If you are an officer or director of a tax-exempt organization, or are involved in running one, get ready. The new Form 990 is coming, and it will be here sooner than you may realize.
Form 990 is the annual return which tax-exempt, not-for-profit organizations file annually to report their revenue, expenses, assets, and liabilities and describe their activities to the Internal Revenue Service. And some of the new questions are already stumping nonprofit managers.
For tax years beginning on or after January 1, 2008, these organizations will now be required to file the new form. Thus, by now, most nonprofits should already be in the midst of a tax year for which they will have to file the new Form 990. (Organizations whose gross receipts and assets fall below certain threshold amounts will be allowed to file the simpler Form 990-EZ instead, or, for the smallest organizations, an "electronic postcard" known as Form 990-N.)
The IRS has described its motives in dramatically expanding the Form 990 as "(1) enhancing transparency to provide the IRS and the public with a realistic picture of the organization; (2) promoting compliance by accurately reflecting the organization's operations so the IRS may efficiently assess the risk of noncompliance; and (3) minimizing the burden on filing organizations." It's quite possible that the first two goals will be achieved, but the third goal will be more difficult to accomplish due to the expansion of the form.
The new Form 990 consists of an 11-page "core form" and a series of schedules labeled A through R. In fact, two pages of the core form feature nothing but questions intended to determine which schedules the organization is required to file.
Some of these schedules will be filled out by a great many organizations. For example, Schedule A will require charitable organizations to demonstrate that they still qualify as public charities (rather than being private foundations). Schedule B will continue to be the place for organizations to list their major contributors - as in the past, the names and addresses of the contributors will not be subject to public disclosure (except for private foundations filing Form 990-PF and certain political organizations). Other schedules will be limited to organizations of certain types, such as Schedule E for schools and Schedule H for hospitals. And still others, such as Schedule J, will apply only to organizations which engage in relatively rare activities such as issuing tax-exempt bonds.
Most of the content of a Form 990, is and will continue to be, available for public disclosure. In fact, many organizations' 990s can be accessed online without charge at Guidestar.org. Consequently, directors and officers of nonprofit organizations should remember that this form will not only be reviewed by the IRS, but also by donors and potential donors as well. And some of the questions on the new form appear to be designed to require organizations to adopt certain policies, at the risk of being shamed if they don't.
For example, Form 990, before the changes for 2008, already asked, "Does the organization have a written conflict of interest policy?" Now, however, the form will also ask: "If ‘Yes' ... are officers, directors or trustees and key employees required to disclose annually interests that could give rise to conflicts? Does the organization regularly and consistently monitor and enforce compliance with the policy?" The new Form 990 also introduces questions such as "Does the organization have a written whistleblower policy?" and "Does the organization have a written document retention and destruction policy?" Few organizations will want to answer "No" to questions such as these. Therefore, organizations should plan to fill any gaps in their policies as soon as possible, so that they won't be stuck when the filing deadline for Form 990 comes around.
The Law Offices of Marc J. Lane is happy to help nonprofit organizations negotiate the ins and outs of the new Form 990. More important, we'll help you address the tough policy questions to stay on the safe side of the law while successfully advancing your organization's mission. To get started - it's not too soon -- please contact Marc Lane, personally, by e-mail at [email protected] or call him at (312) 372-1040 (or nationally at (800) 372-1040).
Joshua S. Kreitzer (B.A., Harvard University; M.A., University of South Florida; and J.D., Northwestern University ) is Senior Associate Attorney with The Law Offices of Marc J. Lane, a Professional Corporation
The Lane Report is a publication of The Law Offices of Marc J. Lane, a Professional Corporation. We attempt to highlight and discuss areas of general interest that may result in planning opportunities. Nothing contained in The Lane Report should be construed as legal advice or a legal opinion. Consultation with a professional is recommended before implementing any of the ideas discussed herein. Copyright © 2008 by The Law Offices of Marc J. Lane, A Professional Corporation. Reproduction, in whole or in part, is forbidden without prior written permission.