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The New 990

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					The New 990
      Presenter:
 Kris McMackin CPA
                 The New 990
   What is the 990
   What is all the hoopla about changes to the 990?
   What do you need to know about it?
   What do you need to do about it?
   Disclosure requirements & Conflict of Interest
    Policy
   Financial Statements for the Board
             What is the 990?

Is it just that document that the IRS demands we
   file every year?
            What is the 990?
The answer is NO, it’s important to:
-Federal government
-State government
-Other tax-exempt organizations
-Public
Each year, approximately 550,000 organizations
  file a Form 990 or Form 990-EZ with the IRS.
                   What is the 990?

   IRS’ primary tax compliance tool for tax-exempt organizations.

   Most states rely on the form for charitable and other regulatory
    oversight, and to satisfy state income tax filing requirements for
    organizations claiming exemption from state income tax.

   Public document that is made available by filing organizations,
    the IRS, and others. The public, state regulators, media,
    researchers, and policymakers rely on the 990 to obtain
    information about the tax-exempt sector and individual
    organizations, helping to ensure transparency.
              What is the 990

Most of all, it is your story. The design of the new
 990 allows tax exempt organizations to tell their
 story throughout the form.
Use of a new summary page, supplemental
 information, the core return and schedules allow
 for narrative
       You can use the 990 to your
               advantage
Create a good impression
Tell the world about your work
Show you’re tax compliant
Show accountability and transparency
Explain how your activities support your mission or goal
Provide explanations to clarify information of interest to
   the IRS and public
* It’s not just about the numbers anymore*
         Why Change the 990?
The 990 was last changed in 1979. The form no
  longer reflected the changes in tax law and the
  increasing size, diversity and complexity of the
  exempt sector.
The three guiding principles of the changes are:
 enhancing transparency
 promoting tax compliance
 and minimizing burden on the filing
  organization.
       Summary of Key Changes
   Opportunities throughout the forms and
    schedules for narrative information
   New 3 part section on governance
   Revised reporting of compensation and insider
    transactions
   Revamping form layout- more schedules and
    fewer attachments
   Minimized reporting burden through use of
    thresholds and exceptions
                    Filing levels
   3 Filing levels depending on thresholds
     990-N – also known as the e-Postcard
     990EZ – short form, had some changes

     990 – total revamping, first time in 30 years
                    Phase in
Changes were made in 2008 but the IRS has allowed a 3
  year phase in. (see handout)
Starting with the 2010 tax year:
                                     Form to File
Private Foundation                   990-PF
Gross receipts normally <= $50k      990-N
Gross receipts <$200k &              990-EZ
       Total assets< $500k
Gross receipts =>$200k or            990
       Total assets =>$500k
             New layout of 990:
   consists of a 12 page core form to be completed
    by all organizations
   16 schedules that may be filled out depending
    on the organizations activities
   Many of the schedules replace “unstructured
    attachments” previously required
   Some schedules replace the previous Schedule A
    which has been split into 4 separate schedules
                           990 Layout
   Part I, Summary
   Part II, Signature Block
   Part III, Statement of Program Service Accomplishments
   Part IV, Checklist of Required Schedules
   Part V, Statements Regarding Other IRS Filings and Tax Compliance
   Part VI, Governance, Management, and Disclosure
   Part VII, Compensation of Officers, Directors, Trustees, Key Employees,
    Highest Compensated Employees, and Independent Contractors
   Part VIII, Statement of Revenue
   Part IX, Statement of Functional Expenses
   Part X, Balance Sheet
   Part XI, Financial Statements and Reporting
                                 Schedules
   A – public charity status and public support
   B- schedule of contributors
   C- political campaign and lobbying activities
   D- supplemental financial statements
   E- schools
   F- activities outside of the U.S.
   G- fundraising and gaming activities
   H- hospitals
   I- grants and other assistance orgs, govts & individuals in the U.S.
   J- compensation information
   K- supplemental information on tax exempt bonds
   L- transactions with interested persons
   M- non-cash contributions
   N- liquidation, terminations, dissolution, or significant disposition of assets
   O- supplemental information
   R- related organizations and unrelated partnerships
          New layout of 990-EZ:
   consists of a 4 page core form to be completed
    by all organizations
   7 potential schedules that may be filled out
    depending on the organizations activities
   In the past two formal schedules- A & B
   Schedule A was converted to 3 separate
    schedules
   Other “unstructured attachments” converted to
    schedules
                 990-EZ Layout
   Part I, Statement of Revenue
   Part II, Balance Sheets
   Part III, Statement of Program Service
    Accomplishments
   Part IV, Compensation of Officers, Directors, Trustees,
    Key Employees
   Part V, Other Information
   Part VI, To be completed by 501(c)(3) organizations –
    covers lobbying, schools, highest compensated
    employees and independent contractors
                    Schedules
   A – public charity status and public support
   B- schedule of contributors
   C- political campaign and lobbying activities
   E- schools
   G- fundraising and gaming activities
   L- transactions with interested persons
   N- liquidation, terminations, dissolution, or
    significant disposition of assets
    A Closer Look at Key Changes
   The Summary (page 1) designed to enhance
    transparency by providing key information on
    the first page for the benefit of the public
     Summarizes info found elsewhere on form, snapshot
      of key financial governance & operational info
     Includes mission, unrelated business income,
      professional fundraising expenses, number of
      directors & number of independent directors
    A Closer Look at Key Changes
   Part III – Statement of Program Service
    Accomplishments (page 2)
       Briefly describes mission (again), new activities and
        any activities ceased, 3 largest program svces
          Additional descriptions can be given on Sched O
          Great opportunity for organization to promote its
           accomplishments to the public
  A Closer Look at Key Changes
Part IV Checklist of Required Schedules
 Designed to assist org in determining which of
  the 16 schedules they are required to file
 Eases the filing burden by assisting in
  determining which schedules to file
  A Closer Look at Key Changes
Part VI Governance, Management, Disclosure (p6)
 Good governance promotes compliance

 Not requirements for tax exemption under
  federal law but IRS has indicated that orgs
  without these policies run a greater risk of audit
 Governance, Mgmt, Disclosure
3 parts:
 Part I asks questions about the governing body
  & management
   Number of voting members of Board
   Number of independent voting directors or trustees
   Family or business relationships among officers,
    directors, trustees, or key employees
   Material diversion of assets during the year
   Are meetings documented at the time of the meeting
    Governance, Mgmt, Disclosure
   Part II asks questions about policies
     If the org has local chapters are there written policies
      & procedures to ensure consistency in operations
     Was the 990 reviewed by the board before it was
      filed and a description of the review process
     Written conflict of interest policy with annual
      disclosure requirement and enforcement policy
     Written whistleblower policy
     Written document retention & destruction policy
     Determination of compensation
    Governance, Mgmt, Disclosure
   Part III asks questions about public disclosure
    and if any additional forms are made available
    such as articles of incorporation, bylaws, etc
                Conflict of Interest
   Q12 Section B asks whether the organization has a
    conflict of interest policy in place
   Conflict of Interest Policy:
       Defines conflicts of interest
       Identifies the classes of individuals within the org covered by
        the policy
       Facilitates disclosure of information that can help identify
        conflicts
       Specifies procedures to be followed in managing conflicts
               Conflict of Interest
   What is a conflict of interest?
       When a person in a position of authority such as an
        officer, director, or manager, can benefit financially
        from a decision he/she can make in such capacity.
        (includes indirect benefits such as family members or
        businesses)
                Conflict of Interest
   So, again, the Conflict of Interest Policy:
       Defines circumstances under which a conflict of interest may
        arise- ie. a voting member of governing board who receives
        compensation- vote on matters of compensation?
       Identifies the classes of individuals within the org covered by
        the policy- such as directors, officers, managers
       Facilitates disclosure of information that can help identify
        conflicts- such as annual statement, named individual to
        discuss
       Specifies procedures to be followed in managing conflicts-
        such as excluded from vote, minimum number of bids
            Conflict of Interest

   Example policy is included in your handout
Public Disclosure Requirements

Section C is concerned with the disclosure
requirements and how those are met
 Public Disclosure Requirements
 Certain annual returns
 Applications for exemption

 Copies must be provided immediately in the
  case of in-person requests
 Within 30 days in the case of written requests.

 May charge a reasonable copying fee plus actual
  postage, if any.
(handout)
Public Disclosure Requirements
   Which tax documents must be available?
       Exemption application
          Form 1023 (for 501(c)(3) orgs)
          Form 1024 for most other 501(c)

          Submission letter where no form is prescribed

          All supporting documents & any IRS letter or document
           concerning the application
          Political orgs exempt under 527(a) must make Form 8871
           Notice of Status available
Public Disclosure Requirements
   Which tax documents must be available?
       Annual return
          Form 990- return of org exempt from income tax
          Form 990-EZ- short form return of org exempt from
           income tax
          Form 990-PF- return of private foundation

          990-BL- black lung benefit trusts

          Form 1065- U.S. partnership return of income
    Public Disclosure Requirements
   Which tax documents must be available?
        Additionally, a 501(c)(3)
             Form 990T- exempt organization business income tax return- this
              includes all schedules, attachments, or supporting documents related
              to tax on unrelated business income
        Not required to disclose
             Schedule K-1 of Form 1065
             Schedule A of Form 990-BL
             Name and address of any contributor (except private foundations)
Public Disclosure Requirements
   Which tax documents must be available?
       Returns must be available for a three-year period
        beginning with the due date of the return (including
        any extension of time for filing).
   Where must they be available?
       at the principal office of the organization, and any
        regional or district offices having three or more
        employees
Public Disclosure Requirements
   In person request- honored same day
   Written request (also fax or email)- 30 days
   May charge reasonable copying fees and actual
    postage
Public Disclosure Requirements
   Exception to requirement to provide copies
       If the documents are made widely available
          Ie. via the internet
          Must be in pdf format or other form as described in the
           regulations
          Must be able to download documents for free

          The organization must advise requesters of how to access
           documents
Public Disclosure Requirements
   Other documents you may make available
       These are not required
          Governing documents
          Conflict of interest policy

          Financial statements
  A Closer Look at Key Changes:
Part VI Compensation of Officers, Directors, Trustees, Key
  Employees, Highest Compensated Employees, and Independent
  Contractors:
 List of persons whose compensation must be disclosed is
  expanded:
      Current officers, directors, trustees
      Up to 20 key employees who have reportable compensation greater than
       $150k from org & related
      Five highest paid current employees w/ compensation exceeding $100k
      Former officers, key emps, highest compensated employees w/
       compensation exceeding $100k
      Former directors or trustees whose compensation exceeds $10k
    A Closer Look at Key Changes:
   Must disclose name, title, average weekly hours,
    compensation, and estimated “other”
    compensation such as housing, education,
    insurance
   Must identify independent contractors such as
    law firms, accounting firms, consultants
    receiving more than $100k
   Series of trigger questions to determine if
    schedule J must be filed
            What you need to do:
   Determine which form the organization will need to file
   Identify related organizations required to be listed on
    Schedule R
   Identify officers, directors, trustees and potential key
    employees and top 5 highest compensated employees
    and subcontractors
   Review new governance questions which will be
    answered based on policies in place on the last day of
    the year
   Identify schedules the organization will likely be
    required to file
         What you need to do:

Obviously your organization will have to provide
 the accounting firm preparing the tax return
 with much of this new information
Your accountant should be asking questions!
          Financial Statements
   What information should the Board be
    reviewing on a monthly basis?
           Financial Statements
   What information should the Board be
    reviewing on a monthly basis?
     Balance Sheet
     Income Statement (Profit & Loss)

     Compared to Budget
Balance Sheet
Income Statement (Profit & Loss)
Budget vs Actual
                 For Start-ups
   Consider partnering with an established
    organization such as the United Way, Goodwill,
    etc and operate under their 501(c)(3) designation
                   Resources

   http://www.irs.gov/charities/index.html?navme
    nu=menu1
   http://www.irs.gov/charities/article/0,,id=1666
    25,00.html
   http://stayexempt.org/

				
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