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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.
Copyright © 2007, Davis Wright
Tremaine LLP.
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