Independent Sector Policy Update
February 23, 2006
 

Other Policy Issues Federal Bill Tracker Nonprofit State Legislation Tracker (PDF) (IS members only) Past Policy Updates 1. House-Senate Conference to Begin on Tax Bill Including Charitable Provisions 2. IRS Releases Revised Form 990 3. IRS to Hold Phone Forums on Form 990 4. Postal Reform Bill Goes to Conference

House-Senate Conference to Begin on Tax Bill Including Charitable Provisions
House and Senate conferees will begin working out differences in tax reconciliation legislation at the end of February. The Senate version of H.R. 4297 (formerly known as S. 2020) includes an important package of charitable giving incentives and reforms, many of which mirror recommendations of the Panel on the Nonprofit Sector. The House version does not contain these provisions.

The House named the following members to the conference committee: Ways and Means Committee Chairman Bill Thomas (R-CA), Ranking Democrat Charles Rangel (D-NY), and Reps. Jim McCrery (R-LA), Dave Camp (R-MI), and Pete Stark (D-CA). The Senate conferees are Senate Finance Committee Chairman Charles Grassley (R-IA), Ranking Democrat Max Baucus (D-MT), and Senator Jon Kyl (R-AZ).
Independent Sector would like to see the Senate version adopted as long as five specific provisions are amended or dropped from the bill in conference. IS and a number of our members have been actively working to convince the conferees to make the changes we are requesting.
IS will be sending a letter to the leaders of the House-Senate conference (Senators Grassley and Baucus, and Representatives Thomas and Rangel) stating our support for the charitable giving incentives and identifying the specific changes to the reforms that we believe must be made in conference. (See the 5 changes listed in the letter)

We urge you to join us in this effort by emailing us at PublicPolicy@IndependentSector.org and indicating that your organization will sign on to this letter as soon as possible – but no later than Friday, February 24. Read the Sign-on Letter (PDF)

IRS Releases Revised Form 990
The IRS has released a revised Form 990 containing changes that reflect areas of concern with tax-exempt accountability that the IRS has been focusing on lately. Form 990-EZ and Schedule A have been revised as well. The changes were originally proposed in draft forms that were released in 2005.

The new Form 990 now asks organizations to check boxes in Part II and Part III if they made any foreign grants. Similarly, under Part VI, (Question 91) there are now additional questions about whether the organization maintains an office or has a financial account in a foreign country. These questions have also been added to the new Form 990-EZ (in Parts III and V).

Part V of the revised form now requests additional information for current officers under Part V-A, and includes a new section for former officers (Part V-B). Part V-A also now asks whether the organization has a written conflict of interest policy.

The new questions under Part V-A include how many officers are permitted to vote at board meetings, whether any are related to each other through family or business relationships, and whether any receive compensation from any other related organization, including 509(a)(3) supporting organizations. The instructions for the Form 990 lower the compensation threshold amount for reporting relationships under this section from $100,000 to $50,000 and provide a revised definition for “related organizations.” The instructions explain that “related organizations are tax-exempt or taxable entities with a close connection” and provide a list of factors describing “close connection” including: common control, common governance, direct or indirect ownership, coordination of operations, or common persons exercising substantial influence over the organizations. The instructions explain that “the close connection that creates related entities includes, but is broader than direct or indirect ownership or control.” New section Part V-B specifically asks about any loans and advances received by former officers in addition to other types of compensation.

The revised Schedule A for Form 990 divides a question about compensation of independent contractors into two parts – one section for professional services and a second for “other” services. The new Schedule A also includes a new question under Part III about whether the filing organization received a contribution of real property for conservation purposes. Additionally, Part IV now asks supporting organizations to check a box identifying whether it is a Type 1, 2, or 3 supporting organization.
These changes have been described as incremental. A more comprehensive overhaul of the forms is still ongoing at the IRS. The IRS will begin mailing the new forms towards the end of February to organizations that have tax years ending December 31, 2005 through April 30, 2006.

Revised Form 990
Instructions for Form 990
Packets of Forms are available on the IRS website.

IRS to Hold Phone Forums on Form 990
The IRS will be holding two “Phone Forum” briefings on March 22, 2006, at 10:00 am EST, and March 23, 2006, at 1:00 pm EST to provide an overview of proper preparation of the Form 990. The briefings will focus on areas that most commonly have errors. For more information see the IRS website.

Postal Reform Bill Goes to Conference
The House and Senate have each passed postal reform bills (H.R. 22 / S. 662) and are ready to go to conference to work out the differences in the two measures. Among other reforms, both bills contain provisions that may forestall future postage rate increases by allowing the Postal Service to transfer back to the Treasury the responsibility of funding pension benefits for postal workers with former military service. This responsibility was shifted to the Postal Service in 2003 and the White House is opposed to switching it back to the Treasury.

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