The Internal Revenue Service unveiled its updated Form 990 on December 20, 2007. The revised Form, which most charities will be required to file annually, includes many of the elements that appeared in the draft version, including a core form and a series of schedules. However, in response to widespread comments from the charitable community and its advisors, the IRS has substantially changed the design and many elements of the Form and the schedules.
The IRS announced it will phase in implementation of the new form over four years to allow smaller organizations to prepare for new requirements. Beginning in May 2009, organizations with gross annual receipts of more than $1 million or total assets of more than $2.5 million will be required to file the new returns for fiscal year 2008 activities, and organizations with gross annual receipts between $25,000 and $1 million may file a revised version of the Form 990-EZ. The smallest nonprofits are already being required to file a new electronic postcard (Form 990-N) beginning in 2008. By the end of the transition period in 2011 (for fiscal year 2010 returns), organizations with gross annual receipts of $200,000 or total assets of $500,000 will be required to file the new Form 990. In addition, two of the schedules that provide detailed information on the activities of specific types of organizations or operations will be phased in throughout the transition period.
Organizations can now describe their exempt purpose and accomplishments on the first two pages of the Form, and there are other improvements in financial, compensation, and governance information and in other specific schedules. The Internal Revenue Service announcement, final Form, and supporting information can be found on the IRS Web site.
NOTE: The Internal Revenue Service posted a Q&A document (pdf) on the 2006 Form 990 information return clarifying certain instructions and questions, particularly pertaining to compensation of officers, directors, and key employees. In recent months, practitioners representing tax-exempt organizations expressed confusion about changes made to the 2006 form after enactment of the Pension Protection Act of 2006 (Pub. Law No. 109-280). The Pension Protection Act of 2006 (known by various names such as “the Pension Bill” and “H.R. 4”) tightens the rules for tax-exempt fund raising supporting organizations (“Foundations”) and certain contributions to them. These changes will affect how and to whom donors such as private foundations make grants to your hospital’s foundation, and how your foundation administers these complex relationships. The changes will not affect hospitals that raise funds internally without use of a separate foundation.