A Brave New World for a New Form 990
Presented by:Michael McNeeRobert Lyons
February 2008
©2008 Marks Paneth & Shron LLP
We have come a long way – or have we?Simplification is in the mind of the beholder.
2©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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First Revenue Act of 1913 Page 1
A Brave New World for a New Form 990 | February 2008
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First Revenue Act of 1913 Page 2
A Brave New World for a New Form 990 | February 2008
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First Revenue Act of 1913
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Overview
December 20, 2007: the IRS released the redesigned Form 990Return of Organization Exempt from Income TaxEffective for 2008 returns prepared in 2009Fiscal year filers – for the year beginning in 2008 and ending in 2009Instructions delayed – available by early summer
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Form 990-EZ
Retain present form
Some of the new schedules will be required and will replace attachments
Serves the transition period (discussed later) through 2010
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Phase-in of Filing Requirements
Three year phase-in using Form 990-EZ (with new schedules)
Addresses transition concerns form June draft
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
(Note: The IRS also intends to increase the Form 990-N (e-postcard) filing threshold from $25,000 in gross receipts to $50,000 in gross receipts, beginning with the 2010 tax year.)
< $500,000> $50,000 and < $200,0002010 and later tax years
< $1.25 million> $25,000 and < $500,0002009 tax year (filed in 2010)
< $2.5 million> $25,000 and < $1 million2008 tax year (filed in 2009)
If assets are:If gross receipts are:May file 990-EZ for:
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Phase-in of new Schedules H and K
Transition relief will be provided for the 2008 tax year for organizations required to complete new schedules for hospitals (Schedule H) and tax exempt bonds (Schedule K)
Only portions of those schedules that provide certain identifying information regarding hospitals facilities and bond issues must be completed for 2008
Both will be implemented in the 2009 tax year
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Rationale for Redesign and Guiding Principles
Form 990 has not been revised since 1979
Has not kept pace with the changing world exempt organizations
Does not meet the transparency and accountability needs
Increased interest in foreign activities
Reordering of the forms to emphasize key elements
Redesign to include eleven core pages and sixteen schedules
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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The Order of the New Forms
Part I – SummaryProvides the organization’s identifying information and a snapshot of key financial, governance and operating information, including a summary of their mission or activities. A two-year comparison of revenues and expenses is reported for the current and prior year.
Part II – Signature BlockHas been moved to the bottom of page one.
Part III – Statement of Program Service AccomplishmentsIncludes reporting of new, discounted, or altered program services.
Part IV – Checklist of Required schedulesContains the list, in schedule sequence order, of all questions required to determine which schedules must be completed by an organization.
Part V – Statements Regarding Other IRS Filings and Tax CompliancePart VI – Governance, Management and Disclosure
Requires report regarding governing body composition, and certain governance and disclosure policies and practices.
Part VII – Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent ContractorsPart VIII – Statement of RevenuesPart IX – Statement of Functional ExpensesPart X – Balance SheetPart XI – Financial Statements and Reporting
Requires reporting of certain information regarding financial statement compilations, reviews or audits
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Parts I and II – Summary and Signature Block
Current form does not contain a summary of key information for users.
Changes are to increase and enhance transparency.
First page summary emphases the organization’s key financial, compensation, governance and operational information.
This is an addition to the traditional Statement of Functional Expenses (Part IX).
Additional transparency information added.
Signature block.
[Focus] Categories will have to be maintained in addition to thetraditional program, M & G, and fundraising for all organizations not just 501(c)(3) and 503(c)(4) organizations.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Parts I and II – Summary and Signature Block
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
Continued
Make sure that your mission statement matches what was reported previously to the IRS.
PPA 2006: IRS began a sharing process with the states.
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Part III – Statement of Program Service Accomplishments
This is required in the current return except for the additionalinformation requested concerning codes, change, etc.
Current analysis of income producing activities (Part VII) and questions about programs from Part VI have been incorporated in the new Part III.
Activity codes will not be used until after 2008.
For changes in activities, new Schedule O is used. These changes MUST take into consideration the organization’s exempt purpose.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part III – Statement of Program Service Accomplishments Continued
For e-file purposes, condense information where possible to fit
Schedule O.
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Part III – Statement of Program Service Accomplishments Continued
Codes are not available in 2008.
Make sure the mission statement agrees with Part I and make sure that
the programs match the mission.
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Part IV – Checklist of Required Schedules
Replaced Part VI Additional Information.
Driver for most of the other schedules to be included
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part IV – Checklist of Required SchedulesContinued
Read the questions carefully! This is the driving force behind the 16 schedules.
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Part IV – Checklist of Required SchedulesContinued
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Part V – Statements Regarding Other IRS Filings and Tax Compliance
Purpose is to alert the organization to other potential federal tax compliance information.
Replaces part of the detail currently being reported on Part VI Other Information.
Complexity for the organization will depend on the nature and type of organization.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part V – Statements Regarding Other IRS Filings and Tax ComplianceContinued
This replaces the old Part VI.
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Part VI – Governance, Management and Disclosure
Keystone of the new Form 990
“IRS believes that the existence of an independent governing bodyand will-defined governance and management policies and practices increases the likelihood that an organization is operating in compliance with federal tax law.”
Not all information on this part is open to public inspection.
Required additional information from officers, directors and keyemployees.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part VI – Governance, Management and DisclosureContinued
These questions need to be reviewed at the beginning, not at the end, of the year.
This part is new and represents the most significant area of interest on the
part of Senate and Congress.
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Part VII – Compensation of Officers, Directors, Trustees, Key Employees, and Five Highest Compensated Employees
Form is more interested in Transparency than accountability
Requires the most substantial change in bookkeeping requirements.
$100,000 threshold for five highest compensated employees
Reporting of HCE compensation by non-charities
Address information of listed officers and directors
Retirement benefits and other compensation
Reduced subjectivity
Fiscal year or calendar year reporting – calendar year reporting.
Highly compensated individuals necessitate Schedule J.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part VII – Compensation of Officers, Directors, Trustees, Key Employees, and Five Highest Compensated Employees
Continued
Information needs to be tracked for the entire year,
not just the end.Major expansion of old Part V.
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Part VII – Compensation of Officers, Directors, Trustees, Key Employees, and Five Highest Compensated Employees
Continued
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Part VII – Compensation of Officers, Directors, Trustees, Key Employees, and Five Highest Compensated Employees – Schedule J
Continued
This section addresses the entire benefit issue as to compensation
methodology and reasonableness.
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Part VII – Compensation of Officers, Directors, Trustees, Key Employees, and Five Highest Compensated Employees – Schedule J
Continued
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Part VII – Compensation of Officers, Directors, Trustees, Key Employees, and Five Highest Compensated Employees – Schedule J
Continued
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Part VIII – Statement of Revenue
Combination of Part I and Part VII on the current Form 990
Restructuring of the form for greater visibility.
New form reduces the number of attachments and eliminates UBI codes.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part VIII – Statement of RevenueContinued
This combines the old Parts I and VII.
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Part IX – Statement of Functional Expenses
Mostly retained
Greater detail related to breakout
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part IX – Statement of Functional ExpensesContinued
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Part X – Balance Sheet
Substantially retained with modification of ordering.
Eliminated need for various unstructured schedules.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part X – Balance SheetContinued
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Part XI – Financial Statements and Reporting
Information, in part pulled from current Form 990
Additional questions are concerning financial statement reporting
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Part XI – Financial Statements and ReportingContinued
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Schedules
Schedule APublic Charity Status and Public support
Schedule BSchedule of Contributors
Schedule CPolitical Campaign and Lobbying Activities
Schedule DSupplemental Financial Statements
Schedule ESchools
Schedule FStatement of Activities Outside the United States
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Schedule GSupplemental Information Regarding Fundraising or Gaming Activities
With the sharing of information between the IRS and the states, state law should be
reviewed before carrying out procedures.
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Schedule GSupplemental Information Regarding Fundraising or Gaming Activities
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Schedule GSupplemental Information Regarding Fundraising or Gaming Activities
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Schedules
Schedule HHospitals
Schedule IGrants and Other Assistance to Organizations, Governments and Individuals in the United States.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Schedule KSupplemental Information on Tax Exempt Bonds
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Schedule KSupplemental Information on Tax Exempt Bonds
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Schedule LTransactions with Interested Persons
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Schedules
Schedule MNon-Cash Contributions
Schedule NLiquidation, Termination, Dissolution, or Significant Disposition of Assets
Schedule OSupplemental Information to Form 990.
©2008 Marks Paneth & Shron LLPA Brave New World for a New Form 990 | February 2008
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Schedule RRelated Organizations and Unrelated Partnerships
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Schedule RRelated Organizations and Unrelated Partnerships
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Schedule RRelated Organizations and Unrelated Partnerships
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Schedule RRelated Organizations and Unrelated Partnerships
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Contact Information
Michael M. McNee, CPAPartner-in-ChargeNonprofit Industry [email protected]
Marks Paneth & Shron LLP622 Third AvenueNew York, NY 10017
www.markspaneth.com
Robert R. Lyons, CPA Managing Director of Tax ServicesNonprofit Industry [email protected]