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If you’re interested in collaborating with others regarding the new Form 990, think about heading over to the National Center for Charitable Statistics and Guidestar’s wiki. If you’re not familiar with wikis, they are collaborative websites which can be edited by anyone. Sounds like a disaster, but usually they work quite well (like Wikipedia… usually). This is a great resource if you want to learn more about the revision or add your two cents to the discussion on how it can be improved.

Thanks to Gene Takagi’s Nonprofit Law Blog for the pointer…

Today’s IRS teleconference on the new Form 990 was interesting. Here are the highlights:

Reasons for change & approach
The form is outdated… it was last updated in 1979. Since then there have been an explosion in the number and sophistication of tax exempt organizations. The current form has been “jury rigged” to deal with changes, and that has not been effective. The form can’t be renumbered in the current system, so the form often makes no sense. This leads to incomplete and incorrect filings.

The new form is designed to increase transparency, improve compliance and reduce burden on filers. One of the ways to deal with this was to reduce the number of schedules and restructure the whole form so that it makes more sense and is more consistent, especially for smaller organizations.

Overview of the redesign

• A summary or snapshot of the organization… the information all comes from other places on the form
• New calculation of efficiency and effectiveness indicators (seeking comments on this)
• Five highest compensated individuals (not just officers, etc.) – must use W2 or 1099 reporting and it expands beyond just 501(c)(3)s
• City and state of residence for individuals added (currently allows address of the organization)
• Page 4 – mostly new questions on governance (seeking comments)
• More breakdown on types of support and some forms of expenses
• Part VII – trigger questions for filing schedules (seeking comments)
• Part VIII – trigger questions for filing other IRS forms (seeking comments)
• Trimmed to 15 Schedules… some highlights:
• Schedule A is still for (c)(3)s only but it has been streamlined. It includes a public support test section with a five year period instead of four. Lobbying information has moved to Schedule C.
• Schedule B is largely unchanged (lists donors).
• Schedule C includes lobbying and inter-organization transfers with 527s.
• Schedule D has a mix of old and new, including Donor Advised Funds
• Schedule F has new information on foreign activities
• Schedule G has new information on third party fundraising (not internal development officer information, however)
• Schedule I still covers grants, but there are some changes
• Schedule J is new and targets information on highly compensated individuals

More information on the draft Form 990 is here. As far as the Form 990 goes, it looks like this new form may be simpler to handle, but as with any change, people who are used to the old form may be puzzled by the proposed changes. It seems like the IRS has put a lot of effort into this redesign, but it remains to be seen the degree to which this helps smaller nonprofits. There may be some threshold changes to the Form 990-EZ to help with that, but those changes are unclear right now (the IRS is seeking comment on that). The very smallest of organizations will be filling out a new Form 990-N beginning in 2008… basically a postcard that includes very limited information for filing.

Comments are due by September 14th (details here) in order to get this new form ready for fiscal 2008 (filed in 2009). The IRS rep says that if the new form is not finalized by December of this year it could not be implemented until 2012. That seems odd, but it apparently has something to do with the IRS technology division… and you don’t want to argue with them, I suppose.

Next Tuesday, the House Ways and Means Oversight Subcommittee will hold a hearing on the new Form 990 and the impact on tax-exempt organizations. The subcommittee will hear testimony from the IRS, GAO and some select nonprofits. If you’re interested in weighing in, you can let the Oversight Subcommittee know your thoughts here. I’ll post some thoughts next week after the hearing.

The IRS is hosting two days of teleconferences as part of its roll-out of the new Form 990. It’s definitely attracting some attention, as the first day is totally booked. The remaining available slot is July 19th from 1-2 PM EDT.

If you’re the point person at your nonprofit that fills out the annual tax return (aren’t you lucky!), this might be of interest to you. If you’re already booked during the big show, or would alternatively rather do something… anything else, I’m signing up for it and will post the scoop here.

The Chronicle of Philanthropy has a great article that breaks down the brand new, ink-still-wet Form 990. The highlights:

• Lots of new schedules following a 10 page “core” form that all groups fill out
• Supplemental compensation information for the highly-paid executives of nonprofits (>$150k)
• A narative section for the most significant accomplishment for the year
• A new schedule devoted to fundraising

There’s a lot more… check out the Chronicle’s article for the summary.

This is not the final form… the IRS is taking comments through September 14. If you’re interested in checking out the draft, or in making comments go to the IRS draft 990 site and fire away. I’m still digesting the proposed changes… clearly the new form asks for more information, and I’m unsure what the practical utility is for some of these adds.

One last note… the proposed form will not go into effect until the 2008 tax year, so none of this really hits until 2009. Seems like it’s far away, but it will be here before you know it!

A Senate committee wrote the Treasury Department a letter asking the IRS to include additional disclsoures in the Form 990 annual tax return. Specifically:

• Executive pay and perks
• Expanded questions on governance
• Expanded questions on endowments
• Related organizations and joint ventures (to determine if there are private benefits)
• The amount of money spent on fundraising

The next Form 990 may be more time-consuming to complete if all of these measures are adopted, but they certainly would give the public a better understanding of the internal workings of any given charity. The devil’s in the details, however… if the IRS agrees and adds these sections in a new 990, but gives poor guidance on how one fills out the section, there could be problems. More to come on this, to be sure…

This has been threatened promised for a few years now… the Wall Street Journal reports on the latest here.

Not sure if this has been on anyone’s radar in the 501(c)(3) community, but it popped up for me recently in my role as a director for the Tranquil Space Foundation. It’s a very new public charity that will not likely have more than $25,000 in gross receipts for this tax year. Previously, that meant the charity did not have to file a Form 990 return with the IRS. However, the Pension Protection Act of 2006 made some changes starting in 2008. The IRS says:

Beginning in 2008, exempt organizations with gross receipts under $25,000 must file an annual notice.*

*Information on how to comply with these provisions will be available on this site soon.

First, define “soon” and second, what kind of annual notice will that be? A 990? Some kind of a “990-EZ”?

This is a pretty big deal since small charities previously avoided the paperwork hassles (and they can only be described that way) of filling out a Form 990. Now, we at the Tranquil Space Foundation fully expected to be pulling in gross receipts larger than $25,000 by then, so this doesn’t really change our plans. However, for small community groups and other 501(c)(3)s that benefitted from this exception… sharpen your pencils… you’ll be filling out a 990 of some kind for FY2008.