Today the Internal Revenue Service released a long-awaited draft rewrite of IRS
Form 990, the annual return required to be filed by tax-exempt organizations. The
new form, which has been described by Exempt Organization Director Lois Lerner as
“very different from the current return” includes a 10-page “core” form to be
completed by all exempt organizations, and fifteen specific schedules that
organizations may be required to complete depending on the types of activities
engaged in by the exempt entity.
Comments from the public on the new Form 990 and Instructions will be accepted by
the IRS for the next 90 days. The IRS emphasized at a press conference today that
comments will not be accepted after the 90-day period ending September 14, 2007.
The IRS expects to make revisions to the Form 990 and Instructions based on public
comments and proposes to finalize the Form 990 and all Schedules by December 31,
2007, although Instructions are not expected to be finalized until sometime in
Summer 2008. The IRS expects a final version of the redesigned Form 990 to be
implemented for tax year 2008 (i.e. for returns filed by an exempt organization in
calendar year 2009).
The new core form includes a summary page that is intended to provide a snapshot
summary of what an exempt organization is doing and how it spends its funds.
Another new section of the core form requires information on governance,
management and financial reporting and requests information regarding board
composition, conflict of interest, document retention and whistleblower policies and
The IRS has noted that the redesign of the Form 990 is based on three guiding
principles: (1) enhancing transparency, (2) promoting tax compliance, and (3)
minimizing the burden on the filing organization.
Schedules to the Core Form 990 include:
- Schedule D: Supplemental Financial Statements – requires information
relating to investments, FIN 48 disclosures for uncertain tax positions,
donor-advised and similar funds, accumulation and expenditure of
endowment assets over a 5-year look-back period, and collections of art
or historical treasures, among other items.
- Schedule H: Hospitals and Other Medical Organizations – requires data
from all facilities that are determined to be exempt as a part of a single
employer identification number (EIN). The schedule solicits numerical
and financial information related to community benefit, billing and
collections, management companies and joint ventures. General
narrative information related to health care needs assessment,
emergency room policies and procedures, and distribution of information
about financial assistance is also sought. The schedule also requests
identifying information and a list of activities for each facility that is a part
of the reporting entity.
- Schedule J: Supplemental Compensation Information – requires detailed
reporting of additional compensation-related information for certain
individuals listed in Part II, Section A of the Form 990. Individuals
covered by the new schedule would include former officers, directors or
key employees of the organization, individuals receiving in excess of
$150,000 of reportable compensation for the year, individuals receiving in
excess of $250,000 of reportable and other compensation (e.g., deferred
compensation, nontaxable fringe benefits, expense reimbursements) for
the year, and individuals receiving compensation from a source other
than the organization for services rendered to the organization. The
information required to be reported for each such individuals includes (i)
base compensation, (ii) bonus or other incentive compensation, (iii)
severance pay, (iv) nonqualified deferred compensation; (v) nonreportable
benefits, and (vi) non-reportable expense reimbursements.
Reporting on this schedule is not required for persons not listed in Form
990, Part II, Section A.
- Schedule K: Tax-Exempt Bonds -- requires reporting with respect to any
tax-exempt bond issues for the organization that are outstanding on the
last day of the taxable year with a principal amount greater than
$100,000. The information required to be reported for each issue
includes (i) information regarding the investment and use of bond proceeds, including the amount of any bond proceeds still unspent, (ii)
information relating to potential "private use" of bond proceeds, including
whether the financed property is owned by a partnership, whether the
organization entered into a management contract with respect to the
financed property, and whether any sponsored research is conducted on
the financed property, and (iii) information regarding compensation paid
to third parties in relation to tax-exempt bond issues, including amounts
paid to lawyers, underwriters, and financial advisors, and whether such
persons were selected through a formal process.
- Schedule N: Disposition of Assets – requires reporting with respect to
any transaction involving the sale, exchange, or other disposition or
transfer of more than 25% of the organization's net assets. Information is
also required with respect to organizations that have liquidated,
terminated or dissolved and have ceased operations (other than general
winding up of affairs). Information required to be reported includes (i)
transactional expenses of $10,000 or more, (ii) method used for
determining fair market value of assets, (iii) information relating to any
involvement by officers, directors or key employees in any successor or
transferee organization, (iv) information relating to any discharge or
defeasance of tax-exempt bonds, and (v) copies of any IRS letters
regarding loss of exempt status or approving a termination or significant
disposition. Transactions required to be reported include transfers of
significant assets to joint ventures or for-profit companies in exchange for
an equity interest, even if the organization receives fair market value in
Schedule R: Related Organizations – requires disclosure of all related
organizations by type (e.g., disregarded entities, tax-exempt
organizations, entities taxable as partnerships, corporations or trusts)
and specific transactions with such organizations including grants, loans,
purchase or sales, leases, expense reimbursements and other transfers.
Other Schedules cover the following: Supplementary Information for Organizations
Exempt Under Section 501(c)(3) (Schedule A); Schedule of Contributors (Schedule
B); Political Campaign and Lobbying Activities (Schedule C); Private Schools
(Schedule E); Statement of Activities Outside the U.S. (Schedule F); Supplemental
Information Regarding Fundraising Activities (Schedule G); Supplemental Information
on Grants and Other Assistance to Organizations, Governments, and Individuals in
the U.S. (Schedule I); Supplemental Information on Loans (Schedule L); and Non-
Cash Contributions (Schedule M).