VSCPA Comments on Form 990 Draft
Internal Revenue Service
Form 990 Redesign
ATTN: SE:T:EO
1111 Constitution Avenue, NW
Washington, D.C. 20224
Lois G. Lerner
Director of the Exempt Organizations Division of the IRS
Ronald J. Schultz
Senior Technical Advisor to the Commissioner of TE/GE
Catherine E. Livingston
Deputy Associate Chief Counsel (Exempt Organizations)
Dear Ms. Lerner, Mr. Schultz, and Ms. Livingston:
The Virginia Society of Certified Public Accountants (VSCPA) is the premier professional association for CPAs in Virginia. A 501(c)(6) organization based out of Richmond, Virginia, the VSCPA has 8,300 members across the Commonwealth. The VSCPA is grateful for the opportunity to comment on the draft changes to the Form 990, and submits the following comments for your consideration. While this letter will address the overarching concerns that the VSCPA has with the form, we wish to note our concurrence with the specifics detailed in the letter dated September 10,2007, issued by the American Society of Association Executives (ASAE).
The VSCPA is a stringent supporter of transparency and fiscal responsibility. However, we are concerned that the breadth of changes to Form 990 may offer little or no additional protection to the public, while making it burdensome and costly for associations and other nonprofits to comply.
For this reason, we urge the IRS to reconsider the September 14, 2007, deadline for comments on the draft form. An extended exposure period will enable small nonprofits and associations (those who will be most profoundly impacted by the changes) to properly examine the proposal and lend feedback. At the very least, an extended comment period will act as an education tool for organizations before the changes are enacted.
The IRS’s guidance on the proposed changes — to enhance transparency, promote tax compliance and minimize the burden on filers — is a just and sorely needed effort since the last revision of this form in 1979. However, the VSCPA believes the current proposed changes do not address the needs set out in the IRS guidance.
Balanced Uniformity
The VSCPA agrees with the IRS that there should be uniformity in Form 990 so that it may apply to all tax-exempt organizations. However, the draft seems unreasonably geared towards charitable organizations, containing many mandatory questions that just don’t apply to non-charitable groups and membership organizations. An example of this issue is the request for an “independent member of the governing body.” By its nature, a membership association consists of individuals who are inherently related to the organization. Answering this question as it is currently worded may give lay readers a mistaken impression of the nature of a nonprofit professional association. Scenarios like this may force professional associations and others to “fit square pegs into round holes” on the form. The confusion could cause inadvertent noncompliance and increase the misunderstanding the public has about the difference between charitable and non-charitable organizations.
501(c)(3) Charitable Nonprofit Compliance
Because many VSCPA members, Virginia CPAs, work with various tax-exempt organizations, the VSCPA is also concerned about compliance for small 501(c)(3) organizations. If implemented without significant changes, the draft Form 990 will substantially increase the administrative and financial burden on many small nonprofits, such as 501(c)(3)’s, which will be required to provide new information going forward. As the IRS knows, most nonprofits, especially 501(c)(3) organizations, operate with a small financial and administrative staff. Additionally, many small, local nonprofits are operated entirely by volunteers and do not have a professional staff to assist with compliance.
The expanded reporting requirements, nearly all across the board, will take more time to compile and complete for nonprofit staff. In addition, external auditors will have to review the reporting requirements and do substantive testing to ensure accuracy — resulting in increased audit fees for small nonprofits. Most audit firms are going to require that they also prepare the Form 990 if they are going to have to sign off on it. The complexity of the new form and added layers of reporting will no doubt lead to much higher audit/Form 990 preparation fees.
The VSCPA could see benefit to these added reporting requirements, but only if the changes substantively increased transparency in a publicly understandable way. However, we believe these broad changes are likely to have the opposite effect — as presented, they will not only confuse the public, but also the nonprofits themselves, causing increased noncompliance and the reporting of inaccurate information.
Filing Burden
Overall, the VSCPA is concerned about the additional burden inherent in the expanded Form 990. Organizations large and small, charitable and non-charitable, will be forced to spend many additional hours gathering information for both the core form and the schedules. The American Society of Association Executives (ASAE) estimates that the average trade association will spend at least 50 percent more time complying with the extra information requirements imposed by this form. This additional preparation will especially impact small organizations that may have little or no staff. In addition to leadership issues, the changes may drastically increase the cost to small organizations for their professional tax preparation and audit fees.
The VSCPA urges the IRS to extend its comment period to adequately gather concerns from all types of tax-exempt organizations, and consider amendments to the form that address the concerns set forth in this letter as well as those comments submitted by ASAE and other organizations.
Additionally, as with any tax or fiscal issue, the VSCPA is happy to lend assistance to the IRS in the form of our member volunteers. We have experts in the area of taxation of tax-exempt organizations who would be happy to assist the IRS in identifying areas on the draft Form 990 that may meet the goals of enhancing transparency, promoting tax compliance and minimizing the burden on filers.
The VSCPA thanks you for the opportunity to lend comment on the proposed changes to Form 990. We applaud your efforts to update a document that has not been significantly remodeled in 30 years. If we can be of any service to you, or if you have questions or concerns, please don’t hesitate to contact me or VSCPA Government Affairs Director Erin Collins at ecollins@vscpa.com or (800) 733-8272.
Sincerely,
Monique T. Valentine, CPA
Chair of the VSCPA Board of Directors
LAST UPDATED 1/1/2007
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