Release of Form 990 Draft Instructions
By Elizabeth Carrott Minnigh,
Esq.
Buchanan Ingersoll & Rooney PC, Washington, DC
On April 7, 2008, the IRS posted draft instructions for the
redesigned Form 990 released on December 20, 2007 on its website
(www.irs.gov). The comment period for the draft instructions is
open until June 1, 2008. The draft instructions include highlight
sections, which indicate certain items on which the IRS would
particularly like to receive public comments. The IRS anticipates
releasing the final instructions by the end of 2008 as organizations
will begin using the redesigned Form 990 for the 2008 tax year.
In releasing the draft instructions to the redesigned Form 990 the
IRS reaffirmed its guiding principles of: (i) enhancing transparency;
(ii) promoting compliance; and (iii) minimizing the burdens on the
filing organization, while still accomplishing the goals of enhancing
transparency and promoting compliance. Moreover, the IRS stated that
the proposed instructions were “designed to promote uniform
reporting and help filing organizations report accurate and complete
information.”
Important changes in the draft instructions include the following:
1.
A glossary of key terms that includes all 176 definitions included
throughout the instructions.
2.
New definitions, including:
a.
“Key Employee”--A “key employee” is an
employee other than an officer, director, or trustee whose reportable
compensation exceeds $150,000 and who
i.
has responsibilities over the organization as a whole that are similar
to those of officers, directors, or trustees;
ii.
manages 5% or more of the “activities, assets, income, or
expenses of the organization… as a whole”; or
iii.
controls or shares authority to control 5% or more of the
organization's “capital expenditures, operating budget, or
compensation for employees”
An
individual who is not an employee of the organization (or of a
disregarded entity thereof) will be treated as a key employee if such
individual serves as a director or other fiduciary of a disregarded
entity and otherwise meets the definition of key employee. Management
companies and similar entities that are independent contractors are
excluded.
b.
“Related Organization”--The instructions now provide one
definition of “related organization” applicable to
throughout the redesigned Form 990. An organization will be a
“related organization” if it “stands in one or more
of the following relationships to the filing organization”:
i.
“Parent--an organization that controls the filing
organization”
ii.
“Subsidiary--an organization controlled by the filing
organization”
iii.
“Brother/Sister--an organization controlled by the same person
or persons that control the filing organization”
iv.
“Supporting/Supported--an organization that is (or claims to be)
at any time during the organization's tax year (i) a supporting
organization of the filing organization within the meaning of section
509(a)(3), if the filing organization is a supported organization
within the meaning of section 509(f)(3), or (ii) a supported
organization, if the filing organization is a supporting
organization”
3.
Appendices as follows:
A.
Exempt Organizations Reference Chart
B.
How to Determine Whether an Organization's Gross Receipts Are Normally
$25,000 (or $5,000) or Less
C.
Section 501(c)(15) Organizations and Gross Receipts
D.
Public Inspection of Returns
E.
Group Returns: Reporting Information on Behalf of the Group
F.
Disregarded Entities and Joint Ventures; Inclusion of Activities and
Items
G.
Section 4958 Excess Benefit Transactions
H.
Ownership in a Subchapter S Corporation (Schedule reserved for
inclusion in final instructions)
The Appendices are intended to provide additional information on
items that affect only certain types of activities or filers so that
the core instructions are generally applicable to all filers.
4.
Separate instructions for each of the 16 schedules to the new Form 990
so that only organizations filing such schedules will need to review
that portion of the instructions.
5.
A sequencing list to assist organizations in completing the form in a
logical order.
6.
Specific instructions for organizations filing group returns.
7.
More examples to illustrate definitions, new requirements and items
previously identified as complicated or confusing.
8.
Updated region identifiers based on the World Bank region
identifications to assist the IRS in determining where foreign
activities are being maintained.
9.
Special instructions and compensation tables to assist in properly
reporting various types of compensation.
This commentary also will appear in the May 8, 2008, issue of
the Tax Management Estates, Gifts and Trusts Journal. For more
information, in the Tax Management Portfolios, see Simpson, 870
T.M., Tax-Exempt Organizations: Reporting, Disclosure and Other
Procedural Aspects, and in Tax Practice Series, see ¶6920, Tax
Returns and Compliance.
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