2011 Form 990 – Tax Update
& New Developments
About BKD Higher Education Team
• Serve over 100 public and private colleges and
universities
•
•
•
•
•
•
Financial management
Tax research and opportunities
Resource management
Student financial aid assistance
Capital expenditures
Endowment/performance
About BKD
Joyce has more than 25 years of experience providing tax services with a focus on colleges
and universities, health care entities and not-for-profit organizations. She serves the
needs of families and their private foundations and trusts through innovative personal
financial and tax planning solutions.
Joyce performs comprehensive reviews of not-for-profit activities to identify and help
mitigate exposure areas related to private inurement, intermediate sanctions, worker
classification and unrelated business taxable income issues. She also has extensive
experience dealing with IRS examinations, obtaining favorable determination letters and
closing agreements.
Joyce Dulworth, CPA
Partner
jdulworth@bkd.com
Joyce is a member of the American Institute of Certified Public Accountants, Indiana CPA
Society, Council on Foundations and the Fort Wayne Estate Planning Council. She
currently serves on the board of the Foellinger Foundation and previously served on
boards of several other organizations, including Big Brothers Big Sisters of Northeast
Indiana. She is a frequent presenter for internal and external seminar programs and has
authored numerous tax articles.
Joyce is a 1983 honors graduate of Ball State University, Muncie, Indiana, with a B.S.
degree in accounting.
University of Nebraska - Lincoln
• For 143 Years, a Leader in Higher Education
• The University of Nebraska–Lincoln, chartered in 1869, is an
educational institution of international stature. UNL is listed
by the Carnegie Foundation within the "Research Universities
(very high research activity)" category. UNL is a land-grant
university and a member of the Association of Public and
Land-grant Universities (APLU). The university is accredited by
the Higher Learning Commission of the North Central
Association of Colleges and Schools. UNL celebrated the
143rd anniversary of its founding on Feb. 15, 2012
University of Nebraska - Lincoln
•
Brad Sheriff is Assistant Vice Chancellor of Academic Affairs for Business and Finance at the
University of Nebraska-Lincoln. In this role, he oversees and directs the business operations
and financial affairs of the University’s academic enterprise.
Brad’s career in higher education administration began in 1998 at the University of Illinois.
During his nearly twelve years in the University’s Office of Business and Financial Services, he
served in the positions of Business Analyst, Strategic Planning Coordinator, Administrative
Director of Business Operations & External Relations, and Director of University Strategic
Procurement. In 2010, Brad joined Indiana Wesleyan University as Associate Vice President
for Business Affairs & Compliance. In this capacity, he led the areas of accounting and
financial reporting, student accounts and cashiering, risk management and insurance, and
procurement services. He also oversaw several auxiliary services and directed enterprisewide compliance efforts.
Brad Sheriff
Assistant Vice Chancellor of
Academic Affairs for
Business and Finance
bsheriff2@unl.edu
Brad has participated with the Big Ten Controllers’ Group, the Big Ten Purchasing Directors’
Group, and is an active member of the Central Association of College and University Business
Officers, serving on the Business and Finance Committee as well as the Audit Committee. He
has also served on the Midwestern Higher Education Compact Master Property Program
Leadership Committee and its Finance and Audit sub-committee. Brad has been a member
of the Board of Directors of Educational & Institutional Cooperative Service, Inc. since 2010.
A Certified Management Accountant, Brad earned an MBA with honors from the University
of Illinois–Springfield and a BA in Business Management with honors from Greenville College.
In 2009, he completed the Harvard Institutes for Higher Education Management
Development Program, offered through Harvard University’s Graduate School of Education.
Agenda
• 2011 Form 990 significant changes
• Schedule F, J, H revisions
• New focus & initiatives of IRS on exempt
organizations
2011 Form 990 Updates
• Core form generally similar to 2010 Form 990
 Instructions continue to clarify information
• Filing thresholds for Form 990-EZ is same as in 2010
 Less than $500,000 in total assets and
 Less than $200,000 in gross receipts
• To file Form 990-N postcard, organization normally
must have less than $50,000 in gross receipts
2011 Form 990 Updates
• E-filing required for
 Form 990 filers with at least $10 million in total assets &
filing at least 250 returns in calendar year
 Informational returns include W-2s, 1099s, & 941s
 Form 990-PF filers filing at least 250 returns in calendar
year, regardless of asset size
 Form 8868 (extensions) may be filed electronically or in
paper form
2011 Form 990 Significant Changes
• Instructions clarify who must file
 Governmental units & affiliates of governmental units
described in Rev. Proc. 95-48 if also section 509(a)(3)
supporting organizations
 Organizations required to file Form 990 series for given
tax year must do so even if it has not yet filed Form 1023
or 1024 with IRS
 Comment
• Name and address of principal officer & web site
address should be current as of date of filing
2011 Form 990 Significant Changes
• Part VI, Governance, Management, and Disclosure
 Line 1a (total governing board members)
• modified to note that if governing body delegated broad
authority to executive committee or similar committee, filing
organization must explain in Schedule O
 Line 1b (total independent governing board members)
• clarifies director no longer loses independence because director
or their family member was key employee of entity that
engaged in Schedule L reportable transaction with organization
2011 Form 990 Significant Changes
• Part VI, Governance, Management, and Disclosure
 Line 2 (business and family relationships)
• exempts from reporting certain business relationships in which
officer, director, trustee or key employee of filing organization
was key employee of another organization
 Line 7b
• expanded to ask if any governance decisions are reserved to, or
subject to approval by, persons other than governing body
2011 Form 990 Significant Changes
• Part VI, Governance, Management, and Disclosure
 Section B Policies
• Instructions clarify that organization may answer “yes” to any
question that asks whether organization has particular policy if
either its governing body or committee authorized by governing
body that adopted policy was adopted by end of tax year
 Section B, line 11 (providing copy of Form 990 to the
board)
• Instructions clarify organization should answer “no” if it merely
informs governing body members that copy of Form 990 is
available upon request
• Comment
2011 Form 990 Significant Changes
• Part VII, Compensation
 Part VII, column (C) Position
• Organizations check only one “position” box for each person
listed in compensation table, unless individual is both officer &
director or trustee
 Part VII reportable compensation
• Reportable compensation for officers & employees includes
compensation reported in Form W-2 box 1 or 5 (whichever is
higher)
2011 Form 990 Significant Changes
• Part VII, Compensation
 Part VII columns (D), (E) & (F)
• Left blank for short year returns in which there is no calendar
year that ends within short year, unless return is final return
 Part VII, column (F)
• Do not report amounts deferred (i.e., accrued bonus) paid with
in 2 ½ months after end of tax year
2011 Form 990 Significant Changes
• Part VII, Compensation
 Part VII, column (F) other compensation
• Include amounts of annual increase or decrease in actuarial
value of defined benefit plan
• Decreases in these amounts are disregarded for purposes of
determining if compensation was more than $150,000
2011 Form 990 Significant Changes
• Part VII, Compensation
 The “transition rule” for non-section 501(c)(3)
organizations is eliminated & former highest
compensated employees must be reported in Part VII if
they meet requirements
 Part VII, section B independent contractor compensation
• Reported for calendar year ending with or within tax year
• For short year return in which there is no calendar year that
ends with or within short year, do not report any information
unless return is final return. If return is final, report
compensation paid to contractor during short period
2011 Form 990 Significant Changes
• Part VIII, Statement of Revenue
 Losses from:
• Uncollectible pledges,
• Refunds of contributions, or
• Grant reversals
 Report as “other changes in net assets or fund balances” on Part XI, line 5
 Include explanation in Schedule O
 The value of donated services & facilities should not be
reported as revenue
2011 Form 990 Significant Changes
• Statement of Revenue
 Contributions of conservation easements
• Report consistently with reporting on the books and financial
statements
 Medicare & Medicaid payments
 Other governmental payments made to pay or reimburse
the organization for medical services provided to
individuals who qualify under government program, and
 Who select service provider
• Report on line 2 (Program Service Revenue)
2011 Form 990 Significant Changes
• Statement of Functional Expenses
 Clarified classification of expenses
• Section 501(c)(12) organizations should report patronage
dividends to members on line 4
• Payments to contractors for information technology services
should be reported on line 14
• Medical supplies of health care organizations should be reported
on line 24 (not line 13, office expenses)
• The heading includes new checkbox that indicates organization
must check if its Schedule O contains response to question in
Part IX
• Comment
2011 Form 990 Significant Changes
• Glossary revisions
 Control
• Clarifies that a managing partner is a partner designated as such
in partnership agreement or regularly engaged in partnership
management
 Grants & other assistance
• Revised to exclude certain payments made by VEBAs
2011 Form 990 Significant Changes
• Glossary revisions
 Significant disposition of net assets
• Revised to exclude grants & assistance made in organization’s
ordinary exempt-purpose activities
 “Term endowment” renamed “temporarily restricted
endowment”
• Includes donor-restricted endowments for a specific period
• Other temporarily restricted net assets held in a donorrestricted endowment
• Including income from permanent endowments
Joint Ventures & Investments
• Organizations should report amounts reported on
Schedules K-1 and not financial statement amounts
 Distributive share amounts reported on Part VIII,
Statement of Revenue
 Distributive share of partnership assets recorded to
organization’s ending Schedule K-1 capital account
reported on Part X
 Creates “book/tax” differences for Schedule D
reconciliations
 Optional
2011 Form 990 – Schedule F
• Organizations with foreign investments valued at
over $100,000 must complete Schedule F, Parts I &
IV
• Previous focus was on program activities,
fundraising & grant making abroad
2011 Form 990 – Schedule F
• Schedule F, Parts II & III (grants and assistance to
individuals)
 Completed based on organization’s grant activity
outside U.S. and inside U.S. for foreign purposes
 Comment
2011 Form 990 – Schedule H
• Most of Part V (501(r) reporting) mandatory for
2011
 Questions 1-7 CHNA reporting optional for 2011
•
Under 501(r), organizations operating as licensed hospital &
tax-exempt [501(c)(3)] are required to complete CHNA at least
once every three years, beginning with taxable years ending
after March 23, 2012
2011 Form 990 – Schedule H
• Required sections focus on:
 Financial assistance policies,
 billing and collections, and
 emergency care
• Goals of increased disclosure ensure that hospitals:
 Limit charges for emergency/necessary care
 Comply with new billing and collection laws
 Complete required CHNAs
Increased Schedule J Explanations
• Substance of Schedule J similar to 2010
• Methods to determine CEO/executive director
compensation
 Completed for reporting organization, not related
organizations

•
Organizations should explain in Part III if organization relied on
related organizations using any of the methods listed to establish
compensation
Comment
IRS FY 2012 Work Plan
• Compliance: Using Form 990
 IRS redesigned Form 990–promotes transparency &
compliance
 Provides IRS with wealth of information on exempt
organizations
 IRS has developed risk models to assess likelihood
of noncompliance by tax-exempt organizations
IRS FY 2012 Work Plan – IRS Focus
• 501(c)(4), (5) & (6) organizations
 IRS will send comprehensive questionnaire to
assess compliance in this area
• Political activity
 IRS continues to enforce rules relating to political
campaigns & campaign expenditures
 Comment
IRS FY 2012 Work Plan – IRS Focus
• 990-T & UBIT
 Review organizations that report unrelated
business activities but have not filed 990-T
 Analyze Form 990-T to develop risk models that will
help identify organizations that consistently report
significant gross receipts from unrelated business
income but declare no tax due
 Comment
IRS FY 2012 Work Plan – IRS Focus
• Governance
 Review connections between certain governance
practices & tax compliance
 Comment
IRS FY 2012 Work Plan – General Work
•
•
•
•
Colleges & universities
Disaster relief communication
Group rulings
Private foundations
Continued Increase in Audits
• Traditional examinations & compliance checks
snapshot (FY 2004-FY 2011)
Source: http://www.irs.gov/pub/irs-tege/fy2012_eo_work_plan_2011_annrpt.pdf
Not-For-Profit Tax Alerts
•
•
•
Significant 2013 & 2014 Business Tax Implications of Health Care Reform
How Tax Compliance Is Affecting Tax-Exempt Organization Governance
Gift Receipt Letters

•
Fraternity Foundation - Loss of Exempt Status

•
•
•
•
•
•
•
Comment
Comment
Anonymous Donor Reporting
Revocation of Exempt Status for Failure to File
Updated Public Disclosure Rules for Tax-Exempt Applications
No More Identification of Split-Interest Trusts on IRS Form 990
Filing Extension May Be Available for Exempt Organization Returns Reporting
Requirements Under FFATA
IRS to Survey Exempt Organizations Regarding 2010 Compliance Burden
Government Financial Troubles & Assistance
Expiring Provisions Effective December 31,
2012
• American Opportunity Tax Credit
• Section 127 Employer – Provided Educational
Assistance
• Student Loan Interest Deduction
• Coverdale Education Savings Accounts
AICPA Suggested Changes to Form 990
• Minor
• Technical
• Helpful
Questions?