IRS: 990 Redesign and other issues

PANO (Pennsylvania Association of Nonprofit Organizations) updates regarding nonprofit IRS matters

Please note that we are not the IRS.  If you need to reach them, visit www.irs.gov/eo. 

Analysis by Independent Sector  
Analysis by OMBWatch with specific focus on changes regarding advocacy.
IRS core form 990  
Schedules and instructions

8/6/10 Action Item For Tax-Exempt Charities: Take Advantage of Filing Extension To Retain Your Non-Profit Status - Information from member King, Spry, Herman, Freund & Faul LLC.

7/28/10 IRS Announces One-Time Filing Relief for Small Organizations that Failed to File for Three Consecutive Years.  The Internal Revenue Service announced that small nonprofit organizations at risk of losing their  tax-exempt status because they failed to file required returns for 2007, 2008, and 2009  can preserve their exempt status by filing returns by October 15, 2010.   

Two types of relief are available for small exempt organizations -a filing extension for the smallest organizations required  to file Form 990-N, Electronic Notice (e-Postcard), and a voluntary compliance program  (VCP) for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.   Find more information about the filing relief program here http://www.irs.gov/newsroom/article/0,,id=225959,00.html.  

5/18/10 Did you miss the deadline? What should you do if your organization's tax-exempt status is revoked for failure to file annual returns?

• Your organization will have to apply for tax-exempt status all over again before it will be tax-exempt.
• Why? If your organization missed the May 17, 2010, deadline to file its annual 990 return with the IRS this year, AND has not filed an annual return for the prior two years, its tax-exempt status will be automatically revoked on May 18, 2010, as a result of the requirements in the Pension Protection Act of 2006. Revocation means that the organization is no longer exempt from federal income taxes.

Please note that the IRS encourages nonprofits to continue filing 990-N in spite of deadline passing. Read the IRS statement.

5/10/10 2010 SPECIAL ALERT: Is your nonprofit about to lose its tax-exempt status?  CHECK THE LIST and File Online Today

On May 17, 15,431 nonprofits in Pennsylvania could lose their tax-exempt status. Will your nonprofit be one of them?

We hope not. The Urban Institute’s National Center for Charitable Statistics has developed a simple tool to find out if you need to file. Here’s how in 3 easy steps:

(1) Go to the NCCS website

(2) Select the name of your state and then enter your nonprofit’s name. If there is an alert “FILE NOW” by your nonprofit’s name, then

(3) File a 990 by May 17 or your nonprofit’s tax-exempt status will be automatically revoked

Please help us SPREAD THE WORD!

8/19/08 IRS Releases three background Papers on Form 990 Redesign. The recent IRS redesign of the Form 990 is the most comprehensive change to the 990’s since its inception. The IRS has posted three background papers explaining the changes to the Form 990 and Instructions. The Background Papers include a Summary of Form 990 Redesign Process, including an explanation of the transitional relief available to smaller organizations; Form 990, Moving From the Old to the New, includes guidance on determining whether an organization must complete a particular section; and Changes to April Draft Instructions. More information is posted at http://www.irs.gov/charities/article/0,,id=181089,00.html.  For the revised Form 990 Instructions (released on August 19, 2008) go to http://www.irs.gov/charities/article/0,,id=185561,00.html. 

12/20/07 The IRS has just released the newly redesigned form 990 exempt organization return for tax year 2008 (to be filed in filed in 2009).  501(c)(3) charities and 501(c)(6) associations that exceed $25,000 in annual revenue are required to file the form 990 each year.  This redesign represents the first major overhaul to the form in 30 years.  Incorporating hundreds of recommendations from the charitable community, the new form is designed to enhance transparency, promote tax compliance, and reduce the filing burden.  The new 990 retains a core form with a long list of schedules.  Changes include:  

·         More opportunity for an organization to describe its exempt accomplishments and mission and explain its activities up-front as well as throughout the document.

·         Major changes were made to the summary page, governance section, and the various schedules, including schedules for executive compensation, related organizations, foreign activities, hospitals, non-cash contributions and tax exempt bonds. 

·         A checklist of schedules was added for clarity.

·         A graduated transition period allowing smaller organizations to file the form 990 EZ instead of the 990 until they become familiar with the new form.  In 2009 (for 2008 returns) the filing threshold will exclude organizations with gross receipts under $1 million or total assets under $2.5 million.  The threshold will scale-down over three years to be set permanently at $200,000 gross receipts and $500,000 total assets.

·         Also for the 2010 tax year, the IRS will increase the filing threshold for organizations required to file Form 990-N (e-postcard return) from the new $25,000 in gross receipts to $50,000.  

·         The new 990 instructions are expected in early 2008.   

IRS Form 990 Redesign & Schedules
IRS Press Release (Dec. 20 2007) [IR-2007-204]
IRS Overview of Form 990 redesign
IRS Background paper on Form 990 redesign
IRS Discussion Draft (June 14, 2007)

9/12/07 Public Comments on IRS Draft Form 990 Revisions- deadline September 14. The IRS form 990 defines how we govern ourselves as charities. This is the most significant restructuring of that form since its inception. Your comments can help the IRS capture more useful, relevant, and effective information and reduce reporting burdens on small and midsize nonprofits. The public comment period closes on September 14. Comments on the proposed redesigned Form 990, schedules and related instructions are due September 14, 2007. Questions and comments should be e-mailed to the IRS at Form990Revision@irs.gov or mailed to Form 990 Redesign, ATTN: SE:T:EO, 1111 Constitution Ave., N.W., Washington, DC 20224.

For additional information go to http://www.irs.gov/charities/article/0,,id=173106,00.html.  The IRS has received numerous comments regarding the Draft Redesigned Form 990 released for public comment on June 14, 2007. Electronic and paper comments received as of the date indicated are provided below. Additional comments will be posted here on a periodic basis. Paper copies of comments submitted electronically are not required. Electronic and paper comments received as of the date indicated are provided below.

Comments (June 14 - July 28)
Comments (July 28 - August 12)
Comments (August 13 – August 21)
Comments (August 22 - August 31)
Form Letter re: Schedule H (for Nonprofit hospitals)

8/29/07 ASAE Sign-on to ASAE Letter By August 30 to Extend Public Comment Period for IRS Form 990 Revisions. Has your organization commented on the to the draft IRS form 990 revisions? Have you received adequate opportunity to review the proposed changes and their potential consequences for your organization? PANO wants to know. The IRS Comment Period closes on September 14. What would you do with an extension to the public comment period? Sign-on to ASAE’s letter before August 30 and urge the IRS to extend the public comment period for the recent draft revisions to the IRS form 990. The ASAE sign-on letter deadline is August 30.

8/15/07 Comments on IRS Draft Form 990 Revisions Due September 14. The IRS form 990 defines how we govern ourselves as charities, and this is the most significant restructuring of that form since its inception. Your comments can help the IRS capture more useful, relevant, and effective information and reduce reporting burdens on small and midsize nonprofits. Your comments are welcomed and strongly encouraged. The public comment period closes on September 14.

7/16/07 Charities Respond to IRS Draft Form 990 Revisions. The IRS’ recent release for public comment of the revised Form 990 has allowed nonprofits to help compose a document which assists both the IRS and nonprofit filers. IRS notes that the revised Form 990 should promote transparency, increase compliance, and ease the reporting burden for filing organizations. The following summary was written by NCNA and Independent Sector.

The newly released draft of the core form provides summary information about an organization’s mission, finances and fundraising expenses, and includes sections with new questions on governance, compensation, and expenses. Several current requests for attachment of additional information have been deleted and others have been standardized on the new schedules. Trigger questions on the core form direct organizations to fill out more detailed schedules.

The revised Form 990 provides 15 schedules including familiar questions or attachments from the old Form 990 that have been moved or rearranged, and other schedules that are completely new. Most charitable organizations would complete Schedule A, which now includes more detailed questions about how the filing organization qualifies as a public charity. Schedule B still covers contributors. The other schedules are: political campaign and lobbying activities (Schedule C); supplemental financial statements previously disclosed through attachments (Schedule D); private schools (Schedule E); activities outside of the U.S. (Schedule F); fundraising activities (Schedule G); hospitals (Schedule H); grants and other assistance (Schedule I); supplemental compensation information (Schedule J); tax-exempt bonds (Schedule K); loans (Schedule L); non-cash contributions (Schedule M); information on liquidation, termination or dissolution (Schedule N); related organizations (Schedule R).

Since the drafts was release, charities and those who serve charities are reviewing the document and submitting their suggestions to the IRS on how the form can demonstrate adherence to tax laws and ethical business practices while providing a source of public information, but not adding an undue burden in reporting. Additionally, the nonprofit groups are drawing from their own experiences to provide information on practical reporting thresholds which disclose information as appropriate yet reduce superfluous data collection.

The nonprofit sector appreciates the IRS’ consideration in soliciting comments and looks forward to future partnerships regarding important filing considerations. NCNA and the state associations are working with other national organizations to submit comments on behalf of the sector – particularly small and mid-size nonprofits. The comments period is tight and PANO is working in partnership with NCNA and its state association colleagues to ensure that the perspective of all nonprofit organizations are adequately represented.

NCNA Offers Conference Call with IRS on Revised 990’s- Space is Limited.   Find out more about the new IRS Form 990 revisions from IRS representative Theresa Pattara.  The National Council of Nonprofit Associations (NCNA) has invited charities to attend a conference call on August 9, 2007 at 3:00 pm EDT.  This is your chance to get answers to your questions and offer your feedback directly to the IRS. Your participation in this call will ensure that the IRS final revision of Form 990 increases compliance, promotes transparency, and minimizes the filing burden on charities.  Registration cost is only $10, but space is limited to the first 90 registrants.  Sign up today at http://givevoice.org/ncna/events/ncna990call/details.tcl. 

7/1/07 IRS Announces New Phone Forum on the Draft Redesigned Form 990. The IRS invites tax professionals and representatives of tax-exempt organizations to participate in a phone forum on the draft redesigned Form 990 (Return of Organizations Exempt from Income Tax). The forum will be presented on July 18, 2007 and repeated July 19, 2007. Forums are being offered free of charge and on a first-come, first-served basis. For more information or to Register online go to http://www.irs.gov/charities/article/0,,id=171994,00.html. 

6/29/07 IRS Wants Charities Comments on the Draft Redesigned Form 990. IRS must receive comments no later than September 14, 2007. Charities are encouraged to email questions regarding the Forms and Instructions directly to the IRS at Form990Revision@irs.gov; or mailed to Form 990 Redesign, ATTN: SE:T:EO, 1111 Constitution Ave., N.W., Washington, DC 20224. Information on the draft redesigned Form 990 is posted at http://www.irs.gov/charities/article/0,,id=171216,00.html. 

6/19/07 IRS Releases Redesigned Form 990; Public Comment Is Requested. On June 14, the IRS released for public comment a discussion draft of the newly redesigned Form 990 Return of Organizations Exempt from Income Tax, and issued a request for public comment. Some of the changes include Schedule A with more detailed questions about how the filing organization qualifies as a public charity; Schedule C for political campaign and lobbying activities; Schedule D for supplemental financial statement schedule previously disclosed on attachments; and a host of additional schedules including Schedule I for grants and other assistance; Schedule J for supplemental compensation information; Schedule M for non-cash contributions; and Schedule R for related organizations. For highlights of the redesigned form 990 go to http://www.irs.gov/pub/irs-tege/highlightsform990redesign_061307.pdf. 

6/14/07 IRS Releases Newly Redesigned Form 990; Requests Public Comment. This morning, the IRS released for public comment a discussion draft of the newly redesigned Form 990 Return of Organizations Exempt from Income Tax. In an effort to enhance transparency, promote tax compliance, and minimize organizations’ filing burden, the IRS has revised the form 990 and changed some of the disclosure requirements. In this first major redesign in 30 years, the new form changes the way public charities disclose finances, fundraising activities, governance, executive and board compensation, and program services. The IRS has requested public comments from the tax-exempt community. While the form is not expected to be used until 2009 (for the 2008 tax year returns), the IRS must receive comments no later than September 14, 2007. Charities are encouraged to email questions regarding the Forms and Instructions directly to the IRS at Form990Revision@irs.gov; or mailed to Form 990 Redesign, ATTN: SE:T:EO, 1111 Constitution Ave., N.W., Washington, DC 20224. More information on the Form 990 redesign is posted at http://www.irs.gov/charities/article/0,,id=171216,00.html. 

5/30/07 Senate Finance Committee Calls for New Form 990 with More Disclosure: existing federal tax data outdated and inadequate. In a May 29 letter to Treasury Secretary, Henry Paulson, Senate Finance Committee Chair Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) urged the Treasury Department to reform the IRS Form 990 to improve transparency and compliance. According to Grassley and Baucus, the Form 990 has not kept up with modern practices in the charitable sector, nor does it capture vital information regarding major parts of the sector especially hospitals and universities, fundraising, executive Compensation, endowments and joint ventures. While the IRS plans to release its revised Form 990 later this summer, Grassley and Baucus have requested a response from Secretary Paulson by June 30. A copy of the Letter is posted at http://us.gallerywatch.com/docs/news/US/agdocs/24889_finance-irs-52907.htm. 

1/25/07 IRS Posts New Reporting Requirements and Forms Changes for Charities required by the Pension Protection Act of 2006. Certain provisions of the Pension Protection Act of 2006 result in new reporting requirements for exempt organizations required to file their 2005 Forms 990, 990-EZ, 990-PF, 990-T and 4720. This applies only to organizations that had not already filed their 2005 990s. The 2005 forms and instructions will not be changed to reflect these reporting requirements. However, the IRS has just posted a list to help you with the changed rules at http://www.irs.gov/charities/article/0,,id=166019,00.html.  For additional information go to: http://www.irs.gov/charities/article/0,,id=161145,00.html. 

For charities filing 2006 Forms 990 and 990-EZ and Schedule A, instructions incorporating significant changes to address legislation enacted in 2006 (the Pension Protection Act) can be found here http://www.irs.gov/charities/article/0,,id=167156,00.html. 

11/13/06 IRS Releases Form 990-W to report Unrelated Business Income. The Internal Revenue Service recently released the 2006 IRS form 990-W entitled “Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations”. Generally, unrelated business activity is subject to unrelated business income tax (UBIT) if the activity is a trade or business regularly carried-on, and is not substantially related to furthering the exempt purpose of the organization. The Pension Protection Act of 2006 required additional disclosure of information relating to this income. The new IRS form 990-W also applies to investment income for private foundations. A copy of this new form 990-W is posted at http://www.irs.gov/pub/irs-pdf/f990w.pdf.