Nonprofits may influence new Form 990, but they must act | Compensation, governance and fundraising are targeted
The promised overhaul of the IRS Form 990 gives nonprofits an opportunity to weigh in on the proposed changes, but they must act by next month.
Form 990 is the only form in the 990 series that is getting a facelift. Other forms, such as Form 990-EZ, Form 990-T and 990-PF will not be significantly changed at this time.
The Form 990 will consist of a 10-page "core" that all filers must complete. This core form is supplemented by 15 schedules, identified alphabetically as Schedules A through R, that must be completed only if the filing entity engages in the activities covered by a particular schedule or must report information in addition to that required in the core form.
The first page of the core form will detail the organization's identifying information and summarize its key financial, compensation, governance, and operational information. The summary page will make the return more user-friendly.
The primary changes are in the areas of compensation, governance, activities outside the U.S. and fundraising/gaming. These have been IRS hot buttons for some time.
Compensation
Reporting the amounts of contributions to benefit plans and deferred compensation plans and expense amounts is eliminated under the new form unless Schedule J must be completed. Instead, four amounts will be required: compensation from the organization, compensation from related organizations, loans owed to the organization, and loans owed to related organizations. The compensation threshold for listing persons has increased from $50,000 to $100,000.If any person receives more than $150,000 in compensation or receives more than $250,000 of compensation, nontaxable fringe benefits, and expense reimbursements from the organization and related organizations, Schedule J must be completed.
Governance
Part III of the core form requests information related to policies that the IRS concedes "may not be required under the Internal Revenue Code." Among other things, the organization must indicate whether it has a written (1) conflict of interest, (2) whistleblower and (3) document retention and destruction policy.
Similarly, Part VII asks the organization whether it has (1) a written policy to review its investments or participation in disregarded entities, joint ventures, or other affiliated organizations; or (2) a written policy that requires it to safeguard its exempt status for its transactions and arrangements with related organizations.
The IRS has given no hints concerning the consequences of "wrong" answers to its policy questions. Perhaps the answers will be used as part of a "scoring" process to determine whether a return should be audited or supplemental information requested on certain issues.
Gambling and other fundraising activities
The IRS is increasingly concerned about the lack of transparency for fundraising activities, particularly the difficulty determining the amount of each dollar given by a donor that actually reaches a charity.
Organizations that either (1) have $10,000 or more in gross revenue from fundraising events, or (2) pay $10,000 or more in fees to a professional fundraiser will have to file Schedule G.
Your Input
The new Form 990 is based on three principles: enhancing transparency, promoting compliance, and minimizing the filing burden (for most organizations). The IRS wants feedback by Sept. 14. Questions and comments should be emailed to the IRS at: Form990Revision@irs.gov, or mailed to: IRS, Form 990 Redesign, ATTN: SE:T:EO, 1111 Constitution Avenue, NW, Washington, DC 20224.
Frank Monti is a principal with the Providence, R.I.-based CPA firm of Kahn, Litwin, Renza & Co. Ltd.
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