Comment Period Ends September 14, 2007

On June 14, 2007, the IRS released to the public for comments its long-awaited wholesale revision of the Form 990 information return. The IRS announced that the redesign of Form 990, the required annual information return for most tax-exempt entities, was based upon three guiding principles:

  • enhancing transparency
  • promoting tax compliance
  • minimizing the burden on filing organizations

Some will question whether the third guiding principle has been achieved.

Comments on the redesigned Form 990 are due no later than September 14, 2007. The IRS anticipates using the redesigned Form 990 for the 2008 tax year, so returns filed in the year 2009 will need to be filed on the redesigned form if the target date is met.

The redesigned Form 990 is only one page longer than the current Form 990, but it has been significantly reorganized, and it provides for the attachment of up to 15 schedules compared to the current two schedules. In announcing the redesigned Form 990, the IRS suggested that the burden on some filing organizations could be reduced, noting that most small organizations should need to complete only three of the 15 schedules. For larger organizations engaged in more complex activities, however, it is likely that the reporting burden will be increased, at least initially while adjusting to the new return and its required schedules.

Some of the requests for information that appear directly on the current Form 990 have been moved to several of the new schedules; nonetheless, that information is still required. Together, the redesigned Form 990 and many of the new schedules ask for more detailed information than is sought on the current Form 990, concerning matters such as executive compensation, loans to management and others, corporate governance, political campaign activities, and joint ventures and other types of transactions. The removal of some matters from the pages of the current Form 990 to new schedules also leaves room on the Form 990 itself for more targeted questions about other matters of particular interest to the IRS, such as compensation and governance.

Among the new schedules covering mostly new ground are the following:

  • Schedule H (Hospitals) - requiring hospitals to report aggregate community benefit for all facilities, including charity care and related matters (essentially adopting the approach of the Catholic Health Association), and seeking information relating to billings, collections and joint ventures, among other things.
  • Schedule J (Compensation) - requiring the reporting of more detailed information concerning compensation practices for organizations that pay more than $150,000 of reportable compensation, or $250,000 of total compensation, to at least one individual, or that compensate former officers, directors or key employees.
  • Schedule K (Tax-Exempt Bonds) - requiring information relating to compliance with both the arbitrage rules and with rules limiting private use of bond-financed facilities, including compliance with safe harbor guidance in connection with management contracts and research contracts.
  • Schedule L (Loans) - requiring information about loans to or from officers, directors, key or highly compensated employees, and "disqualified persons."
  • Schedule M (Non-Cash Contributions) - requiring information relating to contributions of property having a value of more than $5,000.

It is difficult to adequately summarize the many changes in reporting requirements that will become effective when the redesigned Form 990 is formally placed into use. The time for attempting to influence the IRS to remove any particularly burdensome requirements is now. All reasonably large tax-exempt organization filers should carefully review the redesigned Form 990 and its potentially applicable schedules, and submit comments to the IRS by the September 14, 2007 deadline.

The redesigned Form 990 and its schedules can be accessed at www.irs.gov, click on "Charities & Non-Profits," click on "Draft Redesigned Form 990."