What’s New for Form 990

1. What’s New for Form 990 • Heavy redesign of Form 990 • Related changes to Form 990-EZ • New “Electronic Postcard” for very small exempt organizations

2. New 990 Overview • Redesigned for 2008 and later • First major revision since 1979 • 11 page, 11-part CORE form • 16 Schedules: A – O, and R • NO MORE WHITE PAPER SCHEDULES! Explanations go on Schedule O or on Form sections. • Phased-in filing requirement: smaller orgs may file a slightly-revised Form 990-EZ. • Draft 2009 990 shows little change from 2008

3. Why, oh Why? • Significantly expanded compensation section • New and extensive questions on governance policies and practices • Requires greater detail regarding foreign activities, fundraising and gaming, grants and assistance, related parties and organizations

4. 2008 Core Form . . . Core Form 990 Parts I through V . . . 2008 Compared with 2007

5. 2008 Core Form . . . Core Form 990 Parts VI through XI . . . 2008 Compared with 2007

6. The Schedules . . . 990 Schedules A - G . . . 2008 Compared with 2007

7. The Schedules . . . 990 Schedules H - N . . . 2008 Compared with 2007

8. The Schedules . . . 990 Schedules O - R . . . 2008 Compared with 2007

9. Small Organizations . . . Filing Requirement Phase-In

10. Form 990-EZ . . . • Essentially the same as 2007, BUT . . . • Some information previously reported on attachments will now go on schedules. • 990-EZ filers may have to file one or more new Schedules: A, B, E, E, G, L, and N.

11. New Form 990 Instructions . . . • New instruction features make transition and preparation easier: • Instructions are written in a more “user-friendly” format • Core 990 section “sequencing list” outlines the order in which the form should be prepared • New IRS Glossary of key terms • New compensation section includes comprehensive table to help with proper classification of every conceivable form of compensation or benefit • The 2009 instructions are expected to be expanded and more detailed – so if you’ve already done a 2008 return, don’t necessarily expect things to be the same for 2009

12. The Biggest Changes . . . • The new 990 has caused an uproar in the exempt and practitioner communities • The two sections drawing the biggest interest: • Part VI – Governance, Management and Disclosure • Part VII – Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors

13. Governance Policies . . . • Suggested written policies: • Conflict of interest policy for board members, officers, senior staff, consistently monitored • Whistle-blower policy (Sarbanes-Oxley) • Document retention and destruction policy (Sarbanes-Oxley) • Investment and/or joint venture policy • Gift acceptance policy (review of nonstandard donations; Sch M) • Compensation policies: salary and benefits (“rebuttable presumption” standards), payment of “perks” (Sch J) • Parent-subordinate consistency policy

14. Governance Procedures . . . • Suggested procedures: • Contemporaneous documentation of board and committee meetings • Full board review of Form 990 prior to submission to IRS • A board composition reflecting broad public interest, and minimizing potential for misuse: • Independent members • A minimum of members with family or business relationships • Full disclosure of business and family relationships

15. Public Disclosures . . . • Form 990 and Form 1023 or 1024 (this actually is mandatory), and how disclosed • Form 990-T, charities (also mandatory) • Governing documents, conflict of interest policy, financial statements (audited or unaudited)

16. This is VERY IMPORTANT!! • Some questions asked in the governance section require policies to be in place by end of your tax year – if a “yes” answer is desired. • Organizations are NOT REQUIRED to have these policies in place! But organizations need to carefully consider each suggested policy and procedure, weigh its usefulness, and construct a reasonable explanation for each answer . . . remembering that Form 990 is a public document.

17. Compensation . . . • Greatly expanded over prior years • Non-charities must now disclose 5 highest-paid employees (over $100,000) • “Key employee” definition expanded significantly

18. Who Gets Reported? • All officers – at a minimum, those officers statutorily defined by state law • De facto officers – chief management official (CEO, EVP, etc) and chief financial official (CFO, VP Finance, etc.) • Directors or trustees with voting rights who served at any time during the year • Key Employees • 5 Highest Paid employees (> $100,000)

19. Who is a “Key Employee?” • Three-prong test: • Reportable compensation from reporting and related organizations > $150,000 • Responsibility test: • Responsibilities, powers, influence over whole organization similar to officers, directors, trustees, OR • Manages segment of => 10% of activities, assets, income, or expenses, OR • Has or shares authority over => 10% of capital expenditures, operating budget, or employee compensation • One of top 20 such persons, ranked by reportable compensation

20. What Gets Reported? • Reportable compensation from the reporting organization and related organizations • Amount in Box 5 of Form W-2 or Box 7 of Form 1099-MISC • For the calendar year ending within the tax year • Other compensation from the reporting organization and related organizations • Deferred compensation that’s not taxable • Certain nontaxable benefits

21. Details, Details . . . • ALL reportable compensation of the reporting organization must be included • Reportable compensation from related organizations is included if it is $10,000 or more • Other compensation is generally subject to a $10,000-per-item floor, except for 5 items that must be reported, regardless of amount

22. Formers . . . • Part VII also requires the reporting of “formers” • Officers and key employees: • Performed services during the tax year • Received > $100,000 reportable compensation • Officer or key employee within the last 5 years • Directors and Trustees: • > $10,000 reportable compensation • Paid in capacity of former director or trustee • Former director or trustee within the last 5 years

23. Formers . . . • Former 5 highest paid employees: tricky! • > $100,000 reportable compensation • Change in position: employed in a different position, or by a related organization, or gone from the organization BUT was a “5 highest paid” during the past 5 years • Reportable compensation would place him or her within the current year’s “5 highest paid” • 5-year look-back rule does not apply to non-charitable organizations if they did not have the 5HP requirement in a look-back year

24. Schedule J . . . • Thought you were done with compensation reporting? Nope. • Schedule J is in addition to Part VII. • Some Part VII individuals are subject to expanded compensation reporting requirements: • ALL “formers” • Reportable + other compensation > $150,000 • Paid by an unrelated org for organization services

25. Compensation Questions . . . • Questions generally apply only to persons listed in Part VII: • List and explain “perks” - first class or charter travel, discretionary spending account, housing allowance, club dues, personal services, more • Explain how CEO/Executive Director’s compensation is determined • Explain severance payments, “change in control” payments, equity-based compensation arrangements

26. Compensation Questions . . . • 501(c)(3) and (4) organizations get special questions relating to private inurement potential: • Payment or accrual of compensation contingent on organization revenues • Payment or accrual of compensation contingent on organization net earnings • 501(c)(3): “. . .no part of the net earnings of which inures to the benefit of any private shareholder or individual . . .” • 501(c)(4): “ . . . and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.”

27. Expanded Reporting . . . • The rest of Schedule J involves expanded reporting • W-2 or 1099 compensation is broken into components • ALL reportable and other compensation is included – no minimums • Includes deferred compensation, nontaxable benefits, previously reported compensation

28. Also Pay Attention to . . . • Schedule C: • Pointed questions designed to uncover improper political activity, excessive lobbying • Expanded PAC contributions reporting • Schedule D: if an organization has a FIN 48 footnote in its audited financials, it must be reprinted word-for-word • Schedule L: hugely expanded version of “related party” questions in previous 990s • Schedule R: report transactions with certain related organizations, disregarded entities, partnerships, corporations

29. 990 “e-Postcard” • In the past, orgs with less than $25,000 filed nothing with the IRS. • Now, an “e-postcard” is required of all organizations with less than $25,000 in annual gross receipts. • Thus, if you’ve got an EIN, you now need to file something with the IRS each year.

30. 990 “e-Postcard” • For December 2009 CYE orgs, due date is May 15, 2010. • Fiscals: due by the 15th day of the fifth month after the end of the fiscal year. • Any organization that fails to file a required e-postcard for three years in a row will AUTOMATICALLY lose its tax exempt status.

31. 990 “e-Postcard” • What information should you have handy: • EIN • Tax year • Legal name and mailing address • Any “DBA” names used • Name and address of a principal officer • Web site (if there is one) • Make sure gross receipts are normally less than $25K • Termination/liquidation information (if applicable)

32. 990 “e-Postcard” • Well, OK, how do you file this thing, anyway? • Can ONLY by submitted electronically. • Go to ePostcard.Form990.org • This site is hosted by the Urban Institute – this is ok, they’re an IRS “trusted partner.” • Follow the instructions.

33. Questions???