Even hard-core tax mavens don’t usually get excited when the IRS releases instructions for tax forms. An exception this year is the release of instructions for the 2009 Form 990, the form to be filed by tax-exempt organizations (other than private foundations) for calendar year 2009 and tax years starting in 2009.
As we’ve reported previously, the IRS did a top-to-bottom redo of the Form 990 for the 2008 reporting year. The redo added a number of very specific questions about board composition, policies, conflicts of interest, identity of related parties, and transactions between interested persons. Organizations that conduct certain activities (such as hospitals or schools) or have certain assets or liabilities (such as endowments, art collections, or tax-exempt bonds) also have new schedules to complete.
In moving from 2008 to 2009, the IRS made very few changes to the forms and schedules. A number of changes made in the instructions are for clarification in response to the many questions posed to the IRS by organizations in completing the initial round. Some other changes are more substantive.
The IRS has compiled a table of significant changes, as well as in the beginning of the Form 990 instructions. A few changes that may be of interest to many organizations are:
· Related organizations may include governmental entities as well as private entities.
· The instructions clarify that foreign investments are included among foreign activities that must be reported on Schedule F (Statement of Activities Outside the United States).
· The instructions to Schedule K (Supplemental Information on Tax-Exempt Bonds) address how bonds should be reported when multiple organizations (for example, a parent and subsidiary) use bond proceeds. The reporting organizations can choose whether to report all bonds at the borrower (e.g., parent) level or to allocate reporting among all related organizations, but reporting must be consistent within the group.
· Tax-exempt organizations could in the past notify the IRS by letter of changes in their activities. The Form 990 instructions articulate the current IRS practice, which is that it will not respond to such letters with a letter stating that the change in activities doesn’t affect exempt status. All changes should simply be reported on the Form 990.
· The instructions clarify how leased employees, employees on common paymaster arrangements, and employees paid through payroll agents are to be counted and reported.
This list of changes is not an exhaustive or complete list.
In preparation for filing the 2009 Form 990, exempt organizations should make sure their systems can capture any additional needed information.
Disclosure forms and practices should be reviewed to confirm that the organization will get all the information it needs to make all disclosures of interested persons and transactions under the revised instructions.
Portions of some schedules did not have to be completed in the 2008 Form 990, like portions of the schedules for hospitals and tax-exempt bonds, because the requested information was difficult to obtain or was not maintained in that form.
Organizations that must complete these schedules for the first time should take advantage of this delay so that accurate information can be gathered.
Finally, organizations that have not yet filed the 2008 Form 990 – for example, organizations with a tax year ending in June or September who are on extension – may in some cases be able to get clarification from the new instructions in completing last year’s form.