Form 990 Tax Update3 by QHRDSL7

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									2011 Form 990 – Tax Update
   & New Developments
About BKD Higher Education Team


 • Serve over 100 public and private colleges and
   universities

   •   Financial management
   •   Tax research and opportunities
   •   Resource management
   •   Student financial aid assistance
   •   Capital expenditures
   •   Endowment/performance
   About BKD

                      Joyce has more than 25 years of experience providing tax services with a focus on colleges
                      and universities, health care entities and not-for-profit organizations. She serves the
                      needs of families and their private foundations and trusts through innovative personal
                      financial and tax planning solutions.

                      Joyce performs comprehensive reviews of not-for-profit activities to identify and help
                      mitigate exposure areas related to private inurement, intermediate sanctions, worker
                      classification and unrelated business taxable income issues. She also has extensive
                      experience dealing with IRS examinations, obtaining favorable determination letters and
                      closing agreements.

                      Joyce is a member of the American Institute of Certified Public Accountants, Indiana CPA
                      Society, Council on Foundations and the Fort Wayne Estate Planning Council. She
Joyce Dulworth, CPA   currently serves on the board of the Foellinger Foundation and previously served on
Partner               boards of several other organizations, including Big Brothers Big Sisters of Northeast
                      Indiana. She is a frequent presenter for internal and external seminar programs and has
jdulworth@bkd.com
                      authored numerous tax articles.

                      Joyce is a 1983 honors graduate of Ball State University, Muncie, Indiana, with a B.S.
                      degree in accounting.
University of Nebraska - Lincoln

• For 143 Years, a Leader in Higher Education
• The University of Nebraska–Lincoln, chartered in 1869, is an
  educational institution of international stature. UNL is listed
  by the Carnegie Foundation within the "Research Universities
  (very high research activity)" category. UNL is a land-grant
  university and a member of the Association of Public and
  Land-grant Universities (APLU). The university is accredited by
  the Higher Learning Commission of the North Central
  Association of Colleges and Schools. UNL celebrated the
  143rd anniversary of its founding on Feb. 15, 2012
   University of Nebraska - Lincoln
                               •   Brad Sheriff is Assistant Vice Chancellor of Academic Affairs for Business and Finance at the
                                   University of Nebraska-Lincoln. In this role, he oversees and directs the business operations
                                   and financial affairs of the University’s academic enterprise.

                                   Brad’s career in higher education administration began in 1998 at the University of Illinois.
                                   During his nearly twelve years in the University’s Office of Business and Financial Services, he
                                   served in the positions of Business Analyst, Strategic Planning Coordinator, Administrative
                                   Director of Business Operations & External Relations, and Director of University Strategic
                                   Procurement. In 2010, Brad joined Indiana Wesleyan University as Associate Vice President
                                   for Business Affairs & Compliance. In this capacity, he led the areas of accounting and
                                   financial reporting, student accounts and cashiering, risk management and insurance, and
                                   procurement services. He also oversaw several auxiliary services and directed enterprise-
                                   wide compliance efforts.

                                   Brad has participated with the Big Ten Controllers’ Group, the Big Ten Purchasing Directors’
                                   Group, and is an active member of the Central Association of College and University Business
Brad Sheriff                       Officers, serving on the Business and Finance Committee as well as the Audit Committee. He
                                   has also served on the Midwestern Higher Education Compact Master Property Program
Assistant Vice Chancellor of       Leadership Committee and its Finance and Audit sub-committee. Brad has been a member
Academic Affairs for               of the Board of Directors of Educational & Institutional Cooperative Service, Inc. since 2010.
Business and Finance
                                   A Certified Management Accountant, Brad earned an MBA with honors from the University
bsheriff2@unl.edu                  of Illinois–Springfield and a BA in Business Management with honors from Greenville College.
                                   In 2009, he completed the Harvard Institutes for Higher Education Management
                                   Development Program, offered through Harvard University’s Graduate School of Education.
Agenda

• 2011 Form 990 significant changes
• Schedule F, J, H revisions
• New focus & initiatives of IRS on exempt
  organizations
2011 Form 990 Updates

• Core form generally similar to 2010 Form 990
   Instructions continue to clarify information
• Filing thresholds for Form 990-EZ is same as in 2010
   Less than $500,000 in total assets and
   Less than $200,000 in gross receipts
• To file Form 990-N postcard, organization normally
  must have less than $50,000 in gross receipts
2011 Form 990 Updates

• E-filing required for
    Form 990 filers with at least $10 million in total assets &
     filing at least 250 returns in calendar year
          Informational returns include W-2s, 1099s, & 941s
    Form 990-PF filers filing at least 250 returns in calendar
     year, regardless of asset size
    Form 8868 (extensions) may be filed electronically or in
     paper form
2011 Form 990 Significant Changes

• Instructions clarify who must file
    Governmental units & affiliates of governmental units
     described in Rev. Proc. 95-48 if also section 509(a)(3)
     supporting organizations
    Organizations required to file Form 990 series for given
     tax year must do so even if it has not yet filed Form 1023
     or 1024 with IRS
    Comment
• Name and address of principal officer & web site
  address should be current as of date of filing
2011 Form 990 Significant Changes

• Part VI, Governance, Management, and Disclosure
    Line 1a (total governing board members)
      • modified to note that if governing body delegated broad
        authority to executive committee or similar committee, filing
        organization must explain in Schedule O
    Line 1b (total independent governing board members)
      • clarifies director no longer loses independence because director
        or their family member was key employee of entity that
        engaged in Schedule L reportable transaction with organization
2011 Form 990 Significant Changes

• Part VI, Governance, Management, and Disclosure
    Line 2 (business and family relationships)
      • exempts from reporting certain business relationships in which
        officer, director, trustee or key employee of filing organization
        was key employee of another organization
    Line 7b
      • expanded to ask if any governance decisions are reserved to, or
        subject to approval by, persons other than governing body
2011 Form 990 Significant Changes

• Part VI, Governance, Management, and Disclosure
   Section B Policies
     • Instructions clarify that organization may answer “yes” to any
       question that asks whether organization has particular policy if
       either its governing body or committee authorized by governing
       body that adopted policy was adopted by end of tax year
   Section B, line 11 (providing copy of Form 990 to the
    board)
     • Instructions clarify organization should answer “no” if it merely
       informs governing body members that copy of Form 990 is
       available upon request
     • Comment
2011 Form 990 Significant Changes

• Part VII, Compensation
   Part VII, column (C) Position
     • Organizations check only one “position” box for each person
       listed in compensation table, unless individual is both officer &
       director or trustee
   Part VII reportable compensation
     • Reportable compensation for officers & employees includes
       compensation reported in Form W-2 box 1 or 5 (whichever is
       higher)
2011 Form 990 Significant Changes

• Part VII, Compensation
    Part VII columns (D), (E) & (F)
       • Left blank for short year returns in which there is no calendar
         year that ends within short year, unless return is final return
    Part VII, column (F)
       • Do not report amounts deferred (i.e., accrued bonus) paid with
         in 2 ½ months after end of tax year
2011 Form 990 Significant Changes

• Part VII, Compensation
    Part VII, column (F) other compensation
      • Include amounts of annual increase or decrease in actuarial
        value of defined benefit plan
      • Decreases in these amounts are disregarded for purposes of
        determining if compensation was more than $150,000
2011 Form 990 Significant Changes

• Part VII, Compensation
   The “transition rule” for non-section 501(c)(3)
    organizations is eliminated & former highest
    compensated employees must be reported in Part VII if
    they meet requirements
   Part VII, section B independent contractor compensation
     • Reported for calendar year ending with or within tax year
     • For short year return in which there is no calendar year that
       ends with or within short year, do not report any information
       unless return is final return. If return is final, report
       compensation paid to contractor during short period
2011 Form 990 Significant Changes

• Part VIII, Statement of Revenue
   Losses from:
     • Uncollectible pledges,
     • Refunds of contributions, or
     • Grant reversals
          Report as “other changes in net assets or fund balances” on Part XI, line 5
          Include explanation in Schedule O
   The value of donated services & facilities should not be
    reported as revenue
2011 Form 990 Significant Changes

• Statement of Revenue
   Contributions of conservation easements
     • Report consistently with reporting on the books and financial
       statements
   Medicare & Medicaid payments
   Other governmental payments made to pay or reimburse
    the organization for medical services provided to
    individuals who qualify under government program, and
   Who select service provider
     • Report on line 2 (Program Service Revenue)
2011 Form 990 Significant Changes

• Statement of Functional Expenses
   Clarified classification of expenses
     • Section 501(c)(12) organizations should report patronage
       dividends to members on line 4
     • Payments to contractors for information technology services
       should be reported on line 14
     • Medical supplies of health care organizations should be reported
       on line 24 (not line 13, office expenses)
     • The heading includes new checkbox that indicates organization
       must check if its Schedule O contains response to question in
       Part IX
     • Comment
2011 Form 990 Significant Changes

• Glossary revisions
    Control
      • Clarifies that a managing partner is a partner designated as such
        in partnership agreement or regularly engaged in partnership
        management

    Grants & other assistance
      • Revised to exclude certain payments made by VEBAs
2011 Form 990 Significant Changes

• Glossary revisions
    Significant disposition of net assets
      • Revised to exclude grants & assistance made in organization’s
        ordinary exempt-purpose activities
    “Term endowment” renamed “temporarily restricted
     endowment”
      • Includes donor-restricted endowments for a specific period
      • Other temporarily restricted net assets held in a donor-
        restricted endowment
      • Including income from permanent endowments
Joint Ventures & Investments

• Organizations should report amounts reported on
  Schedules K-1 and not financial statement amounts
   Distributive share amounts reported on Part VIII,
    Statement of Revenue
   Distributive share of partnership assets recorded to
    organization’s ending Schedule K-1 capital account
    reported on Part X
   Creates “book/tax” differences for Schedule D
    reconciliations
   Optional
2011 Form 990 – Schedule F

• Organizations with foreign investments valued at
  over $100,000 must complete Schedule F, Parts I &
  IV
• Previous focus was on program activities,
   fundraising & grant making abroad
2011 Form 990 – Schedule F

• Schedule F, Parts II & III (grants and assistance to
  individuals)
   Completed based on organization’s grant activity
    outside U.S. and inside U.S. for foreign purposes
   Comment
2011 Form 990 – Schedule H

• Most of Part V (501(r) reporting) mandatory for
  2011
   Questions 1-7 CHNA reporting optional for 2011
     •   Under 501(r), organizations operating as licensed hospital &
         tax-exempt [501(c)(3)] are required to complete CHNA at least
         once every three years, beginning with taxable years ending
         after March 23, 2012
2011 Form 990 – Schedule H

• Required sections focus on:
   Financial assistance policies,
   billing and collections, and
   emergency care
• Goals of increased disclosure ensure that hospitals:
   Limit charges for emergency/necessary care
   Comply with new billing and collection laws
   Complete required CHNAs
Increased Schedule J Explanations

• Substance of Schedule J similar to 2010
• Methods to determine CEO/executive director
  compensation
     Completed for reporting organization, not related
      organizations
       Organizations should explain in Part III if organization relied on
        related organizations using any of the methods listed to establish
        compensation
•   Comment
IRS FY 2012 Work Plan


• Compliance: Using Form 990
   IRS redesigned Form 990–promotes transparency &
    compliance
   Provides IRS with wealth of information on exempt
    organizations
   IRS has developed risk models to assess likelihood
    of noncompliance by tax-exempt organizations
IRS FY 2012 Work Plan – IRS Focus


• 501(c)(4), (5) & (6) organizations
    IRS will send comprehensive questionnaire to
     assess compliance in this area
• Political activity
    IRS continues to enforce rules relating to political
     campaigns & campaign expenditures
    Comment
IRS FY 2012 Work Plan – IRS Focus


• 990-T & UBIT
    Review organizations that report unrelated
     business activities but have not filed 990-T
    Analyze Form 990-T to develop risk models that will
     help identify organizations that consistently report
     significant gross receipts from unrelated business
     income but declare no tax due
    Comment
IRS FY 2012 Work Plan – IRS Focus


• Governance
    Review connections between certain governance
     practices & tax compliance
    Comment
IRS FY 2012 Work Plan – General Work


•   Colleges & universities
•   Disaster relief communication
•   Group rulings
•   Private foundations
Continued Increase in Audits

• Traditional examinations & compliance checks
  snapshot (FY 2004-FY 2011)




   Source: http://www.irs.gov/pub/irs-tege/fy2012_eo_work_plan_2011_annrpt.pdf
Not-For-Profit Tax Alerts

•   Significant 2013 & 2014 Business Tax Implications of Health Care Reform
•   How Tax Compliance Is Affecting Tax-Exempt Organization Governance
•   Gift Receipt Letters
        Comment
•   Fraternity Foundation - Loss of Exempt Status
        Comment
•   Anonymous Donor Reporting
•   Revocation of Exempt Status for Failure to File
•   Updated Public Disclosure Rules for Tax-Exempt Applications
•   No More Identification of Split-Interest Trusts on IRS Form 990
•   Filing Extension May Be Available for Exempt Organization Returns Reporting
    Requirements Under FFATA
•   IRS to Survey Exempt Organizations Regarding 2010 Compliance Burden
•   Government Financial Troubles & Assistance
Expiring Provisions Effective December 31,
2012

• American Opportunity Tax Credit
• Section 127 Employer – Provided Educational
  Assistance
• Student Loan Interest Deduction
• Coverdale Education Savings Accounts
AICPA Suggested Changes to Form 990

• Minor
• Technical
• Helpful
Questions?

								
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