Instructions to the Redesigned Form 990 Released

The Internal Revenue Service April 7 released draft instructions to the revised Form 990 information return that many charities will be required to file beginning in 2009. The instructions are designed to clarify questions on the form and to provide interpretations of the legal and policy questions raised by its disclosure requirements.

The draft instructions for the form and the accompanying schedules follow a consistent format: explaining the purpose of each section, detailing who must file the form or schedule, and providing line-by-line help.  In addition, the IRS has included new tools, such as a glossary of terms; a sequencing list suggesting the order in which to fill out the form and schedules; a table to help organization determine where to report different types of compensation and benefits; and examples to illustrate definitions or new requirements.

The IRS is requesting comments from nonprofit organizations on all aspects of the draft instructions, including suggestions that might further reduce complexity or burden. The comment period is open until June 1, 2008. The IRS has highlighted items in the instructions on which the Service would especially like to receive public comments. The IRS is particularly interested in comments on the definitions contained in the glossary and elsewhere in the instructions and on new or significantly revised areas such as compensation, governance, foreign activities, disregarded entities and joint ventures, group returns, hospitals, and tax-exempt bonds.  It is also seeking, for Part III of the form, examples of program service accomplishments for specific sub-sectors.  

Independent Sector is already reviewing the draft and will post our comments as soon as we have them ready. We encourage all IS members to review the draft instructions and let us know of questions or concerns that you have with them. We also urge you to file your own comments with the IRS to ensure that the instructions adequately address areas of confusion and uncertainty related to your operations.

Form 990 Conference Call
Preparing for the New Form 990: Insights from the IRS
IRS officials explained the draft instructions and the redesigned Form 990 during an IS member conference call on April 8. Learn More

IRS Releases Redesigned Form 990

The Internal Revenue Service unveiled its updated Form 990. The revised Form includes many of the elements that appeared in the draft version, including a core form and a series of schedules. However, in response to widespread comments from the charitable community and its advisors, the IRS has substantially changed the design and many elements of the Form and the schedules.

Beginning in May, 2009, organizations with gross annual receipts over $1 million or total assets over $2.5 million will be required to file the new Form 990 for fiscal year 2008 activities.

Transition Relief: The IRS announced a phased-in implementation period for the new form to allow smaller organizations time to prepare for the new requirements. At its option, an organization may file the simpler Form 990-EZ instead of the new form if it meets the following size criteria:

Electronic Postcard: The smallest nonprofits will be required to file a new electronic postcard (Form 990-N) beginning in 2008. The threshold for the Form 990-N is annual receipts under $25,000 for tax years 2008 and 2009, and $50,000 for 2010 and subsequent years. More on 990N.

In addition, for Schedule H (Hospitals) and Schedule K (Tax Exempt Bonds) organizations are required to fill out only the identifying information for tax year 2008, but must complete the entire schedules for 2009 onward.

Independent Sector is pleased that the revised Form allows organizations to describe their exempt purpose and accomplishments on the first two pages of the Form, and that the IRS has made many of the improvements we requested in financial, compensation, and governance information, as well as in other specific schedules. We believe the revised Form will facilitate accurate, complete, and consistent reporting by exempt organizations, will be easier for most entities to complete, and improve public understanding of how organizations operate. Independent Sector considers the new Form 990 a major step forward in accomplishing the nonprofit community’s goals of accountability and transparency.

Core Form
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.

16 Schedules
A few schedules include familiar questions or attachments from the old Form 990 that have been moved or rearranged, while other schedules 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 and transactions with interested persons (Schedule L); noncash contributions (Schedule M); information on liquidation, termination or dissolution (Schedule N); supplemental information for responses (Schedule 0); and related organizations (Schedule R).

Background on Draft Form 990
In June, the IRS released a draft of a major revision of the Form 990. Independent Sector filed detailed comments (PDF) on the draft form that support the goals of the IRS, but which make many recommendations for improving the implementation and substance of this informational return. IS conducted seven conference calls for members this summer to hear concerns and obtain suggestions on the draft form. We then posted draft comments for member review and response in early August, which were incorporated in final comments filed on September 14.The IRS has not proposed changes to the Form 990-PF.

Last updated: April 9, 2008