In an effort to enhance transparency and expand disclosure to the general public, the IRS has significantly increased the amount of information that not-for-profit organizations must maintain to complete Form 990.
According to Steven T. Miller, the IRS’ Commissioner for Tax Exempt and Government Entities, the IRS has recently changed direction toward more enforcement in response to a perceived evolution in the nature of the charitable sector.
But additional enforcement is apparently not enough.
Miller’s strategy for regulating not-for-profit organizations includes enhancing the IRS’ efforts to “gather significant and reliable information about the charitable sector―more than we have before―and then make that information broadly available to the public, in a timely and user-friendly fashion.”
The newly redesigned IRS Form 990 is one step in implementing the IRS’ strategy to enhance transparency and expand disclosure to the general public.
The potential benefits of expanded disclosure to the general public remain to be seen. However, the impact on not-for-profit organizations that must file Form 990 is more immediate.
Are your organization’s accounting and recordkeeping systems ready for the enhanced reporting requirements?
New information required for the redesigned Form 990 is outlined below. As a review these data requirements, keep in mind that you may need to implement changes to your accounting and recordkeeping systems in order to accommodate the expanded disclosure.
The revised Form 990 requires that you provide the following information:
total number of volunteers (an estimate is acceptable)
revenues generated and expenses incurred for each of the three largest program services
number of Forms 8282 filed
whether Form 1098-C was filed for contributions of cars, boats airplanes, or other vehicles
revenues received from federated campaigns―i.e., public solicitation campaigns conducted by federated fundraising agencies and similar fundraising organizations, such as United Way
funds received from related parties
funds received from gaming activities
fees paid to nonemployees for management, legal, accounting, lobbying, professional fundraising, investment management, and other activities
entertainment expenses for federal, state, and local public officials, including each separate expenditure over $200 paid to a government official or the official’s family members, as well as the aggregate expenditures that exceed $1,000 for the year paid to a government official or the official’s family members
If your total grants exceed $5,000 in any tax year, you’ll be required to track the following information for all grants and other assistance paid to governments, organizations, and individuals in the U.S.:
name, address, and EIN of the recipient
recipient’s IRC exemption code
amount of cash grant
amount of noncash grant
valuation method and a description of noncash assistance
purpose of grant or assistance
total number of 501(c)(3) and government organizations that received grants
total number of other organizations that received grants
You’ll also need to report all program-related investments (separately from other securities), and their method of valuation.
If your organization maintains donor advised funds, provide the following information for donor advised funds separately from other funds and accounts:
total number of funds at year-end
contributions to the funds during the year
grants from funds during the year
aggregate value at year-end
If your organization holds assets in term, permanent or quasi-endowments, provide the following information for the current year and the four previous years:
beginning of the year balance of endowments
contributions to endowments
investment earnings or losses of endowment funds
grants or scholarships from endowments funds
other expenditures for facilities or programs from endowment funds
administrative expenses of endowment funds
end of the year balance of endowment funds
You’ll also need the book value and method of valuation for investments that are program-related.
If your organization reports revenues or expenses from grant-making, fundraising, business, and program service activities outside of the U.S., you’ll need to track the following information by region:
number of offices
number of employees or agents
activities conducted, by type (e.g., fundraising, program services, grants to local recipients)
for program services, a description of the type of services offered
If your organization reports more than $15,000 from fundraising, you’ll be asked to indicate which of the following activities were used:
solicitations of non-government grants
solicitations of government grants
special fundraising events
You’ll also be asked to identify the following information for any event with gross receipts greater than $5,000:
cash prizes paid
non-cash prizes paid
rent/facility costs paid
other direct expenses
If you report more than $15,000 in gross income from gaming activities, you must provide the following detail for bingo, pull tabs, instant bingo, progressive bingo, and other gaming activities:
rent and facility costs
other direct expenses
percent of gaming activity operated in your facility and outside your facility
gaming manager’s name and compensation, and a description of the services provided
If you use volunteer labor―i.e., substantially all of the work is performed without compensation―you’ll need the percentage of total labor performed by volunteers for each type of gaming conducted. You can determine the percentage by comparing the number of individuals who receive direct compensation for their gaming-activity services with the total number of volunteers.
You’ll be asked if your organization provided any of the following to or for current officers, current directors, current trustees, current key employees, current highest compensated employees ($100,000 or more), former officers, former key employees, or former highly compensated employees ($100,000 or more):
first class or charter travel
travel for companions
tax indemnification and gross-up payments
discretionary spending account
housing allowance or residence for personal use
payments for business use of personal residence
health club or social club dues or initiation fees
personal services (e.g., maid, chauffer, chef)
You’ll also be required to track the following for all current officers, current directors, current trustees, current key employees, current five highest-compensated employees ($100,000 or more), former officers, former key employees, or former highly compensated employees ($100,000 or more):
bonus and incentive compensation
prior-year compensation reported on Form 990
If your organization received more than $25,000 in noncash contributions or it received contributions of art, historical treasures, or similar assets, you must track the following information:
number of noncash contributions by category, such as art, cars, clothing, securities, real estate
revenues reported from the noncash contribution
method of determining revenue from the noncash contribution.
number of Forms 8283 received for these noncash contributions