Changes in IRS Form 990: What Every Nonprofit Should Know The Nonprofit Center at LaSalle University May 28, 2009

Elizabeth F. Pilacik, CPA Chair, Non-Profit & Tax-Exempt Services Senior Manager, Accounting & Auditing Asher & Company, Ltd. Direct Dial: (215)

What we will cover Purpose of Form 990 Purpose of Form 990 Form 990: Past and Present Form 990: Past and Present Key Aspects of the Redesign Key Aspects of the Redesign Phase-In Period Phase-In Period Reporting Impact Reporting Impact Operational Impact Operational Impact Handout Handout

Purpose of Form 990 Promote tax compliance Promote tax compliance Accountability Accountability Enhance transparency Enhance transparency Marketing tool Marketing tool

Form 990: Past and Present Form 990 History Form 990 History –First 990 filed in 1942 – Consisted of a two page form with three yes/no questions, an income statement, a balance sheet, and certain schedules (if applicable) –By 1976, Form 990 was still two pages, Schedule A consisted of four pages, and instructions were covered in seven and one-half pages

Form 990: Past and Present Form 990 History (continued) Form 990 History (continued) –By 2000, Form 990 and Schedule A were each six pages, at least two pages for Schedule B (including instructions) and a separate forty-two page instruction booklet Form 990 – Pre-Redesign (2007 returns filed in 2008) Form 990 – Pre-Redesign (2007 returns filed in 2008) –Consisted of a nine page form, six pages for Schedule A, and one or more pages for Schedule B

Key Aspects of the Redesign Increased focus – activities, not just numbers Increased focus – activities, not just numbers Summary page – snapshot Summary page – snapshot Checklist of schedules Checklist of schedules Enhanced reporting – related organizations, joint ventures, UBI Enhanced reporting – related organizations, joint ventures, UBI Targeted information – endowments, bonds, hospitals, major transactions, FIN 48 Targeted information – endowments, bonds, hospitals, major transactions, FIN 48

Phase-In Period Revised Form 990 effective for the 2008 tax year (returns filed in 2009) Revised Form 990 effective for the 2008 tax year (returns filed in 2009) Phase-in period over three years for smaller organizations Phase-in period over three years for smaller organizations –For the 2008 tax year, organizations with gross receipts less than $1M and total assets less than $2.5M may file Form 990-EZ –Thresholds decrease for 2009 and 2010 tax years ($500K/$1.25M and $200K/$500K, respectively)

Reporting Impact Governance Governance Programmatic Programmatic Financial Information Financial Information Tax Compliance Tax Compliance

Reporting Impact: Governance Year of formation Year of formation State of domicile State of domicile Number of voting members of governing body Number of voting members of governing body Number of independent voting members Number of independent voting members Total number of volunteers Total number of volunteers Board interrelationships Board interrelationships Documentation of meetings (includes committees authorized to act) Documentation of meetings (includes committees authorized to act)

Reporting Impact: Governance Fraud disclosure Fraud disclosure Written policies and procedures Written policies and procedures Conflict of interest policy Conflict of interest policy Review of Form 990 by the Board Review of Form 990 by the Board Policy/Process for determining and reviewing compensation Policy/Process for determining and reviewing compensation Policies over financial statements and financial reporting Policies over financial statements and financial reporting

Reporting Impact: Programmatic Prominence of description of organization’s mission and significant activities Prominence of description of organization’s mission and significant activities Programs disclosed by expenses, grants and revenues – identification of achievements Programs disclosed by expenses, grants and revenues – identification of achievements Enhanced disclosure of international activities Enhanced disclosure of international activities

Reporting Impact: Financial Information Two year presentation of revenue and expenses Two year presentation of revenue and expenses Enhanced reporting of compensation of officers, directors, trustees, key employees Enhanced reporting of compensation of officers, directors, trustees, key employees Donor advised funds Donor advised funds Endowment funds (five year presentation) Endowment funds (five year presentation) Fundraising activities Fundraising activities Enhanced reporting of non-cash contributions Enhanced reporting of non-cash contributions

Reporting Impact: Tax Compliance Employment tax filings Employment tax filings Donor acknowledgement filings Donor acknowledgement filings Enhanced reporting of political and lobbying activities Enhanced reporting of political and lobbying activities Support schedule (facts & circumstances test) Support schedule (facts & circumstances test) Compliance with state filing and registration requirements Compliance with state filing and registration requirements

Operational Impact How best to prepare How best to prepare –Review existing policies and procedures related to governance, public disclosure, compensation, relationships –Expand documentation –Evaluate information currently provided –Take a trial run of the new Form 990

Handout

Questions/Discussion

Concluding Remarks What should you know? What should you know? –Develop a pro-active approach –Enlist Board involvement –See the opportunities – growth, marketability –Enhance perception and accountability – to the public, to your peers