1. The New 990 Presenter: Kris McMackin CPA

2. The New 990 What is the 990 What is all the hoopla about changes to the 990? What do you need to know about it? What do you need to do about it? Disclosure requirements & Conflict of Interest Policy Financial Statements for the Board

3. What is the 990? Is it just that document that the IRS demands we file every year?

4. What is the 990? The answer is NO, it’s important to: -Federal government -State government -Other tax-exempt organizations -Public Each year, approximately 550,000 organizations file a Form 990 or Form 990-EZ with the IRS.

5. What is the 990? IRS’ primary tax compliance tool for tax-exempt organizations. Most states rely on the form for charitable and other regulatory oversight, and to satisfy state income tax filing requirements for organizations claiming exemption from state income tax. Public document that is made available by filing organizations, the IRS, and others. The public, state regulators, media, researchers, and policymakers rely on the 990 to obtain information about the tax-exempt sector and individual organizations, helping to ensure transparency.

6. What is the 990 Most of all, it is your story. The design of the new 990 allows tax exempt organizations to tell their story throughout the form. Use of a new summary page, supplemental information, the core return and schedules allow for narrative

7. You can use the 990 to your advantage Create a good impression Tell the world about your work Show you’re tax compliant Show accountability and transparency Explain how your activities support your mission or goal Provide explanations to clarify information of interest to the IRS and public * It’s not just about the numbers anymore*

8. Why Change the 990? The 990 was last changed in 1979. The form no longer The 990 was last changed in 1979. The form no longer reflected the changes in tax law and the increasing size, diversity and complexity of the exempt sector. The three guiding principles of the changes are: enhancing transparency promoting tax compliance and minimizing burden on the filing organization.

9. Summary of Key Changes Opportunities throughout the forms and schedules for narrative information New 3 part section on governance Revised reporting of compensation and insider transactions Revised reporting of compensation and insider transactions Revamping form layout- more schedules and fewer attachments Revamping form layout- more schedules and fewer attachments Minimized reporting burden through use of thresholds and exceptions Minimized reporting burden through use of thresholds and exceptions

10. Filing levels 3 Filing levels depending on thresholds 3 Filing levels depending on thresholds 990-N – also known as the e-Postcard 990-N – also known as the e-Postcard 990EZ – short form, had some changes 990EZ – short form, had some changes 990 – total revamping, first time in 30 years 990 – total revamping, first time in 30 years

11. Phase in Changes were made in 2008 but the IRS has allowed a 3 year phase in. (see handout) Starting with the 2010 tax year: Form to File Private Foundation990-PF Gross receipts normally <= $50k990-N Gross receipts <$200k &990-EZ Total assets< $500k Gross receipts =>$200k or990 Total assets =>$500k

12. New layout of 990: consists of a 12 page core form to be completed by all organizations consists of a 12 page core form to be completed by all organizations 16 schedules that may be filled out depending on the organizations activities 16 schedules that may be filled out depending on the organizations activities Many of the schedules replace “unstructured attachments” previously required Many of the schedules replace “unstructured attachments” previously required Some schedules replace the previous Schedule A which has been split into 4 separate schedules Some schedules replace the previous Schedule A which has been split into 4 separate schedules

13. 990 Layout Part I, Summary Part I, Summary Part II, Signature Block Part II, Signature Block Part III, Statement of Program Service Accomplishments Part III, Statement of Program Service Accomplishments Part IV, Checklist of Required Schedules Part IV, Checklist of Required Schedules Part V, Statements Regarding Other IRS Filings and Tax Compliance Part V, Statements Regarding Other IRS Filings and Tax Compliance Part VI, Governance, Management, and Disclosure Part VI, Governance, Management, and Disclosure Part VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors Part VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors Part VIII, Statement of Revenue Part VIII, Statement of Revenue Part IX, Statement of Functional Expenses Part IX, Statement of Functional Expenses Part X, Balance Sheet Part X, Balance Sheet Part XI, Financial Statements and Reporting Part XI, Financial Statements and Reporting

14. Schedules A – public charity status and public support A – public charity status and public support B- schedule of contributors B- schedule of contributors C- political campaign and lobbying activities C- political campaign and lobbying activities D- supplemental financial statements D- supplemental financial statements E- schools E- schools F- activities outside of the U.S. F- activities outside of the U.S. G- fundraising and gaming activities G- fundraising and gaming activities H- hospitals H- hospitals I- grants and other assistance orgs, govts & individuals in the U.S. I- grants and other assistance orgs, govts & individuals in the U.S. J- compensation information J- compensation information K- supplemental information on tax exempt bonds K- supplemental information on tax exempt bonds L- transactions with interested persons L- transactions with interested persons M- non-cash contributions M- non-cash contributions N- liquidation, terminations, dissolution, or significant disposition of assets N- liquidation, terminations, dissolution, or significant disposition of assets O- supplemental information O- supplemental information R- related organizations and unrelated partnerships R- related organizations and unrelated partnerships

15. New layout of 990-EZ: consists of a 4 page core form to be completed by all organizations consists of a 4 page core form to be completed by all organizations 7 potential schedules that may be filled out depending on the organizations activities 7 potential schedules that may be filled out depending on the organizations activities In the past two formal schedules- A & B In the past two formal schedules- A & B Schedule A was converted to 3 separate schedules Schedule A was converted to 3 separate schedules Other “unstructured attachments” converted to schedules Other “unstructured attachments” converted to schedules

16. 990-EZ Layout Part I, Statement of Revenue Part I, Statement of Revenue Part II, Balance Sheets Part II, Balance Sheets Part III, Statement of Program Service Accomplishments Part III, Statement of Program Service Accomplishments Part IV, Compensation of Officers, Directors, Trustees, Key Employees Part IV, Compensation of Officers, Directors, Trustees, Key Employees Part V, Other Information Part V, Other Information Part VI, To be completed by 501(c)(3) organizations – covers lobbying, schools, highest compensated employees and independent contractors Part VI, To be completed by 501(c)(3) organizations – covers lobbying, schools, highest compensated employees and independent contractors

17. Schedules A – public charity status and public support A – public charity status and public support B- schedule of contributors B- schedule of contributors C- political campaign and lobbying activities C- political campaign and lobbying activities E- schools E- schools G- fundraising and gaming activities G- fundraising and gaming activities L- transactions with interested persons L- transactions with interested persons N- liquidation, terminations, dissolution, or significant disposition of assets N- liquidation, terminations, dissolution, or significant disposition of assets

18. A Closer Look at Key Changes A Closer Look at Key Changes The Summary (page 1) designed to enhance transparency by providing key information on the first page for the benefit of the public The Summary (page 1) designed to enhance transparency by providing key information on the first page for the benefit of the public Summarizes info found elsewhere on form, snapshot of key financial governance & operational info Summarizes info found elsewhere on form, snapshot of key financial governance & operational info Includes mission, unrelated business income, professional fundraising expenses, number of directors & number of independent directors Includes mission, unrelated business income, professional fundraising expenses, number of directors & number of independent directors

20. A Closer Look at Key Changes A Closer Look at Key Changes Part III – Statement of Program Service Accomplishments (page 2) Part III – Statement of Program Service Accomplishments (page 2) Briefly describes mission (again), new activities and any activities ceased, 3 largest program svces Briefly describes mission (again), new activities and any activities ceased, 3 largest program svces Additional descriptions can be given on Sched O Additional descriptions can be given on Sched O Great opportunity for organization to promote its accomplishments to the public Great opportunity for organization to promote its accomplishments to the public

22. A Closer Look at Key Changes A Closer Look at Key Changes Part IV Checklist of Required Schedules Designed to assist org in determining which of the 16 schedules they are required to file Designed to assist org in determining which of the 16 schedules they are required to file Eases the filing burden by assisting in determining which schedules to file Eases the filing burden by assisting in determining which schedules to file

24. A Closer Look at Key Changes A Closer Look at Key Changes Part VI Governance, Management, Disclosure (p6) Good governance promotes compliance Good governance promotes compliance Not requirements for tax exemption under federal law but IRS has indicated that orgs without these policies run a greater risk of audit Not requirements for tax exemption under federal law but IRS has indicated that orgs without these policies run a greater risk of audit

25. Governance, Mgmt, Disclosure Governance, Mgmt, Disclosure 3 parts: Part I asks questions about the governing body & management Number of voting members of Board Number of voting members of Board Number of independent voting directors or trustees Number of independent voting directors or trustees Family or business relationships among officers, directors, trustees, or key employees Family or business relationships among officers, directors, trustees, or key employees Material diversion of assets during the year Material diversion of assets during the year Are meetings documented at the time of the meeting Are meetings documented at the time of the meeting

26. Governance, Mgmt, Disclosure Governance, Mgmt, Disclosure Part II asks questions about policies If the org has local chapters are there written policies & procedures to ensure consistency in operations If the org has local chapters are there written policies & procedures to ensure consistency in operations Was the 990 reviewed by the board before it was filed and a description of the review process Was the 990 reviewed by the board before it was filed and a description of the review process Written conflict of interest policy with annual disclosure requirement and enforcement policy Written conflict of interest policy with annual disclosure requirement and enforcement policy Written whistleblower policy Written whistleblower policy Written document retention & destruction policy Written document retention & destruction policy Determination of compensation Determination of compensation

27. Governance, Mgmt, Disclosure Governance, Mgmt, Disclosure Part III asks questions about public disclosure and if any additional forms are made available such as articles of incorporation, bylaws, etc

29. Conflict of Interest Conflict of Interest Q12 Section B asks whether the organization has a conflict of interest policy in place Conflict of Interest Policy: Defines conflicts of interest Identifies the classes of individuals within the org covered by the policy Facilitates disclosure of information that can help identify conflicts Specifies procedures to be followed in managing conflicts

30. Conflict of Interest Conflict of Interest What is a conflict of interest? When a person in a position of authority such as an officer, director, or manager, can benefit financially from a decision he/she can make in such capacity. (includes indirect benefits such as family members or businesses)

31. Conflict of Interest Conflict of Interest So, again, the Conflict of Interest Policy: Defines circumstances under which a conflict of interest may arise- ie. a voting member of governing board who receives compensation- vote on matters of compensation? Identifies the classes of individuals within the org covered by the policy- such as directors, officers, managers Facilitates disclosure of information that can help identify conflicts- such as annual statement, named individual to discuss Specifies procedures to be followed in managing conflicts- such as excluded from vote, minimum number of bids

32. Conflict of Interest Conflict of Interest Example policy is included in your handout

33. Public Disclosure Requirements Section C is concerned with the disclosure requirements and how those are met

34. Public Disclosure Requirements Certain annual returns Certain annual returns Applications for exemption Applications for exemption Copies must be provided immediately in the case of in-person requests Copies must be provided immediately in the case of in-person requests Within 30 days in the case of written requests. Within 30 days in the case of written requests. May charge a reasonable copying fee plus actual postage, if any. May charge a reasonable copying fee plus actual postage, if any.(handout)

35. Public Disclosure Requirements Which tax documents must be available? Which tax documents must be available? Exemption application Exemption application Form 1023 (for 501(c)(3) orgs) Form 1023 (for 501(c)(3) orgs) Form 1024 for most other 501(c) Form 1024 for most other 501(c) Submission letter where no form is prescribed Submission letter where no form is prescribed All supporting documents & any IRS letter or document concerning the application All supporting documents & any IRS letter or document concerning the application Political orgs exempt under 527(a) must make Form 8871 Notice of Status available Political orgs exempt under 527(a) must make Form 8871 Notice of Status available

36. Public Disclosure Requirements Which tax documents must be available? Which tax documents must be available? Annual return Annual return Form 990- return of org exempt from income tax Form 990- return of org exempt from income tax Form 990-EZ- short form return of org exempt from income tax Form 990-EZ- short form return of org exempt from income tax Form 990-PF- return of private foundation Form 990-PF- return of private foundation 990-BL- black lung benefit trusts 990-BL- black lung benefit trusts Form 1065- U.S. partnership return of income Form 1065- U.S. partnership return of income

37. Public Disclosure Requirements Which tax documents must be available? Which tax documents must be available? Additionally, a 501(c)(3) Additionally, a 501(c)(3) Form 990T- exempt organization business income tax return- this includes all schedules, attachments, or supporting documents related to tax on unrelated business income Form 990T- exempt organization business income tax return- this includes all schedules, attachments, or supporting documents related to tax on unrelated business income Not required to disclose Not required to disclose Schedule K-1 of Form 1065 Schedule K-1 of Form 1065 Schedule A of Form 990-BL Schedule A of Form 990-BL Name and address of any contributor (except private foundations) Name and address of any contributor (except private foundations)

38. Public Disclosure Requirements Which tax documents must be available? Which tax documents must be available? Returns must be available for a three-year period beginning with the due date of the return (including any extension of time for filing). Returns must be available for a three-year period beginning with the due date of the return (including any extension of time for filing). Where must they be available? Where must they be available? at the principal office of the organization, and any regional or district offices having three or more employees at the principal office of the organization, and any regional or district offices having three or more employees

39. Public Disclosure Requirements In person request- honored same day In person request- honored same day Written request (also fax or email)- 30 days Written request (also fax or email)- 30 days May charge reasonable copying fees and actual postage May charge reasonable copying fees and actual postage

40. Public Disclosure Requirements Exception to requirement to provide copies Exception to requirement to provide copies If the documents are made widely available If the documents are made widely available Ie. via the internet Ie. via the internet Must be in pdf format or other form as described in the regulations Must be in pdf format or other form as described in the regulations Must be able to download documents for free Must be able to download documents for free The organization must advise requesters of how to access documents The organization must advise requesters of how to access documents

41. Public Disclosure Requirements Other documents you may make available Other documents you may make available These are not required These are not required Governing documents Governing documents Conflict of interest policy Conflict of interest policy Financial statements Financial statements

42. A Closer Look at Key Changes: Part VI Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors: List of persons whose compensation must be disclosed is expanded: List of persons whose compensation must be disclosed is expanded: Current officers, directors, trustees Current officers, directors, trustees Up to 20 key employees who have reportable compensation greater than $150k from org & related Up to 20 key employees who have reportable compensation greater than $150k from org & related Five highest paid current employees w/ compensation exceeding $100k Five highest paid current employees w/ compensation exceeding $100k Former officers, key emps, highest compensated employees w/ compensation exceeding $100k Former officers, key emps, highest compensated employees w/ compensation exceeding $100k Former directors or trustees whose compensation exceeds $10k Former directors or trustees whose compensation exceeds $10k

43. A Closer Look at Key Changes: Must disclose name, title, average weekly hours, compensation, and estimated “other” compensation such as housing, education, insurance Must disclose name, title, average weekly hours, compensation, and estimated “other” compensation such as housing, education, insurance Must identify independent contractors such as law firms, accounting firms, consultants receiving more than $100k Must identify independent contractors such as law firms, accounting firms, consultants receiving more than $100k Series of trigger questions to determine if schedule J must be filed Series of trigger questions to determine if schedule J must be filed

45. What you need to do: Determine which form the organization will need to file Determine which form the organization will need to file Identify related organizations required to be listed on Schedule R Identify related organizations required to be listed on Schedule R Identify officers, directors, trustees and potential key employees and top 5 highest compensated employees and subcontractors Identify officers, directors, trustees and potential key employees and top 5 highest compensated employees and subcontractors Review new governance questions which will be answered based on policies in place on the last day of the year Review new governance questions which will be answered based on policies in place on the last day of the year Identify schedules the organization will likely be required to file Identify schedules the organization will likely be required to file

46. What you need to do: Obviously your organization will have to provide the accounting firm preparing the tax return with much of this new information Your accountant should be asking questions!

47. Financial Statements What information should the Board be reviewing on a monthly basis? What information should the Board be reviewing on a monthly basis?

48. Financial Statements What information should the Board be reviewing on a monthly basis? What information should the Board be reviewing on a monthly basis? Balance Sheet Balance Sheet Income Statement (Profit & Loss) Income Statement (Profit & Loss) Compared to Budget Compared to Budget

49. Balance Sheet

50. Income Statement (Profit & Loss)

51. Budget vs Actual

52. For Start-ups Consider partnering with an established organization such as the United Way, Goodwill, etc and operate under their 501(c)(3) designation Consider partnering with an established organization such as the United Way, Goodwill, etc and operate under their 501(c)(3) designation

53. Resources http://www.irs.gov/charities/index.html?navme nu=menu1 http://www.irs.gov/charities/index.html?navme nu=menu1 http://www.irs.gov/charities/index.html?navme nu=menu1 http://www.irs.gov/charities/index.html?navme nu=menu1 http://www.irs.gov/charities/article/0,,id=1666 25,00.html http://www.irs.gov/charities/article/0,,id=1666 25,00.html http://www.irs.gov/charities/article/0,,id=1666 25,00.html http://www.irs.gov/charities/article/0,,id=1666 25,00.html http://stayexempt.org/ http://stayexempt.org/ http://stayexempt.org/