Draft of Revised Form 990 Released

By Laura Kalick and Mike Sorrells

The Internal Revenue Service (IRS) has just released a draft of a redesigned Form 990, Return of Organizations Exempt from Income Tax, and has requested public comments. It is proposed that the revised Form 990 will be used for the 2008 tax year. This is a complete redesign of a form that developed somewhat haphazardly over many years.

The draft Form 990 is based on three guiding principles:

• Enhancing transparency,
• Promoting compliance, and
• Minimizing the filing burden on organizations.

The draft form consists of 10 core pages that all organizations will complete. The core pages will ask for more detailed governance information including board composition and conflicts of interest. The first page of the form provides a “snapshot” of the organization, with exempt purpose, summarized financial information and some ratio presentation that gives some idea of an organization’s efficiency. Additionally, where applicable, organizations will complete other schedules that include detailed information on: public charity status; contributors; political and lobbying activity; supplemental financial statement detail, including FIN 48 disclosure of uncertain tax positions: schools; foreign activities; fundraising and gaming; hospitals, grants; compensation; tax exempt bonds; loans; non-cash contributions; termination of significant disposition of assets; and related organizations.

Much of the information is already requested; however on the current form, taxpayers are allowed to provide their own schedules, which has resulted in inconsistent (and sometimes omitted) information reporting. Furthermore, an impetus for the formatted schedules is to promote electronic filing of information. Currently, even though an organization can file a Form 990 electronically, only information requested on the form is transmitted to IRS.

The redesigned Form 990 can be found on the IRS website at http://www.irs.gov/charities/index.html.

Laura Kalick is a senior manager in the Nonprofit Tax practice in BDO Seidman’s Greater Washington, D.C. office. She can be reached at lkalick@bdo.com. Mike Sorrells is the director of the Nonprofit Tax practice in BDO Seidman’s Greater Washington, D.C. office. He can be reached at rsorrells@bdo.com.

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