IRS Form 990 Update for TaxExempt Organizations
Stephen Clarke
Internal Revenue Service,
Exempt Organizations
Dallas CPA Society
May 26, 2011
Material provided in this presentation is for educational use only and is
not intended to establish IRS position or practice and may not be relied
on or cited as precedent. For more detailed information, please refer to
1
the "Charities and Nonprofits" section of www.IRS.gov
Form 990 Redesign--Background


1941—inception of Form 990
No major revisions since 1979


Only piecemeal revisions
Need for change:
Obsolete—didn’t reflect changes in sector & tax law
 Did not provide full picture of organization
 Did not meet needs of the IRS, states, or public


Three guiding principles in redesign:
Promote tax compliance
 Enhance transparency
 Minimize burden


Redesigned for tax year 2008
2
2009 Tax Year
(Filed in 2010 or 2011)
Form to
File
Gross receipts are normally
990-N
≤$25,000
Gross receipts are >$25,000 990-EZ or
and <$500,000 and assets are
990
<$1.25 million
Gross receipts are ≥$500,000
990
and/or assets are ≥$1.25
million
3
2010 Tax Year and later
(Filed in 2011 and later)
Form to
File
Gross receipts are normally
990-N
≤$50,000
Gross receipts are >$50,000 990-EZ or
and <$200,000 and assets are
990
<$500,000
Gross receipts are ≥$200,000
990
and/or assets are ≥$500,000
4
990-N (e-postcard) Update

990-N: notice submitted to IRS electronically on IRS.gov



990-N threshold: Gross receipts normally ≤$50,000
(averaged over past three years)




Not an information return
Only a notice with basic information provided (e.g., name,
principal officer and address, web site, certification of under
$50,000 in gross receipts
$75,000 average for first year of existence
$60,000 average if in existence more than one but less than three
years
2008 tax year : approx. 293,000 Forms 990-N submitted
2009 tax year: over 389,000 Forms 990-N submitted
5
Form 990 Filing Statistics and
Trends (as of February 2011)



TY2008: Approx. 224,000 Forms 990 and 323,000
2008 Forms 990-EZ have completed processing
TY2009: Approx. 170,000 Forms 990 and 265,000
Forms 990-EZ have completed processing
Electronic filing
TY2007: 12% of Forms 990 filed electronically
 TY2008: 26% of Forms 990 / 14% of Forms 990-EZ
filed electronically
 TY2009: 34% of Forms 990 / 20% of Forms 990-EZ
filed electronically
6

Form 990—Filing Requirements

2010 Form 990 used to report:
2010 calendar year, or
 A fiscal year that begins in 2010 and ends in 2011


Due date for filing: 15th day of 5th month after
end of tax year
Even if exemption application is pending or not yet filed
 Automatic 3-month extension
 Discretionary 3-month extension


Form 990 must be filed electronically if:
Total assets ≥ $10 million and
 Files ≥ 250 returns in a year
 Other filers may, but are not required to, file the
Form electronically

7
Penalties for failure to file
■
Failure to file a complete information return by
the filing deadline:
 For organizations with annual gross receipts ≤ $1
million: $20 a day, not to exceed lesser of $10,000 or
5% of gross receipts
 For organizations with annual gross receipts > $1
million: $50 a day, not to exceed $50,000
Failure to file for 3 consecutive years:



Automatic loss of tax-exempt status
Donations are not tax deductible
May reapply for reinstatement of tax exemption
8
3-Year Revocation


Tax-exempt status is automatically terminated
for failure to file/submit a 990-series return for
3 consecutive years
Effective beginning Jan. 1, 2007
Revocations effective beginning May 15, 2010
 Revocations will be posted on www.irs.gov later in
spring or summer of 2011


Revoked orgs. may reapply for exemption
Exemption effective from date of reapplication,
absent reasonable cause
 Taxes may be owed in interim period between
revocation and restoration of exemption

9
Major Changes to 2009 Form 990





Part XI: new questions re: consolidated audited
financial statements
Part IV: new question re: filing of Schedule O
Part IV: new trigger question for Sch. D, Part X re:
FIN 48 footnote
Part V: leave lines 1c, 7g, 7h blank if Qs are not
applicable
Part VIII: report on lines 2 (program service
revenue) and 11 (miscellaneous revenue) codes from
a new Appendix J, Business Activity Codes, which
are derived from North American Industry
Classification System (NAICS) codes
10
Major Changes to 2010 Form 990
Most changes are clarifications to instructions
 New Part XI for reconciliation of net assets
 New checkboxes for each part to indicate whether part is
supplemented with narrative in Schedule O
 New appendix on Contributions
 Addition of narrative parts at the end of schedules;
elimination of continuation schedules
 Schedule B instructions direct not to attach substitutes for
Schedule B, and clarify that Parts I-III may be duplicated
to provide adequate space for listing all contributors
 Increased reporting of foreign activity on Schedule F
11
Affordable Care Act-related changes
to 2010 Form 990

Changes reflecting health care legislation

Facility-by-facility reporting of hospitals on Sch. H
New questions reflecting section 501r regarding community
health needs assessments, financial assistance, billing and
collections, and gross charges
 New questions only need to be completed for hospital
facilities with 2010 tax years beginning after 3-23-10

Information on indoor tanning services
 Questions regarding 501(c)(29) qualified nonprofit
health insurance issuers (under HHS CO-OP program)

12
Schedule F –Foreign Activities







Part I, Line 3, col. (c): report number of independent
contractors in a foreign region, along with the number of
employees and agents
Part I, line 3, col.(f): report total book value of investments in a
foreign region
Part I, col. (f): indirect expenditures for foreign activity do not
have to be reported if they are not separately tracked
Part II: report not only grants and other assistance to foreign
organizations, but also to U.S. organizations for foreign activity
Parts II and III: organizations using the accrual method of
accounting that make foreign grants to be paid in future years
should report the grants’ present value in Parts II and III and
report any accruals of additional value in future years
Parts II and III: report foreign grants regardless of the source of
the grant funds (whether restricted or unrestricted) and whether
the filing organization selected the grantee
New Part IV requires reporting of whether organization engaged
in foreign activities that require filing of other IRS forms
13
Practical Considerations in
Preparing the Redesigned Form 990


Commence process of information gathering
well in advance of return preparation and filing
Preparer cannot operate in a vacuum
Involve program staff and management
 Form 990 is no longer primarily a financial report


Take steps to satisfy “reasonable efforts”
standard

Provide questionnaires to key personnel (e.g.,
officers, directors, key employees) to obtain
information needed for compensation and related
14
Beginning the Form 990 WalkThrough; Preliminary Considerations


Consider following the Sequencing List (General
Instruction C) in completing the Form
Preliminary considerations:
501(c)(3)s: private foundation (Form 990-PF) or public
charity (Form 990)?
 Determine related organizations
 Determine officers, directors, and key employees
 Refer to Glossary for definitions of key terms


Don’t forget to complete and file Schedule O!
15
What does the IRS plan to do with
information from the Form 990?
Examples of current compliance projects:
 Determining whether section 501(c)(3) exempt
organizations are meeting the public support test by
reviewing Schedule A
 Determining why organizations filed or submitted the
wrong 990-series return or notice for a particular tax year
 Determining which organizations that filed Form 990-N
should be automatically-revoked for failing to file proper
990-series return for three consecutive years
 Focusing on non-compliance among 501(c)(4), 501(c)(5),
and 501(c)(6) organizations
16
Resources & Comments

http://www.irs.gov/eo
 2009--2010
Form 990 and instructions
Background Papers and Overview
 StayExempt.org mini-courses
 Frequently Asked Questions
 Videos re: how to complete Form 990
 Send comments to Form990Revision@irs.gov

Stephen.M.Clarke@irs.gov
Material provided in this presentation is for educational use only and is not
intended to establish IRS position or practice and may not be relied on or
cited as precedent. For more detailed information, please refer to
the "Charities and Nonprofits" section of www.IRS.gov
17