The New IRS Form 990
February 2010
Not too many topics are less exciting than a change in the tax law. And while in our personal tax
preparations, we’re always ready for something new and expect changes in the tax code, such
is not usually the case with the non-profit tax exempt Form 990. In fact, it’s been 30 years since
filing requirements for tax-exempt organizations have had a major change. Well the time has
come! There’s a new 990, and this month’s topic will ease your stress level about it. Focusing
on the new changes and format for reporting purposes, we’ll walk you through the changes and
touch on some topics related to the history and purpose of the 990.
This paper is written with the intention to provide an introductory overview of the tax reporting
changes effecting tax-exempt organizations and is not presented as professional tax or legal
advice. A full detail report pertaining to any of the topics discussed can be reviewed at
www.irs.gov/charities or www.stayexempt.org. Always check with your accountant or tax
consultant.
Purpose of the 990:
Since non-profits pay no taxes, why do they fill out a return anyway? It’s important to keep in
mind that your non-profit organization does not belong to you – it exists for the public benefit.
Therefore, the public deserves a full accounting of your activities throughout the year. Whereas
the Form 1040, for example, gives a full accounting so that the total taxes owed can be
calculated, the 990 is merely a reporting tool. There are three audiences for this information. At
the federal level, the Internal Revenue Service uses the Form 990 to confirm that tax-exempt
organizations are in compliance with government guidelines for such organizations. At the state
level, the Form 990 is used to determine whether tax-exempt organizations and charities are
exempt from state income tax. At the donor level, donors want to know that you have been
spending your money in a responsible manner, consistent with your principals and mission.
And keep in mind that, unlike your personal tax returns, non-profit tax returns are public
information and most can be pulled up on the internet in a matter of minutes. We have seen
more than a few Executive Directors taken by surprise when donors produce their prior year 990
for review.
History of the Revised Form 990:
The last major modification to the Form 990 was done in 1979. In 2007, the Internal Revenue
Service had come to conclude that it was time for an update, due to the lack of scope of the old
Form 990. The Internal Revenue Service also concluded that tax exempt organizations needed
prodding to adopt what were viewed as best practices regarding corporate governance. To their
credit, the first act of the Internal Revenue Service was to release, for public comment, a
redesigned draft. The public review closed on September 17, 2007, and the new Form 990
was released in 2008. The phase-in was designed to cover a three year period and is outlined
below. Check with your accountant on which form you will need to file this year.
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The redesigned form consists of a 10-page core form, as well as a summary page to be
completed by all tax-exempt filers who meet the filing requirements, compared to the 2006 form
which was a 9-page core and 35 possible attachments. The new form has added 1 page to the
core section and reduced the possible attachments from 35 to 15 schedules. Within the new
core format the Internal Revenue Service incorporated three guiding principles:
1. Enhancing transparency to provide the IRS and the public with a realistic picture of the
organization including the organizations key governance policies.
2. Promoting compliance by accurately reflecting the organization’s operations so the IRS
may efficiently assess the risk of noncompliance.
3. Minimizing the burden on filing organizations.
Additional highlights of the new form are the following:
•
•
•
A summary page providing the organization’s identifying information and a snapshot of
the organization’s key financial, compensation, governance, and operational information.
A portion of the form requiring governance information including the composition of the
board, and certain other governance and financial statement practices. The reporting on
governance deserves particular attention as there are a number of new questions
requesting information on a variety of internal policies and procedures, which the IRS
believes are indicative of a well-governed organization as discussed more fully below.
Schedules that will focus reporting on certain areas of interest to the public and the IRS:
fundraising, compensation, hospitals, tax exempt bonds and non-cash charitable
contributions.
In addition to expanding the 990, the redesigned form also includes 15 schedules; a mixture of
old and new. Only those organizations that participate in additional activities need to fill out the
required forms. The usage of each schedule and filing estimates is outlined below.
Redesigned
Schedule
A
B
C
Topic
Current/New Item
Public Charity Status
Contributions
Political and Lobbying Activities
Current
Current
New in part
Filing
Estimate
<75%
30-40%
10%
D
New in part
100%
E
F
G
Supplemental
Financial
Statement Detail
Schools
Foreign Activities
Funding Raising & Gaming
Current
New
Current
<5%
<5%
<25%
H
I
J
K
L
M
Hospitals
Grants
Compensation
Tax Exempt Bonds
Loans
Noncash Contributions
New
Current
Current
New
Current
New
<5%
<20%
<5%
<5%
<5%
<205
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%
N
Termination
or
Disposition of Assets
R
Related Organizations
Significant Current
Current
<55
<25%
Reporting on Governance
Due to the specific nature of the requests for information regarding internal governance that are
now contained on Form 990, non-profit organizations may wish to adopt policies in the following
areas if they have not already done so:
•
•
•
•
•
Whistleblower Policy
Document Retention and Destruction Policy
Compensation Review Policy and Procedures
Written Expense Reimbursement Policy
Gift Acceptance Policy
While the Internal Revenue Service cannot mandate particular management structures or
operational policies, it clearly believes that tax exempt organizations must be thoughtful about
the governance practices that assure sound operations and compliance with the tax law.
Although the IRS has not specifically indicated that the absence of such policies will lead to an
increased likelihood of audit, many believe that may well be the case. At a minimum, it is
important to recognize that the absence of policies could leave those reviewing an
organization’s Form 990 with an unintended negative impression regarding the organization’s
structure
Organizations may also wish to consider the methods by which they disseminate Form 990 to
their internal constituencies. The IRS now considers the distribution to the board and their
review of the Form 990 to be a best practice. To encourage such review, organizations are now
specifically asked whether they have provide a copy of the Form 990 being filed to the
organization’s governing body and to provide a narrative of the process used for review. See
Form 990, Section VI, Question 11.
For a detailed explanation about the revisions and schedules, information can be viewed at
either of these links www.irs.gov/charities or www.stayexempt.org.
Which Form to File: 990-EZ, 990-N, or 990:
Due to the unusual timing of the new Form 990, The Internal Revenue Service has provided
small organizations additional time to adapt by establishing a three-year transition period. The
charts below are an overview of the general filing requirements for exempt organizations during
the transition period.
2007 Tax Year
(Filed in 2008 or 2009)
Form
to
File
Gross receipts normally ≤ $25,000
Note: Organizations eligible to file the e-Postcard may choose to file a
full return.
990-N
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2007 Tax Year
(Filed in 2008 or 2009)
Gross receipts < $100,000, and
Total assets < $250,000
Gross receipts ≥ $100,000, or
Total assets ≥ $250,000
2008 Tax Year
(Filed in 2009 or 2010)
Gross receipts normally ≤ $25,000
Note: Organizations eligible to file the e-Postcard may choose to file
a full return.
Form
to
File
990-EZ
or 990
990
Form to
File
990-N
Gross receipts < $ 1 million, and Total assets < $2.5 million
990-EZ
or 990
Gross receipts ≥ $1 million, or
Total assets ≥ $2.5 million
990
2009 Tax Year
(Filed in 2010 or 2011)
Gross receipts normally ≤ $25,000
Note: Organizations eligible to file the e-Postcard may choose to file a
full return.
Gross receipts < $500,000, and
Total assets < $1.25 million
Gross receipts ≥ $500,000, or
Total assets ≥ $1.25 million
2010 Tax Year and later
(Filed in 2011 and later)
Gross receipts normally ≤$50,000
Note: Organizations eligible to file the e-Postcard may choose to file a
full return.
Gross receipts< $200,000, and
Total assets < $500,000
Gross receipts ≥ $200,000, or
Total assets ≥ $500,000
Cathedral Consulting Group, LLC
Form
to
File
990-N
990-EZ
or 990
990
Form
to
File
990-N
990-EZ
or 990
990
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Next Steps:
To verify if your organization falls within the above parameters for filing, you must begin to
review the new form and instructions and prepare for the next filing season – 2009. The Internal
Revenue Service has been generous to outline a checklist for tax-exempt organizations.
Redesigned 990 Checklists:
o
o
o
o
o
o
o
o
o
o
o
Determine whether you are eligible to file Form 990-EZ for 2008
Review the redesigned Form 990 released in December 2008
Review the final instructions released in December 2008
Identify the schedules you need to complete
Identify key internal stakeholders to involve to complete the form, including finance,
program leaders, fundraisers, PR/government relations and HR
Identify key external stakeholders to involve to complete the form, including directors,
board members, trustees, grant makers, accountants and layers
Assign an internal leader to coordinate 990 preparation
Identify your related organizations and ODTKE’s (officers, directors, trustees, key
employees)
Be prepared to answer new questions about governance, executive compensation, and
insider transactions
Determine your overseas and joint venture activities
Establish or modify internal systems to prepare for filing season
Articles for Further Reading:
•
•
•
“New Form 990 – Don’t be caught unprepared” www.SmartGivers.org
“The Door has Opened: New Form 990 Creates Strategic Opportunities and Risk for
Nonprofit Organizations” www.guidestar.org
“How to Read the IRS Form 990 & Find Out What it Means” www.npccny.org
A printable version of this checklist can be found at http://www.irs.gov/pub/irs-pdf/p4740.pdf
Peter Giersch is the Managing Director and Corey Benson is a former Intern Associate in the Midwest
Office. Additional information was provided by Ann M. Rieger, President of Davis & Kuelthau, S.C., a fullservice law firm offering an array of legal services from six offices throughout the State of Wisconsin.
For more information, please visit Cathedral Consulting Group LLC online at
www.cathedralconsulting.com or contact us at info@cathedralconsulting.com.
Cathedral Consulting Group, LLC
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