Tax-Exempt Organizations Advisory Bulletin
Redesigned Reporting Form for Tax-Exempt
Organizations:
IRS Releases Draft Form 990
By Monica
Gianni
[June 2007]
On June 14, 2007, the Internal Revenue Service (IRS) released
for public comment a redesigned draft Form 990, Return of Organization
Exempt from Income Tax, the annual return required to be filed by
tax-exempt organizations. The IRS plans to have the form ready for
2008 returns filed in 2009. The draft is a significant redesign
of the form, which has been changed only on a piecemeal basis since
1979 and has not kept pace with changes in the tax-exempt sector
and the law.
The form’s redesign is based on three guiding principles:
(1) enhancing transparency to give the IRS and the public a realistic
picture of the organization, (2) promoting tax compliance by accurately
reflecting the organization’s operations, and (3) minimizing
the organization’s filing burden by asking questions in a
way that makes it relatively easy to fill out the form.
The current form consists of a nine-page core form, two schedules,
and 36 possible attachments. The new draft consists of a 10-page
core form to be filed by all Form 990 filers, and a series of 15
schedules to be filed only by those organizations that conduct certain
activities.
The IRS maintains that most organizations will not experience a
material change in their filing burden, although those with complicated
compensation arrangements, related entity structures, and activities
that raise compliance concerns, may see an increase in the effort
required to complete the form. The IRS estimates that more than
25 percent of filing organizations will need to file only three
of the 15 schedules, and that eight of the schedules will be completed
by less than 10 percent of all filing organizations.
Some of the highlights of the draft form are:
- Summary page. All organizations
must complete a summary page that provides the organization’s
identifying information and a snapshot of the organization’s
key financial, compensation, governance, and operational information.
- Executive compensation. Organizations
must provide additional information for certain highly compensated
individuals or those with complicated compensation arrangements,
including details on loans, deferred compensation, fringe benefits,
and retirement. A new question asks whether the organization has
paid for first class travel, club dues or use of a personal residence.
The form has been re-formatted to display compensation information
prominently on page 2.
- Governance. Information on board
composition and certain other governance and financial statement
practices must be provided.
- Hospitals. Organizations that
operate a hospital or medical care facility must furnish information
on aggregate community benefit, including information in charity
care and subsidized health services, as well as information on
billings, collections, and joint ventures. Hospitals must also
list the facilities and services the facilities provide, as well
as policies and activities involving communities served.
- Tax-exempt bonds. For borrowers
with bond issues of more than $100,000, reporting on the use and
investment of proceeds and relationships with outside advisers
is required.
- Non-cash charitable contributions.
Organizations that receive more than $5,000 of non-cash contributions
must report the types of contributions and valuation methods of
donees for financial reporting purposes.
- Other. New reporting areas include
accounting of political activity and inter-corporate fund transfers,
information on related entities and foreign activities, and uncertain
tax positions under Financial Accounting Standards Board Interpretation
No. 48.
The IRS has emphasized that the document is in draft form, and
the agency is actively soliciting comments. Comments must be submitted
by Sept. 14, 2007.
Click
here for more information on the Form 990 redesign.
For more information, please contact:
This advisory is a publication of the
Tax-Exempt Organizations and Health Law Groups of Davis Wright Tremaine
LLP. Our purpose in publishing this advisory is to inform our clients
and friends of recent legal developments. It is not intended, nor
should it be used, as a substitute for specific legal advice as
legal counsel may be given only in response to inquiries regarding
particular situations. Attorney Advertising. Prior results do not
guarantee a similar outcome. Thank you.
Copyright © 2007, Davis Wright Tremaine LLP.
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