RSM Resources

July 2007

On June 14, the IRS released a discussion draft of the Form 990 - Return of Organization Exempt From Income Tax. This is the first full-scale revision of the form in more than 25 years. The IRS is allowing a 90-day comment period ending on September 14, 2007.

The revised Form 990 schedules and instructions are available by clicking here.

This significant revision has greatly expanded the reporting requirements for tax-exempt organizations. The new form is 10 pages long and has 15 schedules. Tax-exempts will be required to provide significantly more information to address topics that have been areas of concern to the IRS, such as political activities, compensation, charity care and community benefits and tax-exempt bonds.

The redesigned 990 is based on three guiding principles:

• Enhancing transparency to provide the IRS and the public with a realistic picture of the organization;
  
• Promoting compliance by accurately reflecting the organization's operation so that the IRS may efficiently assess the risk of non-compliance; and
• Minimizing the burden on filing organizations.

In reviewing these three guiding principles, it seems clear that the redesigned Form 990 will not minimize the burden on filing organizations.

Among the highlights of the new form are the following:

• A summary page providing the organization's identifying information and a snapshot of the organization's key financial, compensation, governance and operational information;
• 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
  

RSM McGladrey, as well as many professional associations, is working diligently to provide comments to the Internal Revenue Service about these new requirements. We recommend you review the draft 990 with your management team and board of directors. Although the form is a draft, the IRS has clearly stated they intend this new form to be used for the 2008 reporting year. As such, organizations will need to gear up to account for certain activities effective January 1, 2008. In addition, you may need to address governance procedures so as to respond to the 990 in the most positive light.

Remember, the Form 990 is your most public document. It is the report to the community of the public benefits you provide and a statement designed to support your continued tax-exempt status.

A member of our health care team, listed below, can help you address this draft form and how it applies to your organization.

Author: Ginny Striegel is a tax director based in RSM McGladrey's Des Moines office and works exclusively with tax-exempt clients across the country. If you have any questions regarding the information in this article, please contact Striegel at 515.281.9272 or ginny.striegel@rsmi.com.