Community Economic Development Law Project 100 N. LaSalle St., Suite 600, Chicago, IL 60602 NFP ALERT CEDLP provides pro bono legal services and education to community-based organizations and entrepreneurs who meet our eligibility requirements. To help our clients stay informed, we are distributing this information alert. Occasionally, we will issue these alerts on topics of interest to our clients. If you have topics you would like us to address, let us know. Contact us at email@example.com or 312.939.3638. IRS FORM 990 – NEW QUESTIONS, NEW REQUIREMENTS Organizations with gross revenues not exceeding $25,000, file the 990-N, information return. All others file Form 990 or 990EZ. The IRS has completely redesigned Form 990 for the first time since 1979. There is now a 37-question checklist that determines which of 16 supplemental schedules the organization will have to file in addition to the main form. In this NFP ALERT we provide a summary of some of the changes that will affect exempt organizations and identify when an organization has to begin using the new form. Regardless of the organization’s gross receipts, the policies and procedures explained in this ALERT will help your organization comply with the best practices expected by the government, donors and funders. 1. GOVERNANCE ISSUES Part VI of the new Form 990 requires the organization to provide the following information: 1. A description of the composition of the board of directors (for example- the number of voting members of the board, the number of voting members who are uncompensated, whether any directors or officers have a family or business relationship with any director, officer or key employee, etc.). 2. Identify whether the organization has the following policies; a. Conflicts of interest and how compliance is monitored and enforced. b. Whistleblower protection, c. Document retention and destruction. The Community Economic Development Law Project is a project of the Chicago Lawyers’ Committee for Civil Rights Under Law, Inc. d. Compensation policy 3. Are there any family or business relationships that exist between the organization and its officers, directors, trustees or key employees? 4. Did it make any significant changes to its organizational documents (e.g., articles of incorporation, bylaws) since it last filed Form 990? 5. Are minutes taken during meetings of its board of directors that document actions taken? 6. Do members of the board of directors review the filled-out Form 990 prior to it being submitted to the IRS? 7. Does the organization provide copies of the following documents, if requested? a. Form 1023 b. Form 990 Although, most of these questions are not required by federal tax laws, the IRS believes that the existence of an independent board of directors with well-defined policies and procedures increases the likelihood that an organization is operating in compliance with federal tax law. CEDLP recommends that all organizations adopt these policies and procedures before December 31, 2008. 2. REPORTING COMPENSATION The new form requires the organization to describe how it determines staff compensation and report the number of people receiving more than $100,000 in compensation. The IRS will look to see if compensation decisions are approved by independent members of the board of directors, if the organization compared its compensation practices and pay to other similarly sized organizations, and if the organization documented (in writing) its decisions. The organization has to list all current officers, directors, trustees and key employees on the new Form 990 regardless of compensation and identify the number of independent members on the board. It must identify all individuals, including independent contractors, who receive more than $100,000 in total compensation. 3. NON-CASH CONTRIBUTIONS Schedule M requires a detailed reporting of any non-cash charitable contributions. The new form requires non-cash contributions to be listed by type. For example: Art, Books, Clothing and Household Goods, Cars, Stocks, Real Estate, etc. The organization must explain how it determined the value of the contribution for inclusion in its revenues. Schedule M requires the organization to describe its gift acceptance and gift tracking policies. Finally, the organization has to report any contribution that is subject to an agreement not to dispose of it for at least 3 years and which is not used for exempt purposes by the organization. 4. EFFECTIVE DATES AND FILING RELIEF - There is a graduated transition period for using the new 990. 2008 returns filed in 2009 If the organization has gross revenue under $25,000, it must file the new IRS Form 990-N. If the organization has gross annual receipts between $25,000 and $1 million, and total assets below $2.5 million they may file the 990 EZ or the new 990 All other organizations must file the new 990. --------------------------------------- 2009 returns filed in 2010 If the organization has gross revenue under $25,000, it must file the new IRS Form 990-N If the organization has gross receipts between $25,000 and $500,000, and assets below $1.25 million, they may file the 990 EZ or the new 990 All other organizations must file the new 990. ----------------------------------------- Filing thresholds are pe rmanently set for 2010 returns filed in 2011. Organizations with assets under $50,000 must file the 990-N. The 990 EZ is available for organizations with gross receipts between $50,000 and $200,000, and assets below $500,000, but they may file the new 990. All other organizations must file the new 990 form. _________________________________________ The information contained in this ALERT is not a comprehensive guide to the changes and should not be construed as legal or tax advice. For additional information or legal guidance, please contact CEDLP or the attorney or tax advisor you normally consult.