New Form 990: Extreme Makeover

1. New Form 990: Extreme Makeover Fern N. Zappala, M.P.H, J.D. General Counsel ASHP March 3, 2008

2. Disclaimer • Any views or comments offered today are those of the presenter and should not be construed as the position of the ASHP. • This presentation is designed to provide accurate information in regard to the topic covered. It is provided with the understanding that we are not providing legal services or advice. If legal services or other assistance is required the services of a professional person in your area should be sought.

3. Objectives for Today’s Webinar • Raise awareness about the redesigned Form 990 • Discuss implementation dates • Impact on Form 990EZ and 990-N • Provide an Overview and Identify key areas in the new Form 990 • Suggestions for next steps

4. What is the Form 990? • Informational return to the IRS for 501(c) tax exempt organizations • Reports income, expenses, assets, liabilities and other information. • First redesign in over 30 years.

5. Why a redesigned Form? Fall out from Sarbanes-Oxley (for-profit sector) • Scandals in the Tax-Exempt Community • Changes in the activities of EOs • Congressional Inquiry on governance • Justification for tax-exempt status

6. IRS Principles behind a revised Form 990 • Enhance transparency for IRS and the Public • Realistic picture of exempt organization • Basis for comparing the organization to similar organizations • Promote tax compliance • Staying within exempt purpose • Appropriate Use of assets • Minimize burden on filing (??)

7. Implementation and effective dates • Revised Form 990 issued 12/20/07 by IRS • Revised Form 990 is for 2008 tax year (2009 filing season) • IRS Instructions in Spring 2008 (pending) • Form 990EZ and Form 990-N: relief for smaller organizations

8. 3 Year-Transition schedule for smaller exempt organizations that use Form 990-EZ 2008 tax year: - Gross receipts > $25,000 & < $1mil, and - Total assets at year end < $2.5 mil. 2009 tax year: - Gross receipts > $25,000 & <$500,000, - Total assets <$1.5 mil. 2010 and later: - Gross receipts >$50,000 &< $200,000, and - Total assets < $500,000

9. E-Postcard: Form 990-N • Gross receipts < $25,000 (2010 : threshold increases to < $50,000) • Simply identifies organization • Indicates justification for not filing a return • Electronic filing • Applies to tax years after 12/31/06 • Available to the public

10. Overview of Redesigned Form 990 • “Core Form” is 11 pages • 16 Schedules for specific activities • Expanded opportunity to provide descriptions and explanations, tell your story • Much of the new information is nonfinancial • Enforcement: $200,000 and/or 5 years in jail

11. Core Form: Parts I - X • Part I and II: Summary information and Signature block • Part III: Statement of Program Service Accomplishments (describe and explain) • Part IV: Checklist of Required Schedules • Part V: Other IRS Filings & Tax Compliance

12. Core Form con’t: Part VIGovernance, Management and Disclosure • Organization’s board composition • Level of Independence • Governance and management structure • Changes to governing documents • Documentation of board and key committees • Policies • e.g. whistleblower, document retention, COI, etc. • Board review of the Form 990

13. Core form: Part VII: Compensation of Officers, Directors, Trustees, key employees and Other HCEs and Independent Contractors • Current officers, directors, trustees and key employees (regardless of compensation) • Organization’s 5 current highest paid employees with >$100,000 • Current compensation to: • Former officers, key employees, or highest paid employees receiving >$100,000 in compensation • Former directors receiving > $10,000 of compensation • Top 5 Independent Contractors who received >$100,000

14. Core Form (con’t) Parts VIII, IX, X, XI ( financial information is largely unchanged) • Revenue • Functional Expenses • Balance Sheet • Financial Statements

15. 16 Supplemental Schedules • Designed to gather specific information about organization’s activities • Complete only relevant ones to your organization

16. A – Public Charity Support B – Schedule of Contributors C – Lobbying Activities D – Supplemental Financial Info E - Schools F – Activities outside US G – Fundraising/Gaming H – Hospitals I- Supplemental Info on Grants J- Compensation Information K- Supplemental Info on Tax Exempt Bonds L – Transactions with Interested Persons M – Non-cash Contributions N – Significant Disposition of Assets O – Supplemental Info to Form 990 R – Related organizations List of 16 Schedules

17. Possible Next Steps • Review and become familiar with the redesigned form and its reporting requirements. • Review your existing written policies and procedures. An opportunity to improve Board governance and management practices. • Be prepared to “tell your story” and describe your activities in more scope and detail. • Consider doing a draft return.

18. References • IRS. Available at http://www.irs.gov/eo • Panel on the Nonprofit Sector. Principles for good governance and ethical practice. Available at http:// www.nonprofitpanel.org. 2007, October. • Hauge, JC, Herman, ML. Engaging boards in risk management: 990 reform may be just what we need. Association Law and Policy - ASAE and the Center. 2007, August. • Tenenbaum, J, Hiller, A. Telling the IRS a better story: Unveiling of the 2008 form 990. ASAE and the Center. 2007, December.

19. Questions/Comments