CHALLENGES OF NEW FORM 990 FOR NONPROFITS
First Run Broadcast: March 2, 2010
1:00 p.m. E.T./12:00 p.m. C.T./11:00 a.m. M.T./10:00 a.m. P.T. (60 minutes)
The world of nonprofits was recently shaken again when the IRS made the most substantial revision to Form
990, the core income tax return of exempt organizations, in 30 years. The new form substantially alters prior
practice in the areas of governance and compensation, complicating the advice given by attorneys to non-profit
organizations. This program will provide a real-world guide to the new governance questions, compensation
issues, disclosures and donation issues. The program will also cover areas of regulator concern for examination
purposes and best practices to avoid penalties.
Overview of changes made in new Form 990 for nonprofits
Responding to governance and management questions
Executive compensation issues
Areas of regulatory focus and best practices to avoid penalties
Michele A. W. McKinnon is a partner in the Richmond, Virginia office of McGuireWoods, LLP, where she is
considered one of the region’s leading authorities on tax-exempt organizations and charitable giving. She has
more than 20 years experience representing public charities, major colleges and universities, supporting
organizations, large private foundations, and charitable trusts. She is a Fellow in the American College of Trust
and Estate Counsel and currently serves as its Virginia State Chair. She is also a member of the Fiduciary
Income Tax Committee of the ABA Tax Section and the former chair of the Trusts and Estates Section of the
Virginia State Bar. Ms. McKinnon received her B.A. from the University of Virginia, her J.D., magna cum
laude, from the University of Richmond School of Law, and her L.L.M. in taxation from the College of William
& Mary Marshall-Wythe School of Law.
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CHALLENGES OF NEW FORM 990 FOR NONPROFITS , TELESEMINAR
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CHALLENGES OF NEW FORM 990 FOR NONPROFITS, TELESEMINAR
March 2, 2010
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CHALLENGES OF THE NEW FORM 990 FOR NONPROFITS
March 2, 2010
Michele A. W. McKinnon
1. On December 20, 2007, the IRS released a redesigned draft Form
990 followed by draft instructions for the redesigned Form 990 on
April 8, 2008.
2. On December 23, 2008, the IRS finalized the Form 990 and
instructions for filing for 2009 tax years.
3. In early 2010, the IRS released the Form 990 for the 2009 tax year
noting certain additional changes to the form for the 2009 filing
year. See the attachment for the IRS summary of the significant
changes on the 2009 Form 990 and schedules.
4. On January 21, 2010, the IRS issued News Release 2010-10
reminding tax-exempt organizations to file their annual
information returns timely noting that in 2010 the tax-exempt
status of any nonprofit organization that has failed to file its
exemption application during the last three years will be revoked
under new laws enacted as part of the Pension Protection Act of
2006. A list of organizations whose exemption is so revoked will
be made available to the public as well as state charity and tax
B. Reasons for Redesign.
1. First redesign of the Form 990 since 1979.
2. Form 990 had not kept pace with changes in the exempt
organizations sector and the law applicable to exempt
3. Piecemeal revisions of the Form 990 had rendered the Form 990
less helpful to the exempt organization sector and the public.
C. Goals for the Redesign of the Form 990.
1. Reflect manner in which the exempt organization sector operates
in the 21st century.
2. Emphasize the increasing size, diversity, and complexity of the
exempt organization sector.
3. Enhance transparency and accountability.
4. Promote compliance.
5. Minimize filing burden on filing.
D. Guiding Principles for Redesign. The redesign of the Form 990 was
based on three guiding principles.
1. Enhancing transparency by providing the IRS and the public with a
realistic picture of the organization and its operations along with
the basis for comparing the organization to similar organizations.
2. Promoting compliance by insuring that the Form 990 accurately
reflects the organization’s operations and use of assets, enabling
the IRS to efficiently assess the risk of noncompliance.
3. Minimizing the burden on filing organizations by asking questions
in a manner that makes it relatively easy to fill out the form and
that do not impose unwarranted additional recordkeeping or
information gathering burdens to obtain and substantiate the
E. Overview of Revised Form 990.
1. The revised Form 990 consists of an 11 page core form and a
series of 16 schedules.
2. The structure of the redesigned Form 990 provides a method for
organizations to share publicly how their operations and finances
are consistent with their missions.
3. The redesigned Form 990 provides insights into the issues of
concern to the IRS and Congress.
4. The redesigned Form 990 provides a great deal of information to
the IRS that may be used in enforcement actions against
F. Filing Requirements.
1. Private foundations must file Form 990-PF.
2. Supporting organizations must file either Form 990 or Form 990-
3. Organizations (other than private foundations and supporting
organizations) whose gross receipts are normally below $25,000
do not need to file Form 990 or 990-EZ, but instead are required to
make an electronic notice filing on Form 990-N.
4. Organizations (other than private foundations and supporting
organizations) must file either Form 990 or Form 990-EZ.
5. Who must file the new Form 990?
a. For the 2008 tax year, organizations with over $1 million in
gross receipts or total assets over $2.5 million were
required to use the new Form 990.
b. For the 2009 tax year, organization with over $500,000 in
gross receipts or total assets over $1.25 million must use
the new Form 990.
c. For the 2010 tax year, organizations with over $200,000 in
gross receipts or total assets over $500,000 must use the
new Form 990.
6. Organizations (other than private foundations) that are not required
to file the new Form 990 must file either Form 990-EZ or, in the
case of organizations other than supporting organizations, the
7. Failure to file a Form 990, Form 990-EZ, Form 990-PF, or Form
990-N for three consecutive years (beginning in 2007) will result
in automatic loss of exempt status.
II. THE CORE FORM
A. Overview. The core form must be completed by all filing organizations.
Major changes include:
1. A front page summary with key financial and operating
2. A new section on governance matters and policies.
3. Revised compensation reporting.
4. Revised reporting on related organizations.
B. Part I – Summary. The focus of Part I is to help the public gain more
and better knowledge of the organization.
1. Before the Summary.
a. The top of page 1, Questions A-M provide space for a
variety of introductory information, much of which is new
to the Form 990.
b. There is space for an assumed name, a box to check if the
organization’s name has changed, a box for the type of
entity, the year of formation, and the state of legal
2. The Summary. The Summary is designed to enhance
transparency by providing key information on the first page for the
benefit of the public.
a. The Summary summarizes information found elsewhere on
the Form 990. It is a snapshot of the key financial,
governance, and operational information regarding the
b. The Summary includes information regarding:
(1) The organization’s mission.
(2) Unrelated business income revenue and
professional fundraising expenses.
(3) Number of directors or trustees and number of
independent directors or trustees.
C. Part II – Signature Block. The signature block has been moved from the
end of the Form 990 to the beginning of the Form 990.
D. Part III – Statement of Program Service Accomplishments. Part III
allows the organization to describe briefly its mission (again), new
activities undertaken during the year, any activities ceased during the year,
and three largest (by expense) program services.
1. The mission set forth in this Part should be consistent with the
mission as set forth in Part I.
2. New activities, activities no longer engaged in, and program
services other than the three largest should be described on
3. This section offers a great opportunity for the organization to
promote its accomplishments to the public.
E. Part IV – Checklist of Required Schedules. This checklist is designed
to assist the organization in determining which of the 16 schedules to the
Form 990 it is required to file. By completing the checklist, the
organization will know exactly what schedules to complete and file as the
list is comprehensive.
1. The goal of this Part of the core form is to ease the filing burden by
listing all of the trigger questions for schedules in one place to
assist organizations in determining which schedules they are
required to complete.
2. The trigger questions are sequenced in a logical way, going
through each schedule alphabetically and each part of each
F. Part V – Statements Reporting Other IRS Filings and Tax
Compliance. Part V addresses various IRS filings and tax compliance
matters that apply to exempt organizations. It is designed to alert the
organization to potential federal tax compliance matters and filing
obligations and collect important federal tax information in a single place.
1. This Part requests information that should alert organizations to
compliance issues regarding employment taxes, unrelated business
taxable income, foreign bank account reporting requirements,
solicitation disclosures, donor advised funds, and supporting
2. This Part will also alert the IRS to compliance issues and
potentially trigger investigations.
G. Part VI – Governance, Management, and Disclosure. This is one of
the more controversial provisions of the new Form 990. It incorporates
the idea that good governance and accountability practices provide
safeguards to ensure that organizations will use their assets in a manner
consistent with their exempt purposes. In addition to seeking significant
amounts of information regarding the governing body of the organization,
it also asks whether the organization has a number of policies, including a
conflict of interest and a whistleblower policy. Many of these questions
do not pertain to requirements for tax exemption under federal law, but the
IRS believes it has the authority to ask these questions and that good
governance practices promote compliance with the tax laws. The IRS has
indicated that organizations that do not have these policies may run a
greater risk of audit depending upon other responses on the Form 990.
1. The first Section of the new governance part of the Form 990
requests answers to a number of very specific questions about the
governing body and management of the organizations. These
a. The number of voting members of the Board.
b. The number of voting directors or trustees who are
c. Whether any officer, director, trustee, or key employee has
a family or business relationship with any other officer,
director, trustee, or key employee.
d. Whether the organization delegates control over
management duties customarily performed by or under the
direct supervision of officers, directors, trustees, or key
employees to a management company or other person.
e. Whether the organization made any significant changes to
its Articles of Incorporation or Bylaws since the filing of its
last Form 990.
f. Whether the organization became aware of any material
diversion of its assets during the year.
g. Whether the organization has any members or stockholders
and, if so, whether they elect the directors or trustees or
have any approval rights over actions by the governing
h. Whether the organization contemporaneously documents
the meetings of the governing board and any of its
committees during the year.
i. Whether the organization has local chapters or affiliates
and, if so, whether the organization has written policies and
procedures governing their activities to ensure that their
operations are consistent with those of the organization.
j. Whether a copy of the Form 990 was provided to the
governing board before it was filed (with a description of
the process to be included on supplemental Schedule O).
k. Whether there is any director, trustee, or officer who cannot
be reached at the organization’s mailing address.
2. The second Section of the new governance part of the Form 990
requests answers to a number of very specific questions about
certain policies. These questions include:
a. Whether the organization has a written conflict of interest
policy and, if so, whether the policy requires directors,
trustees, officers, and key employees to disclose annually
any interests they may have that could give rise to a
b. If the organization has a written conflict of interest policy,
a description of the manner in which the organization
regularly and consistently monitors and enforces
compliance with the policy.
c. Whether the organization has a written whistleblower
d. Whether the process for determining the compensation of
the persons described below included a review and
approval by independent persons, comparability data, and
contemporaneous substantiation of the deliberation and
decision (to be accompanied on supplemental Schedule O
by a description of this process).
(1) The organization’s President.
(2) Other officers and key employees of the
e. Whether the organization invested in or contributed assets
to, or participated in, a joint venture or similar arrangement
and, if so, whether the organization has adopted a written
policy or procedure requiring it to evaluate its participating
in such arrangements under applicable federal tax law and
has taken steps to safeguard the organization’s exempt
status with respect to such arrangements.
3. The final section on the new governance part of the Form 990
combines questions from the old Form 990 about the public
disclosure of the Form 990 and the Form 990-T (used to report
unrelated business income and now required to be made publicly
available) and any state filings of the Form 990. The Form 990
also asks for information to be set forth on supplemental Schedule
O describing whether and how, if appropriate, the organization
makes the following documents available to the public: Articles of
Incorporation, Bylaws, conflict of interest policy, and financial
statements. Significantly, there is no federal law requiring that
these documents be made available to the public.
4. This Part encourages information to be reported on Schedule O
regarding whether and how the organization will make changes to
its governing documents, conflict of interest policy, and financial
statements publicly available.
H. Part VII – Compensation of Officers, Directors, Trustees, Key
Employees, Highest Compensated Employees, and Independent
1. The new Form 990 expands the number of persons whose
compensation must be reported by the organization and provides
for further specifics on the compensation of certain individuals.
Certain basic compensation information must be reported by the
organization. The core Form 990 (i.e., the part of the Form that
must be completed by all filing organizations) requires disclosure
about compensation to certain person as reported on a Form W-2
or Form 1099. The list of persons whose compensation must be
disclosed is expanded on the new Form 990 and includes:
a. Current officers, directors, and trustees.
b. Up to 20 key employees (who are not officers, directors, or
trustees) who are defined as persons with certain
responsibilities who have reportable compensation greater
than $150,000 from the organization and related entities.
c. The five highest paid current employees whose reportable
compensation exceeds $100,000.
d. Former directors or trustees whose reportable compensation
2. With respect to each of these persons, the organization must
disclose on the Form 990 the name and title of the person, average
weekly hours, reportable compensation from the organization,
reportable compensation from related organization(s), and the
estimated amount of other compensation from the organization and
related organization(s), such as housing, education assistance, or
insurance. In addition, the organization must identify the total
number of individuals being paid more than $100,000 regardless of
whether specifically reported on the Form 990.
3. The organization is also required to identify any independent
contractors, such as law firms, accounting firms, investment
managers, and other consultants, who receive more than $100,000
from the organization and must also identify the services provided
and the amount of compensation paid.
4. This Part also contains a series of trigger questions to determine
whether the organization must also file Schedule J.
I. Part VIII – Statement of Revenue. This Part requires a detailed
breakdown of the various general types of revenues, including
contributions and gifts and grants, program service revenue, and other
types of revenue.
J. Part IX – Statement of Functional Expenses. This Part requires a
detailed breakdown of various general types of expenses, with the total
amounts broken down into program service expenses, management and
general expenses, and fundraising expenses.
K. Part X – Balance Sheets. This Part provides a comparison of assets and
liabilities at the beginning of the year and the end of the year.
L. Part XI – Financial Statements and Reporting. This is a new Part on
financial statements and reporting.
1. This Part examines the oversight the organization engages in with
respect to its revenues, expenses, and balance sheet, as set forth in
Parts VIII, IX, and X.
2. It seeks information regarding independent audits, audits required
as a result of federal grants, and the accounting method used to
prepare the Form 990.
III. SCHEDULES TO FORM 990.
A. Schedule A – Public Charity Status and Public Support.
1. This Schedule is filed by Section 501(c)(3) organizations.
2. Part I of this Schedule requires the organization to describe the
basis for its status as a public charity. Notably, it requires more
detailed information than previously required on the old Form 990,
including additional information on supporting organizations.
3. Parts II and III of this Schedule requires financial information to
show that the organization meets the public support tests.
a. There are separate support schedules for 509(a)(1) and
b. The years of support required to be reported is increases
from four to five years.
c. If the organization is relying on the facts and circumstances
test for 509(a)(1) status because its public support is below
one third, the organization must explain how it meets the
facts and circumstances test.
d. If the organization fails to meet the tests and is a private
foundation, it has to acknowledge this fact and the
instructions require the organization to file a Form 990-PF.
4. Other information previously reported on Schedule A has been
B. Schedule B – Schedule of Contributors. This Schedule remains much
the same as the former Schedule B.
C. Schedule C – Political Campaign and Lobbying Activities. In general,
much of this Schedule is similar to Schedule C on the old Form 990.
There are, however, a few substantive changes.
1. Part I-A. The focus of these questions is to determine if the
primary purpose of the organization is political activity, which
will, in general, endanger the tax-exempt status. Note that the
request for information regarding the number of volunteer hours
may, according to the instructions, be an estimate.
2. Part I-C. Again, the focus of these questions is to determine if the
primary purpose of the organization is political activity. However,
because for these organizations some political activity is
permissible, the questions elicit further information regarding the
organization’s political activity.
D. Schedule D – Supplemental Financial Statements. The focus of this
Schedule is the finances of the organization.
1. This Schedule requests detailed information about donor-advised
funds, conservation easements, art, historical treasures, trust,
escrow, and custodial arrangements, endowments, and
2. It is designed to eliminate attachments, increase compliance, and
3. Asset by asset reporting of investments is eliminated and instead
reporting by classes is permitted with certain exceptions.
4. Part X specifically asks for the text of footnotes in financial
statements reporting liability for uncertain positions under FIN 48.
Essentially, the IRS is requesting that organizations disclose any
tax positions that they are uncertain about – which allows the IRS
to focus immediately on the most potentially damaging issues.
E. Schedule E – Schools. The information on this Schedule was previously
included on Schedule A.
F. Schedule F – Statement of Activities Outside the United States.
1. Previously, the Form 990 had only a few questions about overseas
activity and asked about the number of offices, bank accounts, and
2. The new Form 990 requires disclosure of substantially more
information. All foreign activities or organizations engaged in
fundraising or grant-making outside the United States must also
identify and describe the activity and foreign expenditures,
including any grants to foreign individuals, organizations, or
3. The organization must also provide detail about its procedures for
engaging in activities and making grants.
G. Schedule G – Fundraising and Gaming.
1. This Schedule solicits information about fundraising methods and
gaming activities and the expenses associated with these activities.
2. Generally, the Schedule takes information from various places on
the prior Form 990 and compiles it in one place.
3. Part I of this Schedule, however, is new and requires more detail
on types of fundraising activities and information on the use of
H. Schedule H – Hospitals. The reporting requirements for nonprofit
hospitals increases significantly on the new Form 990, although there is a
phase-in of the reporting requirements.
1. Only Part V of Schedule H was required to be completed for the
2008 tax year. It requires a list of the name, address, and other
information for each facility operated by the hospital.
2. Part I focuses on charity care and community benefit, which has
become an increasingly important issue for the IRS and Congress
over the last few years. The new Form 990 is one way in which
the IRS is examining whether hospitals are “charitable” enough.
a. This Part requires reporting or charity care and community
benefit, including the cost, revenue offset, and net cost of
charity care, lack of reimbursement from Medicaid,
community health improvement services, subsidized health
services, research, and cash and in-kind donations.
b. Also, the organization must state whether it prepares an
annual community benefit report and if it has a charity care
policy (and, if so, how it communicates the policy to
c. Other Parts of Schedule H require the reporting of
community building activities, information about
management companies and joint ventures, billings and
collections information, existence of a written debt
collection policy, a description of emergency room policies
and procedures (including hours of operation), needs
assessments, and a description of the community served.
I. Schedule I – Grants and Other Assistance to Organizations,
Governments, and Individuals in the U.S. This Schedule generally
compiles information previously captured in various places on the old
Form 990 and compiles it in one place. But, the information on grant
selection and substantiation and monitoring of the use of grant funds is
J. Schedule J – Compensation Information.
1. If certain requirements are met, the organization must provide
additional and more detailed compensation information on new
Schedule J. Schedule J must be filed if (1) the organization is
required to list any former officer, director, trustee, key employee,
or five highest compensated employees in the core Form 990; (2)
the sum of reportable compensation and other compensation paid
to any individual listed in the core Form 990 exceeds $150,000; or
(3) the organization participated in an arrangement in which an
unrelated organization paid compensation to at least one of its
officers, directors, trustees, key employees, or five highest
compensated employees for services performed for the
2. For persons required to be reported on Schedule J, the organization
must breakdown its reporting of executive compensation into
components, including regular wages and salary, bonus and
incentive compensation, other reportable compensation, deferred
compensation, fringe or nontaxable benefits, including expense
allowances and reimbursements.
3. Schedule J also requests information about the organization’s
general compensation practices.
a. For any persons whose compensation was reported in the
core part of the Form 990, the organization is required to
disclose whether any of the following were provided by the
organization to the person:
(1) First-class or charter travel.
(2) Travel for companions.
(3) Tax indemnification and gross up payments.
(4) Discretionary spending account.
(5) Housing allowance or residence for personal use.
(6) Payments for business use of personal residence.
(7) Health or social club dues or initiation fees.
(8) Personal services (e.g., maid, chauffeur, chef)
b. If any of these are provided, the organization must disclose
whether it has a written policy regarding payment or
reimbursement of these expenses and, if not, provide an
explanation as to why it does not have such a policy. The
Schedule also inquires as to whether substantiation is
required before making such a reimbursement or payment.
4. In connection with the establishment of the President’s
compensation, Schedule J asks whether any of the following were
a. Compensation committee.
b. Independent compensation consultant.
c. Form 990 of other organizations.
d. Written employment contract.
e. Compensation survey or study.
f. Approval by the Board or a compensation committee.
5. For any persons whose compensation was reported in the core part
of the Form 990, the organization is required to disclose whether
any of those persons:
a. Received a severance or change in control payment.
b. Participated in or received a payment from a supplemental
nonqualified retirement plan.
c. Participated in or received a payment from an equity-based
d. Received pay contingent upon the revenues or net earnings
of the organization or any related organization.
e. Received any non-fixed payments not based on revenues or
6. The new Schedule J also provides space for supplemental
information in the event the organization believes it appropriate to
provide further explanation (whether for the benefit of the public
or the IRS) regarding a particular compensation package, practice,
K. Schedule K – Supplemental Information on Tax-Exempt Bonds.
1. Only Part I was required to be completed for the 2008 tax year.
2. The Schedule requires substantial detail on every bond including
the purpose of the bond, amount outstanding, proceeds, and third-
party use of the facility.
L. Schedule L – Transactions with Interested Persons.
1. In furtherance of the IRS’s concerns about conflicts of interest (and
the possibility of excess benefit transactions between the
organization and persons in a position to substantially influence the
organization), the new Form 990 contains a new Schedule L
requesting information about transactions between the organization
and certain interested persons.
2. This new Schedule L:
a. Requires reporting of:
(1) excess benefit transactions,
(2) outstanding loans to or from current or former
directors or trustees, officers, key employees, highly
compensated employees, or disqualified persons
(3) grants or assistance benefiting an officer, director,
trustee, key employee, or substantial contributor, or
persons related to them,
(4) direct and indirect business relationships with a
current or former officer, director, trustee, or key
employee or entities in which there is more than a
35% ownership interest by such persons,
(5) direct or indirect business relationships of family
members of a current or former officer, director,
trustee, or key employee, and
(6) service by a current or former officer, director,
trustee, or key employee as an officer, director,
trustee, key employee, partner or member of an
entity (or a shareholder in a professional
corporation) in an entity doing business with the
b. Focuses on whether the transactions were arm’s length and
at fair market value for purposes of the excess benefit
transactions rules; and
c. Alerts the IRS to potential excess benefit transactions and
the corresponding tax revenues in the form of excise taxes
on excess benefits paid to “insiders.”
M. Schedule M – Non-Cash Contributions. This Schedule collects
aggregate annual information on various noncash contributions, as well as
noncash fundraising policies, practices, and substantiation. In general, it
mixes a requirement of transparency with a policy proposal to require
certain governance procedures.
1. This Schedule applies to all tax-exempt organizations, not just
section 501(c)(3) and applies only to contributions of goods not
2. The Schedule breaks out non-cash contributions across categories,
such as works of art, art and historic treasures, books and
publications, intellectual property, and taxidermy.
3. The Schedule requests information regarding gift acceptance
policies, the number of Forms 8283 filed, and the use of third
parties or related organizations to process noncash gifts.
N. Schedule N – Liquidation, Termination, Dissolution, or Significant
Disposition of Assets.
1. Part I – Liquidation, Termination, Dissolution. This Part
requests information regarding:
a. The fair market value of assets transferred and the method
for determining the fair market value.
b. The role officers, directors, trustees, key employees, and
independent contractors will play in the transferee
c. Whether the distributions followed the requirements of the
organization’s governing documents.
d. Whether the organization adhered to state law in
discharging or paying liabilities.
2. Part II – Sale, Exchange, Disposition, or Other Transfer. This
Part expands the disclosure requirement to include all asset
dispositions of more than 25 percent of the organization’s assets.
It also requires information regarding:
a. The fair market value of all assets transferred and the
method for determining the fair market value.
b. The role officers, directors, trustees, key employees, and
independent contractors will play in the transferee
O. Schedule O – Supplemental Information. Schedule O to the Form 990
is a blank schedule, which allows organizations to supplement answers to
questions on the Form 990 in a narrative form. It is a new addition to the
revised Form 990 and was added (1) out of a concern that a simple yes or
no response, in some cases, would not allow as complete a response as a
narrative, and (2) to better enable electronic filing by requiring the same
format for all filings by eliminating supplemental information on separate
P. Schedule R – Related Organizations and Unrelated Partnerships.
1. This Schedule was added to capture information about more
complex organizational structures.
2. It requires organizations to identify and provide information about:
a. “Disregarded” entities, such as single member limited
liability companies (Part I).
b. “Related” tax-exempt organizations, including parent-
subsidiary, brother-sister, and supporting organizations
c. “Related” partnerships (Part III) and corporations/trusts
(Part IV), even if not tax-exempt.
3. The Schedule requires information about transactions with all
organizations listed in Parts I through IV.
A. Preparing for the New Form 990.
1. Determine whether any transition rules apply.
2. Read the instructions and glossary.
3. Identify a single person to oversee and coordinate completion of
4. Review Form 990 and identify schedules that the organization will
be required to complete and determine whether and what
additional recordkeeping is required.
5. Review governance policies and procedures and develop,
implement, and revise policies and practices if necessary.
6. Collect date on business and family relationships among officers,
directors, trustees, and key employees and among the organization
and current and former officers, directors, trustees, and key
7. Develop and implement new internal tracking and reporting
procedures to capture relevant information.
B. Treat the Form 990 as an IRS Audit.
C. Use the Form 990 as a Marketing Tool.
2009 Form 990—Significant Changes (Updated February 15, 2010)
Form 990, Return of Organization Exempt From Income Tax, is the IRS’s primary tool
for gathering information about tax-exempt organizations, for educating organizations
about tax law requirements, and for promoting compliance with tax law. The 2009 Form
990, schedules, and instructions have been revised to modify and clarify certain
reporting requirements. The table below summarizes significant changes to the Form
990, schedules, and instructions for 2009.
To see the complete 2009 Form 990, schedules, and instructions, see 2009 Form 990,
schedules, and instructions. To see video, audio, and written materials on how to
complete the Form and its schedules, see Form 990 Resources and Tools.
Form Change(s) Made/Issue(s) Addressed
Part III, Statement of Program Explains that the filer must report significant changes
Service Accomplishments in program services in Part III, rather than in a letter to
the Exempt Organizations Determinations office
Part IV, Checklist of Required • Line 11: Includes more detailed trigger questions to
Schedules help the filer determine whether it needs to complete
Parts VI, VII, VIII, IX, or X of Schedule D.
• Line 12a (new): Asks whether the filer was included
in consolidated, independent audited financial
statements for the tax year.
• Line 14: Explains how revenues or expenses from
foreign investments affect whether the filer meets
the $10,000 filing threshold for Schedule F, Part I.
• Line 20: As previously announced, a filer that
checks Yes to line 20 must complete the entire
Schedule H, not just Part V as was required for the
2008 tax year.
• Line 24a: As previously announced, a filer that
checks Yes to line 24a must complete the entire
Schedule K, not just Part I as required for the 2008
• Line 28: Simplifies trigger questions for Schedule L,
• Line 38 (new): Asks whether the filer completed
Schedule O, as required.
Part V, Statements Regarding • Line 1a: Clarifies that the filer must include on this
Other IRS Filings and Tax line the number of its employees reported on Forms
Compliance 1099, 1098, 5498, and W-2G by its reporting
• Line 2a: Clarifies that the filer must include on this
line the number of its employees reported on a Form
W-3 by its reporting agents.
• Lines 1c, 7g, and 7h: Clarifies that the filer should
leave these blank if questions are not applicable.
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Part VI, Governance, • Line 2: Clarifies that if, two officers, directors,
Management, and Disclosure trustees, or key employees of the filer serve in
similar positions with another tax-exempt
organization, that involvement does not create a
reportable business relationship between the two.
• Line 4: Explains that the filer must report significant
changes to its organizational documents on its Form
990, Part VI and in Schedule O, rather than in a
letter to EO Determinations.
• Line 5: Modifies standard for determining if
diversion is material and must be reported on line 5.
• Line 11: Describes the conditions the filer must
meet to answer Yes when it emails board members
a link to its Form 990.
• Line 15: Defines conflict of interest for
• Line 18: Explains when a filer may check the box
for Another’s website.
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Part VII, Compensation • Clarifies that the current five highest compensated
employees to be reported in the Section A table do
not include officers, directors, trustees, or key
• Clarifies that the key employee responsibility test
may be met at any time during the calendar year
ending with or within the organization’s tax year.
• Clarifies that if a person is a key employee for only
part of the tax year, filer must report that person’s
entire compensation for the calendar year ending
with or within the tax year.
• Explains how compensation to foreign persons from
the filing organization or a related organization
should be reported in the Section A table.
• Explains when and how compensation from
unrelated organizations to the filing organization’s
officers, directors, trustees, key employees, and
highest compensated employees must be reported
in Section A.
• Explains when and how compensation to leased
employees must be reported in Part VII.
• Explains how compensation paid by common
paymasters and other reporting and payroll agents
should be reported in Section A.
• Clarifies that the filer must report all compensation
paid by a related organization during the calendar
year to listed persons, even if the other organization
was related for a portion of the tax year.
• Clarifies (in compensation table) that employee
deferrals to 401(k) and 403(b) plans must be
reported in Part VII, columns (D) and (E), and in
Schedule J, column B(i).
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Part VIII, Statement of • Lines 2 and 11: Asks the filers to report on these
Revenue lines codes from the new Appendix J, which are
derived from the North American Industry
Classification System (NAICS).
• Line 8: Explains how to report revenue from
donated goods sold at auction.
Part IX, Statement of • Line 14: Explains the lines on which to report
Functional Expenses various technology-related expenses.
Part X, Balance Sheet • Line 5: Clarifies that highest compensated
employees are persons from whom receivables
should be reported on this line.
• Line 12: Indicates that the filer should report on this
line publicly traded stock in a corporation that
comprises more than 5% of the filer’s total assets.
Part XI, Financial Statements • Line 2d (new): If the filer answered Yes to line 2a
and Reporting or 2b, it should check the appropriate box to indicate
whether the financial statements were issued on a
consolidated basis, a separate basis, or both.
Form 990 Glossary • Includes new definitions of audit, fair market value,
and principal officer.
• Includes revised definitions of--
o Control: Clarifies means by which the filer can
control or be controlled by another organization,
for purposes of determining the filer’s related
o Escrow and custodial accounts: Exempts
section 4947(a)(2) split-interest trusts from
reporting in Schedule D, Part IV.
o Fundraising events: Includes certain types of
casino nights in the definition, and clarifies which
types of activities are not fundraising events.
o Permanent endowment: Clarifies that
permanent endowment is established by a
o Quasi-endowment: Clarifies that a quasi-
endowment is established by the filer, and that
restrictions the filer imposes on the endowment
may be temporary or permanent.
o Related organization: Clarifies that related
organizations may include governmental units
and other government entities.
o Reportable compensation: Clarifies reportable
compensation of certain clergy and religious
workers, foreign persons, and other persons.
o Term endowment: Clarifies that a term
endowment is established by a donor-restricted
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Schedule A, Public Charity • New example explains how a filer that uses accrual
Status and Public Support method of accounting should report pledges on
• Explains that the IRS does not update records on a
filer’s public charity status based on a change made
on Schedule A. The filer may submit a request for a
determination letter on its new public charity status
to the EO Determinations office.
Schedule B, Schedule of • Clarifies that the filer should specifically identify a
Contributors donor, rather than reporting the donor as
anonymous, if the filer knows the donor’s identity.
Schedule D, Supplemental • Part V: Clarifies that the filer should report
Financial Statements endowments held by other organizations for the filer
and/or held by other organizations to further the
filer’s exempt purposes.
• Part VII: Explains that the filer should report
publicly-traded stock in a corporation that comprised
more than 5% of filer’s total assets.
• Part X: Asks the filer to complete Part X if its
financial statements for the tax year included a
footnote addressing its liability for uncertain tax
• Parts XI-XIII: Clarifies that if the filer was included
in consolidated financial statements (not in separate
financial statements), completing Parts XI-XIII is
Schedule F, Statement of • Part I: Deletes instruction (for tax year 2008) that a
Activities Outside the United filer’s interests in financial accounts reported on Part
States V, lines 4a and 4b should not be reported on
Schedule F, Part I.
• Part I, line 3: Explains how to report foreign
• Part I, column (d): Explains that the types of
foreign activities to be reported include investments,
conducting board meetings, and sending agents of
the filer to attend and speak at seminars or
conferences outside the United States.
• Part I, column (f): Explains that expenditures to be
reported include travel expenses to, from, and within
the region, but allocations of indirect expenditures
for foreign activities are not necessary if the filer
does not separately track them.
• Part III: Explains that the filer should report not only
grants and other assistance to foreign individuals,
but also to U.S. individuals for foreign activity.
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Schedule G, Supplemental • Part I, line 3: Eliminates option to answer all states.
Information Regarding • Part II, lines 7 and 8 (new): Asks for reporting of
Fundraising or Gaming food and beverage expenses and entertainment
Activities expenses related to fundraising events.
• Part III, line 16: Clarifies that the filer should report
only that portion of its gaming manager’s
compensation that is allocable to gaming
Schedule H, Hospitals • As previously announced, organizations required to
file Schedule H must complete all parts of the
schedule for the 2009 tax year.
• Explains how to report indirect interests in joint
ventures, such as a physician group practice owned
by staff physicians of the filer’s hospital.
Schedule J, Compensation • Part I, line 9 (new): Asks if the filer answered Yes
Information to line 8 (regarding the initial contract exception
under Regs. 53.4958-4(a)(3)), did it also follow the
rebuttable presumption of reasonableness
procedure described in Regs. 53.4958-6(c)?
Schedule K, Supplemental • As previously announced, organizations required to
Information on Tax-Exempt file Schedule K must complete all parts of Schedule
Bonds K for the 2009 tax year.
• Explains how related organizations should report
bond issues on Schedule K.
• Part II, line 5: Explains that for 2009 only, the filer
should include in this line the cumulative amount of
bond proceeds used to pay fees for credit
enhancement that are taken into account in
determining the yield on the issue for purposes of
Code section 148(h).
Schedule L, Transactions With • Part II: Explains when tax-exempt bonds purchased
Interested Persons from filer and held by an interested person are
exempted from reporting in Part II.
• Part III: Explains how to report grants, scholarships,
and other assistance from colleges, universities, and
primary and secondary schools to interested
• Part IV
o Explains how to report joint ventures with
interested persons as business transactions
o Clarifies that governmental units and
instrumentalities are not interested persons.
Schedule N, Liquidation, • Explains that the filer should report its liquidation,
Termination, Dissolution, or termination, or dissolution in Part I, rather than in a
Significant Disposition of letter to EO Determinations; EO Determinations no
Assets longer issues letters confirming that an
organization’s tax-exempt status was terminated.
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Schedule O, Supplemental • Asks the filer to use Schedule O, not separate
Information to Form 990 attachments, to respond to specific questions (e.g.,
Part VI, lines 11A, 19), and to supplement other
• Clarifies that the filer should use a separate
attachment—not Schedule O—to explain late filing
of the Form 990.
• Cautions the filer not to include social security
numbers on Schedule O.
Schedule R, Related • Explains how the filer can control or be controlled by
Organizations another organization for purposes of determining
related organizations; includes several new
examples of control.
• Part II: Explains that governmental units and
instrumentalities and foreign governments should be
treated as tax-exempt organizations for purposes of
Schedule R, Part II.
• Part V, line 2: Explains how to report transactions
with a section 512(b)(13) controlled entity, and with
related tax-exempt entities that are not exempt
under Code section 501(c)(3).
• Part V, line 2, column (c): Asks the filer to
describe in Schedule O the method used to
determine the value of services, cash, and other
assets reported in column (c).
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