In 2009, the Internal Revenue Service (IRS) significantly revised the Form 990 "Return of Organizations Exempt from Income Tax."  Included in the Form 990 is Part VI, entitled "Governance, Management, and Disclosure," which seeks information about an organization's governance, management, and disclosure policies.  The Internal Revenue Service has recently released on its website updated Frequently Asked Questions (FAQs) and Tips on Part VI.

All organizations that file Form 990 are required to answer all of the questions in Part VI, with special instructions for group returns.  Many of the questions in Part VI, however, ask about policies and practices that are not required under the Internal Revenue Code for an organization to obtain and maintain tax-exempt status.  Instead, the FAQs indicate that the IRS will use the information reported in Part VI, along with the other reported information, to assess noncompliance and the risk of noncompliance with Federal tax law for individual organizations and across the broader exempt sector.

In the FAQs, IRS clarifies and explains a number of issues arising in Part VI, including the following:

  • How to report a policy or practice adopted after the close of the organization's tax year.  Generally, the questions relate to a specific time or period and must be answered as to that time or period.  However, if the organization adopts a policy after the stated time or period but before it filed its return, it may describe this on Schedule O.  For questions that don't specify a relevant time or period, the organization may take into account practices undertaken after the close of the tax year. (FAQ 3)
  • Whether policies or practices adopted by committees are responsive.  Affirmative answers may be given to questions on policies or practices that are adopted by a committee so authorized by the organization's governing body.  However, the organization cannot rely upon policies adopted by its controlling organization unless it has actually adopted the policies. (FAQs 4 and 11)
  • What is the complete picture of the organization's governance structure.  The questions relating to the independence of voting members of the governing body, members, local chapters and affiliates are intended to provide the IRS with a complete picture of the organization and whether its policies and practices extend to all of its parts.  The questions, however, do not extend to related entities, such as a joint venture, for-profit subsidiary, parent or brother-sister exempt organization.  (FAQs 5 and 10)
  • What efforts need to be made by the organization to answer Questions 1 and 2 of Part VI regarding independent directors and business and family relationships among Board members, officers, and key employees.  An organization is expected to engage in a “reasonable effort” to obtain the necessary information, such as an annual questionnaire. (FAQ 8)

The IRS does not plan to publish model or sample policies that organizations could adopt in order to affirmatively answer questions in Part VI.  The IRS has placed the decision to adopt policies on each individual organization, considering its own particular facts and circumstances. (FAQ 9)  Organizations should review their policies and practices on a regular basis to determine whether a policy or practice should be adopted and/or modified to conform to the current operations of the organization.

The text of "Form 990, Part VI—Governance, Management, and Disclosure, Frequently Asked Questions and Tips" can be viewed on the IRS website at