Earlier this year the IRS issued drafts of the 2013 Form 990, Return of Organization Exempt From Income Tax, and 2013 Form 990 Instructions. Although there were no major changes to the Form 990, there were several changes and clarifications in the draft instructions, including:
- Short Period Returns. The draft instructions clarify that a short period return cannot be filed electronically unless it is appropriately designated as an initial return or final return.
- Change in Accounting Method. The draft instructions provide that an organization that files Form 990-N (electronic postcard) must report its accounting changes on Form 990, Form 990-EZ or Form 1128.
- Documentation. The draft instructions clarify what documentation must be attached to Form 990 to support a name change, or by an organization that has terminated, dissolved, merged or had its exemption revoked by the IRS.
- Public Support Test. The draft instructions clarify when an organization can exclude from Schedule B contributors that fall below the greater-than-$5,000/2% threshold. In order to limit the contributors an organization reports on Schedule B, an organization must complete the “support tests” in Schedule A, Part II.
- Excess Benefit Transaction. The draft instructions clarify when an organization needs to report that it became aware of an excess benefit transaction with a disqualified person in a prior year.
- Compensation. The draft instructions provide that directors’ compensation for non-director independent contractor services must be reported on Part VII, Section A. In addition, compensation from a management company to an officer, director, trustee, key employee or highest compensated employee is generally not reportable on Part VII, Section A.
- Definitions. The draft instructions add a new definition for “domestic individual,” which is defined as an individual who lives or resides in the U.S. and is not a foreign individual. In addition, the draft instructions clarify when a Voluntary Employees’ Beneficiary Association (VEBA) is reported as a “related organization” by its contributing employers and sponsoring organizations. The draft instructions also clarify that “contributions” includes neither donations of services nor discounts provided on goods or services in the ordinary course of business.
These changes are currently only in draft form, so the IRS may make additional changes to the instructions before they are finalized.