: - Special instructions for reporting compensation for officers, directors and key or highly compensated employees
- Additional schedules related to certain activities, including:
- Schedule B: Schedule of Contributors (generally unchanged from 2007)
- Schedule C: Political Campaign and Lobbying Activities
- Schedule E: Schools
- Schedule G: Supplemental Information Regarding Fundraising or Gaming Activities
- Schedule L: Transactions with Interested Persons
- Schedule N: Liquidation, Termination, Dissolution or Significant Disposition of Assets
Changes to the Form 990 The new Form 990 includes an 11-page core form that must be completed by all filers. The core includes a summary page intended by the IRS to provide an overview of the organization’s key financial and operating information, followed by a description of program service accomplishments, a checklist of schedules to be completed, several tax compliance questions, a governance and policy section, and revised compensation reporting for officers, directors, employees and others. Most of the raw financial data, in the form of the Statement of Revenue, Statement of Functional Expenses and the Balance Sheet, comes at the end of the core form. The 16 schedules require reporting by those organizations that conduct certain activities. See the sidebar for a summary of these schedules. Additionally, as part of the instructions package, the IRS has provided a significant amount of additional information, including: - A glossary of significant terms
- Appendices covering specialized topics
- Additional examples and illustrations
- A sequencing list with suggested directions to the most logical route through the form
- A compensation table suggesting reporting methods for various types of compensation
Effective dates Basically, NOW. Use of the new Form 990 series returns will be effective for 2008 tax years (returns filed beginning in 2009). The IRS is phasing in the new returns during a three-year transition period, as outlined in a chart provided by the IRS (see tables). Table 1: 2007 Tax Year (old rules)
(Filed in 2008 or 2009) | Form to
File | Gross receipts normally ≤ $25,000 | 990-N | Gross receipts > $25,000 and < $100,000, and
total assets < $250,000 | 990-EZ
or 990 | Gross receipts ≥ $100,000, and/or
total assets ≥ $250,000 | 990 |
Table 2: 2008 Tax Year
(Filed in 2009 or 2010) | Form to File | Gross receipts normally ≤ $25,000 | 990-N | Gross receipts > $25,000 and < $ 1 million, and total assets < $2.5 million | 990-EZ
or 990 | Gross receipts ≥ $1 million, and/or
total assets ≥ $2.5 million | 990 |
Table 3: 2009 Tax Year
(Filed in 2010 or 2011) | Form to
File | Gross receipts normally ≤ $25,000 | 990-N | Gross receipts > $25,000 and < $500,000, and
total assets < $1.25 million | 990-EZ
or 990 | Gross receipts ≥ $500,000, and/or
total assets ≥ $1.25 million | 990 |
Table 4: 2010 Tax Year and later
(Filed in 2011 and later) | Form to
File | Gross receipts normally ≤$50,000 | 990-N | Gross receipts > $50,000 and < $200,000, and
total assets < $500,000 | 990-EZ
or 990 | Gross receipts ≥ $200,000, and/or
total assets ≥ $500,000 | 990 |
Source: U.S. Internal Revenue Service website, http://www.irs.gov/, updated August 5, 2008
For all years specified in the tables, sponsoring organizations of donor-advised funds and controlling organizations described in section 512(b)(13) must file Form 990 regardless of the amount of their gross receipts or assets.
Next steps
Every CPA should communicate the new requirements to any nonprofit entity with which they are engaged, either professionally or personally. Nonprofit entities are encouraged to contact their CPA, who will be well prepared to answer their questions. The VSCPA will provide training throughout 2009 to assist its members in meeting the demands of these new reporting requirements. More information about the form and the temporary regulations is available on the IRS website at www.irs.gov/eo. Also, the IRS has developed several concise online training modules, found at www.stayexempt.org/mini-courses. Sixteen schedules to new Form 990 - Schedule A: Public Charity Status and Public Support — Completed only by IRC Section 501(c)(3) organizations; documents the non-private foundation status and the public support calculation. Changes include expanding the public support test period from four to five years and increased reporting for IRC Section 509(a)(3) Supporting Organizations.
- Schedule B: Schedule of Contributors — Lists every contributor who gave, on an aggregate basis, $5,000 or more for the year.
- Schedule C: Political Campaign and Lobbying Activities — Used by IRC section 501(c) and section 527 organizations to furnish additional information on political campaign or lobbying activities.
- Schedule D: Supplemental Financial Statements — Expanded reporting of donor advised funds, conservation easements, collections of art and historical treasures, trust or custodial arrangements and endowment funds. Also includes more detailed reporting of financial items summarized in the core form.
- Schedule E: Schools — Reports information on private schools, including information related to nondiscriminatory policies toward students.
- Schedule F: Statement of Activities Outside the United States — Reports information related to the foreign activities and a listing of grants to foreign recipients.
- Schedule G: Supplemental Information Regarding Fundraising or Gaming Activities — Reports professional fundraising fees and revenue and expenses related to fundraising and gaming events and compliance with state gaming laws.
- Schedule H: Hospitals — Portions of this form are optional for 2008, but become mandatory in 2009. This schedule reports charity care policies, community benefit, bad debt expense and Medicare shortfalls, disclosure of management companies and joint ventures and billing practices.
- Schedule I: Grants and Other Assistance to Organizations, Governments and Individuals in the U.S. — Reports grant recipients, $5,000 and up.
- Schedule J: Compensation Information — Discloses executive compensation, with questions related to executive perquisites and details of compensation packages, required for reportable compensation greater than $150,000, or compensation to a former officer or highly compensated employee greater than $100,000, or compensation to a former director or trustee greater than $10,000.
- Schedule K: Supplemental Information on Tax Exempt Bonds — For entities that issued tax-exempt bonds issued after December 31, 2002, and had outstanding balances of those bonds of more than $100,000 as of the last day of the tax year, additional reporting of information related to post-issuance bond compliance is required.
- Schedule L: Transactions with Interested Persons — Discloses transactions between the organization and certain “insiders,” such as officers, directors and substantial contributors, including family or business relationships.
- Schedule M: Non-cash Contributions — Requires additional reporting of various types of non-cash contributions, including art, vehicles and conservation contributions. Also included are questions related to the organization’s policies and filing requirements in these areas.
- Schedule N: Liquidation, Termination, Dissolution, or Significant Disposition of Assets — Required for organizations that liquidate, dissolve or transfer more than 25 percent of their assets to another entity.
- Schedule O: Supplemental Information to Form 990 — Provides supporting information related to various questions throughout the return and provides additional space for any other relevant information.
- Schedule R: Related Organizations and Unrelated Partnerships — Reports information on related tax-exempt organizations, trusts or corporations, related and certain unrelated partnerships and transactions between the organization and the controlled entities.
James D. Cole, CPA, is CEO of the Masonic Home of Virginia in Richmond. His 28 years of experience with corporations and nonprofits include roles as a founder, officer, consultant and auditor. He regularly speaks and writes on nonprofit topics, and he is a member of the VSCPA Editorial Task Force. Contact him at jdcole2001@aol.com. | |
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