New Form 990: Extreme Makeover

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New Form 990 Extreme Makeover

• Fern N. Zappala, M.P.H, J.D.
• General Counsel
• ASHP
• March 3, 2008

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Disclaimer

• Any views or comments offered today are those of
  the presenter and should not be construed as the
  position of the ASHP.
• This presentation is designed to provide accurate
  information in regard to the topic covered. It is
  provided with the understanding that we are not
  providing legal services or advice. If legal
  services or other assistance is required the
  services of a professional person in your area
  should be sought.

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Objectives for Todays Webinar

• Raise awareness about the redesigned Form 990
• Discuss implementation dates
• Impact on Form 990EZ and 990-N
• Provide an Overview and Identify key areas in the
  new Form 990
• Suggestions for next steps

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What is the Form 990?

• Informational return to the IRS for 501(c) tax
  exempt organizations
• Reports income, expenses, assets, liabilities and
  other information.
• First redesign in over 30 years.

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Why a redesigned Form?

• Fall out from Sarbanes-Oxley (for-profit sector)
• Scandals in the Tax-Exempt Community
• Changes in the activities of EOs
• Congressional Inquiry on governance
• Justification for tax-exempt status

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IRS Principles behind a revised Form 990

• Enhance transparency for IRS and the Public
• Realistic picture of exempt organization
• Basis for comparing the organization to similar
  organizations
• Promote tax compliance
• Staying within exempt purpose
• Appropriate Use of assets
• Minimize burden on filing (??)

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Implementation and effective dates

• Revised Form 990 issued 12/20/07 by IRS
• Revised Form 990 is for 2008 tax year
  (2009 filing season)
• IRS Instructions in Spring 2008 (pending)
• Form 990EZ and Form 990-N relief for smaller
  organizations

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3 Year-Transition schedule for smaller exempt
organizations that use Form 990-EZ

• 2008 tax year
• - Gross receipts gt 25,000 lt 1mil, and
• - Total assets at year end lt 2.5 mil.
• 2009 tax year
• - Gross receipts gt 25,000 lt500,000,
• - Total assets lt1.5 mil.
• 2010 and later
• - Gross receipts gt50,000 lt 200,000, and
• - Total assets lt 500,000

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E-Postcard Form 990-N

• Gross receipts lt 25,000
• (2010 threshold increases to lt 50,000)
• Simply identifies organization
• Indicates justification for not filing a return
• Electronic filing
• Applies to tax years after 12/31/06
• Available to the public

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Overview of Redesigned Form 990

• Core Form is 11 pages
• 16 Schedules for specific activities
• Expanded opportunity to provide descriptions and
  explanations, tell your story
• Much of the new information is nonfinancial
• Enforcement 200,000 and/or 5 years in jail

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Core Form Parts I - X

• Part I and II Summary information and Signature
  block
• Part III Statement of Program Service
  Accomplishments (describe and explain)
• Part IV Checklist of Required Schedules
• Part V Other IRS Filings Tax Compliance

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Core Form cont Part VIGovernance, Management
and Disclosure

• Organizations board composition
• Level of Independence
• Governance and management structure
• Changes to governing documents
• Documentation of board and key committees
• Policies
• e.g. whistleblower, document retention, COI, etc.
• Board review of the Form 990

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Core form Part VII Compensation of Officers,
Directors, Trustees, key employees and Other HCEs
and Independent Contractors

• Current officers, directors, trustees and key
  employees (regardless of compensation)
• Organizations 5 current highest paid employees
  with gt100,000
• Current compensation to
• Former officers, key employees, or highest paid
  employees receiving gt100,000 in compensation
• Former directors receiving gt 10,000 of
  compensation
• Top 5 Independent Contractors who received
  gt100,000

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Core Form (cont)

• Parts VIII, IX, X, XI ( financial information is
  largely unchanged)
• Revenue
• Functional Expenses
• Balance Sheet
• Financial Statements

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16 Supplemental Schedules

• Designed to gather specific information about
  organizations activities
• Complete only relevant ones to your organization

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List of 16 Schedules

• J- Compensation Information
• K- Supplemental Info on Tax Exempt Bonds
• L Transactions with Interested Persons
• M Non-cash Contributions
• N Significant Disposition of Assets
• O Supplemental Info to Form 990
• R Related organizations

• A Public Charity Support
• B Schedule of Contributors
• C Lobbying Activities
• D Supplemental Financial Info
• E - Schools
• F Activities outside US
• G Fundraising/Gaming
• H Hospitals
• I- Supplemental Info on Grants

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Possible Next Steps

• Review and become familiar with the redesigned
  form and its reporting requirements.
• Review your existing written policies and
  procedures. An opportunity to improve Board
  governance and management practices.
• Be prepared to tell your story and describe
  your activities in more scope and detail.
• Consider doing a draft return.

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References

• IRS. Available at http//www.irs.gov/eo
• Panel on the Nonprofit Sector. Principles for
  good governance and ethical practice. Available
  at http// www.nonprofitpanel.org. 2007, October.
• Hauge, JC, Herman, ML. Engaging boards in risk
  management 990 reform may be just what we need.
  Association Law and Policy - ASAE and the Center.
  2007, August.
• Tenenbaum, J, Hiller, A. Telling the IRS a better
  story Unveiling of the 2008 form 990. ASAE and
  the Center. 2007, December.

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Questions/Comments