The New Form 990
Amid growing concerns of nonprofit accountability and executive compensation, and questions about the 501(c) 3 status of institutions who seem to make a whole lot of profit, the IRS has released a new version of its Form 990, the tax document charities are required to file each year.
Senators Baucus and Grassley urged the IRS to make gathering more (and better) information a top priority in a letter to Department of the Treasury Secretary Henry Paulson last month, writing “Our concern is that the Form 990 has not kept up with modern practices in the charitable sector and needs significant updating.”
According to the IRS, the redesign of the Form 990 (the first in over 25 years) is based on three guiding principles: enhancing transparency, promoting tax compliance, and minimizing the burden on the filing organization. Charities, lawmakers, and citizens will have until September to debate the benefits of the new form – and recommend changes to it – before the tax agency finalizes it for the 2008 tax year.
The draft form is intended to be both easier for charities to complete and for the IRS (and other interested parties) to read.
Among highlights to the new form are:
• A summary page providing the organization’s identifying information and a snapshot of the nonprofit’s key financial, compensation, governance, and operational information. This summary page will also highlight certain figures, such as the ratio of fundraising to total expenses.
• A portion of the form requiring governance information, including the composition of the board, and certain other governance and financial statement practices.
• Schedules that will focus reporting on certain areas of interest to the public and the IRS: fundraising, compensation, hospitals, tax exempt bonds, and non-cash charitable contributions.
The IRS has been working on an overhaul of the Form for four years…what do you think of its new design?