The NonProfit Times - October 1, 2008 - (Page 14)

TAXING ISSUES HARVEY BERGER, DOUGLAS DAMRON AND D. GREG GOLLER Filing Changes Transparency and disclosure in the new Form 990 T he last time the Internal Revenue Service (IRS) significantly revised the Form 990, Jimmy Carter was receiving his mail at 1600 Pennsylvania Ave., the Sony Corporation was turning the world on to a revolutionary portable cassette tape player, and a young golf prodigy was shooting a 48 on nine-hole courses. A lot has changed since then. For the nonprofit sector, change took the form of dynamic growth in the diversity and complexity of exempt organizations. The IRS has redesigned the Form 990 to be used for tax years ending on or after Dec. 31, 2008 to meet the change, and in response to requests from federal, state and local governments and organization funders. 45 O 00 ve Ur se r Conceptually, the new form is designed to enhance the transparency of an organization’s mission, financial information, operations, and use of resources thereby providing users with a more concise picture of an organization’s activity and governance. Structurally, the new form rearranges the existing core form, adds questions on key areas such as board governance and compensation, and breaks the existing Schedules A and B into 16 separate detailed schedules. THE CORE FORM PARTS I AND II Summary Page Rather than simply replicating the dry recital of an organization’s revenues, expenses, and changes in net assets found in Part I of its predecessor, Part I of the revised Form 990 quickly provides users not only with a summary of your organization’s financial activity on a comparative basis, but also includes information on the organization’s mission or most significant activities, the number of independent and non-independent directors, the number of employees and volunteers, and the amount of your organization’s unrelated business income and unrelated business taxable income. PART III Statement of Program Service Accomplishments Previously located under Part II, this part requires you to describe your exempt-purpose achievements for each of the organization’s three largest program services. PART IV Checklist of Required Schedules This part consists of a checklist of required supplemental schedules and also provides a quick view of whether your organization is conducting activities that raise IRS concern, such as lobbying, political campaign activities, transactions with insiders or members of their family or closely-associated businesses, and major dispositions of assets. PART V Statements Regarding Other IRS Filings and Tax Compliance This part seeks to determine your organization’s compliance with various requirements such as electronic filing, Form 990-T filing, and charitable contribution acknowledgements. PART VI Governance, Management, and Disclosure Probably one of the most significant changes to the form appears in Part VI, which brings to the Form 990 for the first time a governance and management section. More than ever before, your board of s directors is in the spotlight. Among the pieces of information to be provided are who is on your board, the number of board members eligible to vote, the number of independent members, and any family or business relationships between board members, their families, or the organization’s employees and vendors. Although some of the questions about the organization’s specific policies and practices are not required under the Tax Code, the IRS believes that information regarding them is important to determine if the organization has safeguards in place to ensure that its assets are protected and will be used for exempt purposes. These considerations are even more important for organizations subject to the prohibitions on private benefit, excess benefit, and private inurement. PART VII Compensation of Officers, Directors, and Key Employees In keeping with the new form’s overall objective of transparency, the return includes major modifications for reporting compensation from your organization and The instructions will expand the definition of key employees all related organizations. The reporting of total compensation packages and arrangements is designed to provide more complete information regarding complicated compensation and financial arrangements that may raise concerns about private inurement, excess benefit transactions, and substantial private benefits. You must disclose the compensation paid to officers, directors, trustees, and key employees. The instructions will expand the definition of key employees.The revised definition of what constitutes a “key employee” will now have three prongs. Under the new definition, key employees are those persons (other than officers, directors, and trustees) who: • Had reportable compensation exceeding $150,000 for the year (the “$150,000 test”); • Had or shared organization-wide control or influence similar to that of an officer, director, trustee, or managed or had authority or control over at least 10 percent of the organization’s top management officials (the “responsibility test”); and, Call today and get Fundraiser 360° for FREE* 800-890-3962 The Fundraiser 360° Advantage To see how simple software can be, or to view a free demo, call us at 800-890-3962 or visit us online at dynamicdataconcepts.com It works for us! “It gives our staff the information they need to quickly make the right strategic decisions.” FMS School, Cleveland Donor Management | Membership | Events | Memorials | Web Solutions 14 OCTOBER 1, 2008 THE NONPROFIT TIMES www.nptimes.com http://www.dynamicdataconcepts.com http://www.dynamicdataconcepts.com http://www.nptimes.com

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The NonProfit Times - October 1, 2008 Near Miss & Direct Hit Donor Intent The Focus Of Suit North Dakota AG Investigating The Grant Institute Contents Who...When...Where...How...What? Calendar Kumbaya Tying The Knot Filing Changes Philanthropy Caucus Big Bucks For Capital Campaigns 5 Things NOT To Do In A Capital Campaign Acquisition: Staying The Course ServiceNation Summit Fundraising Guide NPT Jobs Resource Directory

The NonProfit Times - October 1, 2008

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