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| [The New] Form 990 (Starting 2008) |
| This page is going to be an evolving work in process. I will add to the page as I learn new things and develop new materials. There is a lot to learn. As I write (5/09) my files are mostly at "version 2.0" and I will indicate version numbers in the filenames. My best material is at the VERY BOTTOM of this page. (Sorry, primitive software, so I can't do a classic FAQ style drop down.) Below are some downloadable teaching tools and some individual comments, and all the IRS forms downloadable in filenames that make more sense than the way they appear on the IRS website. I look forward to doing more presentations on the topic, so let me know if you're interested...it's more than just the printed material :). I'm also planning to experiment with some YouTube delivery. Trainings can be tailored to preparers (CPAs), to finance directors and executive directors, to clients of a public accounting firm, or all of the above. Let me know, maybe we can craft a particular session for you. Some of the text below is outdated when it refers to "drafts" but the substance is still correct; I am unaware of any substantive changes made between draft and final 2008 forms and instructions (May 09). |
| The [no longer quite so] "new" Form 990 and instructions are for Calendar 2008 and later. Process: In June 2007, the IRS released draft forms and instructions and opened them up for comments. I submitted comments as did many others. In December 2007, IRS released final Forms (still marked "draft" but their stated intention is to fix only typos or errors). They have all the forms and instructions and more, here. They also have some basic background and positioning pieces here. Below on this page I have these same files ready to download in larger Zip files, with the internal forms named in full names (IRS uses short names like 990f.pdf or 990i.pdf). Between drafts, they responded to over 650 commenters and removed, thereby de-emphasizing, much of the first page "dashboard," particularly its reliance on functional percentages (program / mgt&gen / fundraising), as well as another couple of ratios such as fundraising cost as a % of total gift income. They also moved program service revenue from the back of the form to Page 2. They dug in their heels on "governance" however, and this is probably the most important thing - see my section below on this topic. Implications: My overall take on the form has moved up and down like my moods: first I was horrified, and then I "heard" what I thought my mentor Gary McGee, one of Portland's nonprofit CPA's was saying, that in most respects the overhaul is just an attempt to formalize the information which has always been required but was lost in the "(attach schedule)" in various questions and preparers' failure to look up the instructions and respond completely. Some of you will remember the advent of Schedule B - for many years Form 990 Line 1d said "(attach schedule)" and the schedules were missing or incomplete, so several years ago IRS promulgated Schedule B to force that preparation. That's still true, only now it's way up to more and more schedules. HOWEVER, once I got to work really digesting the "final" drafts, I got concerned all over again. My biggest concerns are two-fold: 1) the effect on smaller groups, and 2) predicted fall-off in public transparency. Small groups cannot afford a lot of high level advice, and aren't in the loop on changes (although, those of you reading here: get Chronicle of Philanthropy, and read it's page on "Managing" - nothing too important will go on without you being notified there; also, go to irs.gov/charities, and subscribe to the free EO-Update which comes infrequently enough to be a blessing and is very skimmable before you decide whether to read deeper in one of the 1-3 topics they typically send out. After the form was finalized they released draft instructions in March and accepted comments for a couple months (everyone was exhausted and they got many fewer - neither AICPA or ABA commented to my knowledge), and in August 2008 released final instructions, also marked "draft" but the same stated intention to fix only typos or errors). IRS Goal Fulfillment: The IRS' stated goals were: increase compliance, increase transparency, and no increase in burden. The last goal has been subject of open derision. I now have my doubts about the second goal, depending on public’s willingness to read tax forms. Unfortunately, we're in a kafka- esque trap, right when the nonprofit economy falls apart along with the rest of them. I hope this is not a George Bush environmental thing come true, but Charles Grassley is no social justice liberal. Nonetheless, this is where we are now. |
| How did we get here? |
| Governance: IRS "crown jewel" |
| Public Support Tests & the Advance Ruling Period: Big changes! |
| Which Form to File? 990-N? 990-EZ? 990? |
| Relief: 990-EZ for more groups Partial answers on Hospitals & Bonds |
| The Overall Form & Schedules |
| RAW Forms. Nothing in this box has been marked or modified from what IRS publishes other than their filenames which have been made longer and therefore easier to follow, plus the two zip files hold a lot of separate files requiring maybe three dozen separate downloads from irs.gov. These are here as a convenience for my readers. Here are Zip Files containing what they say they do, in one easy (big) download each, which will save you time - on the IRS site there are many files since each Core Form Part has its own instructions, and each Schedule and any continuation schedules are separate files: All the forms: 990 990EZ allSchedules FinalDrafts unmarked.zip 990 Core, 990 EZ, and all Schedules' specific instructions: 990Core 990EZ allSchedules all Instructions unmarked.zip In addition, the IRS has published at least three "general instructions." One of them is very valuable for having the "sequencing order" that is the best way to fill out the form (mostly: 'do financials first, because so many other questions feed from them'), and also the GLOSSARY without which it is impossible to function. These forms are here: 990 General Instructions with Sequencing.pdf 990 Gen Glossary.pdf 990 Gen Appendix of Special Instructions.pdf |
| The 990-N find and file at: http://epostcard.form990.org |
| All 990 filers must now file SOMETHING every year; if they fail to for three years, they lose their exemption. Filers who are too small to file the 990 or 990EZ now must go online and file the "990-N "e-postcard" which is very easy. If you lose exemption, you must return to "start" and file for exemption all over again. This change is theoretically NOT part of the 990 revision, but came in through the Pension Protection Act in 2006. The idea was to clean up the list - if the IRS is carrying 750,000 exempt organizations who don't file and are presumably under $25,000 they wanted to clean up the 25% or however many were actually defunct. Last I read, however, only about 10% had filed the 990-N and now the IRS faces (in two years) the prospect of revoking 600,000 exemptions, and probably triggering 400,000 amateur re-applications so they hardly have the juice to read all of those and I expect to see the rule changed. One last background...one good friend, Eve Borenstein (see my page on Resources: Lawyers for more on Eve, who also is doing trainings on this new 990) calls the 990-N the "990-No" :). It's SIMPLE online, free, “e-postcard”. All it asks for is: Employer Identification Number (EIN or FEIN) also known as a Taxpayer Identification Number (TIN)) Tax year you are filing for Organization’s legal name and mailing address + any other names the organization uses Name and address of a principal officer e.g. Chair or President Web site address (if any) Confirmation that gross receipts normally <=$25K Whether going out of business |
| Form 990, unless small enough: Form 990-N (simple online “e-postcard”) 2008, 2009: Gross receipts “ordinarily” <$25K 2010 & beyond: Gross receipts “ordinarily” <$50K Form 990-EZ 2008: Gross receipts <$1M and Assets <$2.5M 2009: Gross receipts <$500K and Assets <$1.25M 2010 & beyond: Gross receipts <$200K and Assets <$500K |
| By way of transition relief, IRS will allow smaller groups to file the 990-EZ for a couple years until the full 990 hits them (like a "freight train on meth" in the words of one CPA who serves small nonprofits) and Hospitals and Exempt Bond holders received some relief from 2008 reporting that I didn't fully digest since I know too little to serve either of those. As of 2009 I think it all kicks in just as Grassley decides to go after exempt hospitals using old law (but that's a different story). |
| The 990 Structure |
| Key Parts of the 990 Core Form I Summary (dashboard for the public) III Program Service Accomplishments (similar to old 990) IV Checklist of Required Schedules (the so-called “trigger questions” - decoder below) V Other Filings & Tax Compliance (you can’t “plead the 5th”) VI Governance, Mgt & Disclosure (more below - an outline I am proud of!) VII Compensation (unduly complex; more below) VIII Revenue (UBTI analysis on same page) IX Functional Expenses (very slight changes) X Balance Sheet (virtually unchanged from old 990) The 16 Schedules (they made them somewhat alliterative; these are my names and some guesses on the alliteration intended) A Public Support / Public Charity basis (990 & EZ) B Contributors (no change; 990 & EZ) C Campaign & Lobbying Activity (990 & EZ) D Supplemental Financial Statement Detail (990 only) E Schools [Education] (no substantive change) (990 & EZ) F Foreign Activities & Grants (990 only) G Gaming (& Fundraising) (990 & EZ) H Hospitals (990 only) I Domestic Grants (Inside U.S.) (990 only) J Compensation (Justification?) (990 only) K Tax-Exempt Bonds ("K" is lawyer abbrev for contract) (990 only) L Loans and Insider Transactions (990 & EZ) M Non-Cash Contributions (990 only) N Termination / Disposition of Assets (990 & EZ) O Open for Narrative answers, both required & optional (990 only) R Related Organizations (990 only) |
| Biggest Changes |
Compensation – Details AND Process
“Governance” (Governance, Management & Disclosure) – Wide Range of Questions
Other Important Areas of Change
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| No more Advance Ruling Period - No More Form 8734 - All Accrual Basis - 5 Year Measurement Well, that about summarizes the changes. Advance Ruling Period / 8734. IRS will send you a new letter if you are within your advance ruling period - now you just don't calculate % until Year SIX (Yrs 2-3-4-5-6) and then if it is under 33.3% for through Year FIVE (1-2-3-4-5) and if under 33.3% then test through SIX with 10% plus facts & circumstances, and if not then test through FIVE with 10% plus facts & circumstances, and if not then go file 990-PF you have just become a private foundation. More scary in some ways is the fact that the new Schedule A allows filers to change public charity status among all nine choices by simply filling out the narrative schedule. It's like giving razor blades to small children I fear. The 8734 is gone unless it's in process now. 5 Year Measurement Periods / Accrual Basis. If you have been reporting cash basis as you were supposed to you must now go back and recalculate the test on an accrual basis (imagine change in present value discount for a future pledge :)...hey! I favored cash method and was about the only one...now we'll see what happens). One other change is it now clarifies which kinds of income that escapes UBI due to an exclusion counts in the denominator besides interest and passive income (answer: that income excluded as not regularly carried on). In my graffiti version, I mark the code sections to tie to the form's questions and instructions. I'm told this last one was always true but the form didn't precisely track the regs. |
| IRS has dug in its heels on governance. Some have referred to it as their crown jewel. They are not governance experts and never have been. Some of this produces really stupid results - example is they want to know a lot about "endowments" but they include "quasi-endowments" which are just a board-created category within unrestricted net assets - perhaps their goal is to get boards to stop hoarding (as if!). Risk Indicator of Private Benefit. The IRS primary concern is that narrow governance, lack of good conflict policies and such might be indications that a charity is serving narrow private purposes rather than public charitable ones. I agree with them about this risk, but there is evidence that this is slopping over, due possibly to lack of training, into exemption reviews & denials. That is a true risk and reminds one of the movie where they bused "pre-crime" thoughts. Hence, on my governance outline below, I footnoted that movie. Two quotes. First is IRS' Lois Lerner speaking to the National Association of State Charity Officials, and the second is authority Bruce Hopkins commenting on a case denying exemption due to no conflict policy and a narrow board (and other warning signs its only fair to acknowledge): “Some folks would argue that we have gone beyond where we should be going” with such questions, Lois G. Lerner, director of the Exempt Organizations Division of the IRS… “We disagree; we think that governance is a very big part of accountability,” said Ms. Lerner. “There is some argument that this is only the purview of the states. The IRS believes it is your purview but it is also of interest to us.”… “Ms. Lerner said governance policies are one factor that figure into “risk models” that the IRS uses to help decide “which organizations we should use our scarce resources on” when selecting charities for review.” -- From “Governance Is Key Issue in Regulating Charities, IRS Official Tells State Leaders,” Chronicle of Philanthropy, 10/16/07 “…organization was denied…tax-exempt status, in part because…it did not adopt a conflict-of-interest policy and it lacks an independent board. “…This attempt to invoke the private benefit doctrine is ludicrous. That doctrine is to be applied when there is actual private benefit. It is not to be invoked on the basis of wild speculation, such as the possibility that the organization’s assets “could” be used to benefit one or more board members. “… It is imperative that this matter be advanced to the courts, where this arbitrary and capricious policy can be stopped.” -- Bruce Hopkins, in Nonprofit Counsel, October 2008 (Wiley Periodicals), commenting on PLR 200830028 News Flash: as of Dec 09, IRS released a governance "check sheet" (checklist) and "guide sheet" (instructions) for its field auditors to use in evaluating governance. These include detailed questions on Bylaws and you should study them if you advise nonprofits or have any questions about your governance compliance. |
| OK. Here are all the forms, marked up by me as "graffiti" with comments throughout when I find something notable or strange or if the question needs annotation. Also here are special schedules I did: 1. a common language decoder of Core Form Part IV "trigger questions," 2. a special outline on "Governance" issues where I explain what IRS wants (form & instructions), their legal authority (if any), what they say on background, my comments, and finally my recommendations (this document continues to evolve) These two above are particularly useful documents. I have carried my "graffiti" comments to the final form and instructions for the Core Form (Version 3.0) but the rest of it is still marked up final drafts (Version 2.0) which have not substantively changed. The only reason 2.0's are called "Temp" is because I need to get 3.0 done! Forms: 990-2008-core-form-TMGraffiti-3.1.pdf 990-EZ-and-Schedules-TMgraffiti-Temp2.0.pdf My "governance" outline: Governance-on-Form-990-Policies-and-Actual-Procedures-4.0.pdf (see also discussion of IRS "check sheet" immediately above Trigger Questions Decoder: Trigger-Questions-Decoder-3.1.xls IRS Glossary, marked up: 990-2008-IRS.Glossary-TMGraffiti-3.1.pdf Instructions: 990-2008-core-instr-TMGraffiti-3.1.pdf 990-allSchedules-Instr-TMgraffiti-Temp2.0.pdf 990-EZ-instructions-TMgraffiti-2.0-R.pdf |
| My "Graffiti" Forms and Instructions |
| New Form 990 (for 2009) is out. There have been some changes. IRS has published a list of what it sees as key changes; some of them are important. The forms and instructions are all ready now on the IRS website. I will work to update this page in the next couple months. Also remember that for 2009, the threshold for when you must file the full 990 (vs. the 990-EZ) drops to $500,000 (from $1M) in "gross receipts" (and for 2010 will drop to $200,000, when the 990-EZ threshold will rise from "ordinarily" <$25K to ordinarily <$50K). There is also an Assets threshold for filing even if your gross receipts are low, but most of my readers don't run any risk of triggering that one! :-) |