2013 Form 990 Due May 15, 2014 - IRS Revisions to the Form 990 and Instructions

4/23/2014 Articles

For tax-exempt organizations operating on a calendar year, the May 15, 2014 filing due date for the 2013 Form 990 is fast approaching.  Each year the IRS issues a new Form 990 with corresponding instructions.  It is important for tax-exempt organizations, and attorneys and CPAs that advise these organizations, to be aware of changes to the Form 990 and the instructions.  This helps ensure compliance, and provides guidance regarding the IRS’ current interpretation of financial and reporting requirements applicable to tax-exempt organizations.  The following is a summary of key changes:

Organizational Changes

  • Clarification that when an organization changes its name (its legal name, not its “doing business as” name) the amended Articles of Incorporation and proof of filing with the applicable state agency must be attached to the Form 990.
  • Clarification that when an organization has terminated, merged, or dissolved, it must attach a copy of the Certification of Dissolution or Merger approved by the applicable state authorities to the Form 990; if a certified copy is not available, the organization must attach a copy of resolutions of its governing body approving the termination, merger, or dissolution.

Required Schedules

  • Clarification that an organization can exclude from Schedule B contributors that fall below the greater-than-$5,000/2% threshold only in the organization’s first five years, or when the organization meets the 33-1/3% public support test in the filing year or the prior year.
  • Clarification that an organization needs to answer “Yes” to report that it became aware of an excess benefit transaction with a disqualified person in any prior year if the excess benefit transaction has not been previously reported.

Governance, Management, and Disclosure

  • Compensation from a management company to interested persons must be reported on Schedule O.  The IRS provided additional guidance that such compensation must be reported if the organization used a management company or other person to perform any management duties customarily performed by or under the direct supervision of officers, directors, trustees, or key employees. Such management duties include, but are not limited to, hiring, firing, and supervising personnel, planning or executing budgets or financial operations, or supervising exempt operations or unrelated trades or businesses of the organization. The IRS further clarified that management duties do not include administrative services (such as payroll processing) that do not involve significant managerial decision-making.  Management duties also do not include investment management unless the organization conducts investment management services for others.

Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors

  • Clarification that directors’ compensation for non-director independent contractor services to the organization and related organizations must be reported on Part VII, Section A, where director compensation is reported.

Statement of Revenue

  • Clarification that donated services (including discounts on services) cannot be reported as contributions.  For example, in-kind donations from directors in the form of services are not included as contributions.
  • Additional clarification that contributions do not include discounts provided on sales of goods in the ordinary course of the organization’s activities.

Public Inspection of Returns

  • Clarification that public inspection requirements apply to both original and amended returns.

Disregarded Entities

  • Clarification that a single-member LLC that has elected to be treated as a separate association for tax purposes must apply for and obtain a separate tax-exemption, and must file a separate tax return (or consolidated return, if applicable).  This issue may arise for organizations that have formed single-member LLCs in states that do not grant tax-exempt status to LLCs.

Note that this discussion highlights certain key changes, and does not include all changes made to the Form 990 and Instructions.