Prepping for the New 990
Opera America Magazine •
The IRS Form 990, "Return of Organization Exempt from Income Tax," is submitted by tax-exempt and nonprofit organizations to the Internal Revenue Service on an annual basis. The 990 is used by government agencies and charity watchdog groups to prevent organizations from abusing their tax-exempt status. The IRS also provides Web sites such as Guidestar.org with copies of 990s; often this is the only way such information is made available since many tax-exempt organizations do not otherwise publish their audited financials.
On December 20, 2007, the IRS released a redesigned Form 990 for tax year 2008. The form will be filed in 2009 and in subsequent years. The redesign of Form 990 is based on three guiding principles: enhancing transparency, promoting tax compliance and minimizing the burden on the filing organization. It incorporates comments and suggestions from over 650 e-mails and letters received during the comment period.
Who is affected?
For opera companies with gross receipts totaling more than $100,000 and assets totaling more than $250,000, big changes are in store: All organizations above that threshold will be required to file the new Form 990 by tax year 2010.
The new 990 has three sections: An 11-page Core Form, with 11 separate sections that must be filled out by every tax-exempt organization; 16 separate Schedules, at least six of which will likely be required for most opera companies; and an instructions section, which contains a glossary and several appendices.
What are the most important changes to watch for?
The two areas where organizations will notice the most changes in reporting requirements are governance and compensation. Part VI in the Core Form is a new section that asks questions about the organization’s governance structure (such as the size of the board, the number of committees and questions about minutes-keeping), policies (such as whether or not a company has a conflict-of-interest policy, document retention policy and whistle-blower policy) and disclosure practices (such as who gets to see the 990 once it has been filed).
OPERA America recently created and adopted a number of new formal policies, including: Confidentiality Policy, Conflict of Interest Policy, Document Retention and Destruction Policy, and Signatory Policy. The organization has also developed a comprehensive Emergency Preparedness Plan. These documents are available for review by member companies, which may consider using them as a model for their own materials.
Part VII of the Core Form also contains important changes. While companies have always had to report on compensation of the highest-ranking people within the organization, they must now report on compensation information for all officers, directors and trustees, as well as the five highest-paid employees making over $100,000. Additionally, a key employee is now defined as anyone who makes over $150,000 in a calendar year. Companies should also be prepared to report on non-salary compensation provided to these key employees, such as housing subsidies, expense accounts, transportation reimbursements and other benefits.
Where can I go for more information?
The first stop should be the only truly official 990 Web site — the one that belongs to the Internal Revenue Service. The most up-to-date information on the 990 at all times can be found at www.irs.gov/charities/article/0,,id=181089,00.html.
Independent Sector, a leadership forum for charities, foundations and corporate giving programs committed to advancing the common good in America and around the world, has been keeping up with any news related to the 990. Visit this Web site for the latest:
Finally, Public Interest Clearinghouse, a California-based nonprofit, has uploaded the final draft of the Form 990 from December 2007. The IRS has made it clear that the December draft is the same version that nonprofits will be filing in 2009. Visit www.pic.org/resources/Form990/SampleForm.pdf.
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