Public Policy
IRS Releases Revised Form 990 Instructions, Background Documents
The Internal Revenue Service released revised instructions for the redesigned Form 990 on August 19, 2008, along with additional background documents to help nonprofits make the transition to the new form. As announced previously, adjustments were made in areas including: narrowing the definition of key employee; allowing reasonable efforts for obtaining information about interested or third parties in certain sections; and the standard for determining independence of board members. Clarifications were also made in reporting compensation, as well as business relationships and transactions with interested persons. The revised instructions also include the listing of countries according to nine geographic regions to be used for reporting activities outside the United States and a revised definition of hospital.
Independent Sector filed detailed comments on June 2, 2008 with the Internal Revenue Service on draft instructions for the redesigned Form 990, the primary annual information return for many tax-exempt organizations. IS commended the IRS for its effort to bring greater clarity to the revised Form 990 and to address concerns expressed by the nonprofit community in response to the initial draft Form.The IS comments offered suggestions for clarifying definitions and highlighted opportunities where the IRS can use the instructions to continue its commitment to educating the nonprofit sector. The comments also made specific recommendations on such issues as defining the term “key employees” based on positions, board or committee review of the Form 990 prior to filing, the need for a reasonable delay in applying a new standard on indirect political activities of partners in joint ventures, and the inapplicability of unrelated business activity codes to exempt programs.
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, 2008. Learn More
The revised Form 990 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.
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 2007, 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, 2007. The IRS has not proposed changes to the Form 990-PF.
Last updated: January 2, 2009
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