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
disclosure practices.

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
    the exchange. 

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).