Changes in IRS Form 990: What Every Nonprofit Should Know

1. Changes in IRS Form 990: What Every Nonprofit Should Know The Nonprofit Center at LaSalle University May 28, 2009

2. Elizabeth F. Pilacik, CPAChair, Non-Profit & Tax-Exempt ServicesSenior Manager, Accounting & AuditingAsher & Company, Ltd.epilacik@asherco.comDirect Dial: (215) 940-7853

3. What we will cover • Purpose of Form 990 • Form 990: Past and Present • Key Aspects of the Redesign • Phase-In Period • Reporting Impact • Operational Impact • Handout

4. Purpose of Form 990 • Promote tax compliance • Accountability • Enhance transparency • Marketing tool

5. Form 990: Past and Present • Form 990 History • First 990 filed in 1942 – Consisted of a two page form with three yes/no questions, an income statement, a balance sheet, and certain schedules (if applicable) • By 1976, Form 990 was still two pages, Schedule A consisted of four pages, and instructions were covered in seven and one-half pages

6. Form 990:Past and Present • Form 990 History (continued) • By 2000, Form 990 and Schedule A were each six pages, at least two pages for Schedule B (including instructions) and a separate forty-two page instruction booklet • Form 990 – Pre-Redesign (2007 returns filed in 2008) • Consisted of a nine page form, six pages for Schedule A, and one or more pages for Schedule B

7. Key Aspects of the Redesign • Increased focus – activities, not just numbers • Summary page – snapshot • Checklist of schedules • Enhanced reporting – related organizations, joint ventures, UBI • Targeted information – endowments, bonds, hospitals, major transactions, FIN 48

8. Phase-In Period • Revised Form 990 effective for the 2008 tax year (returns filed in 2009) • Phase-in period over three years for smaller organizations • For the 2008 tax year, organizations with gross receipts less than $1M and total assets less than $2.5M may file Form 990-EZ • Thresholds decrease for 2009 and 2010 tax years ($500K/$1.25M and $200K/$500K, respectively)

9. Reporting Impact • Governance • Programmatic • Financial Information • Tax Compliance

10. Reporting Impact:Governance • Year of formation • State of domicile • Number of voting members of governing body • Number of independent voting members • Total number of volunteers • Board interrelationships • Documentation of meetings (includes committees authorized to act)

11. Reporting Impact:Governance • Fraud disclosure • Written policies and procedures • Conflict of interest policy • Review of Form 990 by the Board • Policy/Process for determining and reviewing compensation • Policies over financial statements and financial reporting

12. Reporting Impact:Programmatic • Prominence of description of organization’s mission and significant activities • Programs disclosed by expenses, grants and revenues – identification of achievements • Enhanced disclosure of international activities

13. Reporting Impact:Financial Information • Two year presentation of revenue and expenses • Enhanced reporting of compensation of officers, directors, trustees, key employees • Donor advised funds • Endowment funds (five year presentation) • Fundraising activities • Enhanced reporting of non-cash contributions

14. Reporting Impact:Tax Compliance • Employment tax filings • Donor acknowledgement filings • Enhanced reporting of political and lobbying activities • Support schedule (facts & circumstances test) • Compliance with state filing and registration requirements

15. Operational Impact • How best to prepare • Review existing policies and procedures related to governance, public disclosure, compensation, relationships • Expand documentation • Evaluate information currently provided • Take a trial run of the new Form 990

16. Handout

17. Questions/Discussion

18. Concluding Remarks • What should you know? • Develop a pro-active approach • Enlist Board involvement • See the opportunities – growth, marketability • Enhance perception and accountability – to the public, to your peers