Wednesday, December 24, 2008

In time for Christmas: Final New 990 Form and Instructions

The IRS has posted the final version of the revised Form 990. Included are instructions for the 990, 990-EZ and the many schedules that accompany the Form 990 and 990-EZ.

Also very helpful, the Service has posted a Filing Phase-In table. Many smaller organizations will not have to file the New 990, but rather may file the 990-EZ or even the 990-N, the "e-postcard" filing.

Thursday, December 18, 2008

403(b) Written Retirement Plan Relief

Another notable gift to the exempt organization community, the IRS recently issued a notice(pdf) that it has amended the requirement that organizations adopt a written plan under 403(b) by January 1, 2008. The Service has stated that:

The IRS will treat these plans as meeting the requirements of 403(b) and the regulations during the 2009 calendar year if:

  • By December 31, 2009, the plan sponsor of the plan has adopted a written 403(b) plan that is intended to satisfy the requirements of 403(b) and the regulations.
  • During 2009, the plan sponsor operates the plan in accordance with a reasonable interpretation of 403(b) and the related regulations.
  • By the end of 2009, the plan sponsor makes its best effort to retroactively correct any operational failure during the 2009 calendar year to conform to the written plan.
This notice provides considerable relief for organizations who faced being penalized, or their employees retirement benefits taxed, for failure to provide a written plan. The additional time should allow organizations to prepare and implement written 403(b) plans. The IRS will also be issuing model 403(b) plans in the coming year in order to assist organizations with compliance.

Monday, December 1, 2008

Recent IRS Guidance for Tax Exempt Organizations

Last week the IRS posted a helpful collection of links called the ABC's for Exempt Organizations on its website. Here one can find guidance on issues relating to the federal taxation and exemption of new and small nonprofit organizations, including necessary forms and publications, and information regarding employment taxes and retirement accounts, and also links to IRS online workshops and courses.

The IRS also published the Remarks of Steven Miller (pdf), Commissioner of Tax Exempt and Government Entities (TE/GE), made at the Western Conference of Tax Exempt Organizations in Los Angeles on November 20. Much of Commissioner Miller's discussion was focused on the New Form 990, which many exempt organizations will begin filing for the years 2008 and following. In particular, Commissioner Miller addressed the IRS's new emphasis on the governance of nonprofit organizations, which has not been an area the IRS has had much say over until recently. Mr. Miller concluded his remarks with these thoughts:

One may argue the states can address the issue of governance. Or that the sector can articulate and somehow ensure the application of principles of good governance and the adoption of best practices. It is clearly true that both the states and the sector can and must play important roles in promoting good governance. Indeed I think they have the principal role to play in keeping the tax exempt sector strong and healthy. Now more than ever you have an important opportunity to lead in discussions about the future of governance in your organization.

But the Internal Revenue Service has a robust role as well. I believe that the need for good governance, and its magnifying glass, transparency, has actually increased in the wake of the economic downturn. There are always a few who use the worst of times, and others’ desperate situations, to misuse exempt organizations and line their own pockets.

Thus, it is clear that the IRS has set its sights on this area and has no intention of backing away from it. Every exempt organization needs to begin a comprehensive review its structures, policies and procedures in order to begin working towards compliance in this area.

Lisa notes: Although the Form 990 appears to indicate a "right" and "wrong" answer, there is no one correct form of governance, nor is there a legal requirement that certain policies be in writing. Therefore, it is important for an organization to evaluate, with its legal counsel, whether any changes to either its structure or its operations are appropriate and, if so, what these changes should be, and how they should be implemented. Changes should NOT be made, simply so that the organization "fits" into what the IRS seems to imply is best. And, it cannot be emphasized enough, that IT IS BETTER NOT TO ADOPT A POLICY, THAN TO HAVE A POLICY THAT IS NOT FOLLOWED.

Monday, November 24, 2008

Attorney General's Online Charity Database

As part of the effort to promote accountability and transparency from nonprofit organizations, the California Attorney General’s Registry of Charitable Trusts recently announced its new online search feature. The new search feature allows you to search for information on charities, charity fundraising professionals, and raffle registrants that are registered with the Registry. Access to these reports are available at the search page of the Registry of Charitable Trusts (RCT).

The information that displays in the new search feature represents information currently in the Registry database. It is important that the RCT have current and accurate information for any organization under its jurisdiction. If the information displayed for your organization is in error, you can send an email to the Registrar, using the Contact the Registrar form on the AG's website. In that email, set forth the information you believe to be incorrect and supply the documentation necessary to correct your record. Note that, if your organization is incorporated, its name and facility address information must be updated with the Secretary of State’s office in order to be corrected in the AG's database.

The RCT has not yet established a system for the online viewing of documents filed by charities, though it is only a matter of time before this becomes a reality. Already the forms filed by commercial fundraisers are already available on the Attorney General's website Commercial Fundraiser Financial Database Search. Of course, if the organization files the Form 990 with the IRS, that document will automatically be made available online at

Wednesday, October 8, 2008

New Form for Reporting Foreign Bank and Financial Accounts

October 1, 2008 the U.S. Department of Treasury issued a new Form TD F 90-22.1 REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS.

Any U.S. person who has a financial interest in or signature or other authority over, any foreign financial accounts, including bank, securities, or other types of financial accounts in a foreign country, if the aggregate value of the financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing this report with the
Department of the Treasury on or before June 30 of the succeeding year.

According to the new instructions, "The term 'United States person' means a citizen or resident of the United States, or a person in and doing business in the United States." As defined in US Code, a United States person includes:

An individual, a corporation, a partnership, a trust or estate, a joint stock company, an association, a syndicate, joint venture, or other unincorporated organization or group, an Indian Tribe...and all entities cognizable as legal personalities.

Consequently, tax-exempt or nonprofit corporations, associations, trusts and their officers, directors and trustees may be required to file this form if the organization holds a financial account in a foreign country.

The new Form TD F 90-22.1 must be used for all filings beginning January 1, 2009.

Friday, October 3, 2008

Congress Extends the IRA Charitable Rollover

The massive Emergency Economic Stabilization Act of 2008 (the "bailout bill") that was signed into law today by President Bush includes a provision to extend the IRA charitable rollover through 2009. These provisions were originally included in the Pension Protection Act of 2006 in response to Hurricane Katrina as a means to increase tax-free charitable giving. The provisions allow an individual to donate up to $100,000 from an individual retirement account (IRA) to charity tax-free.

A bit of silver lining in this storm cloud.

Wednesday, October 1, 2008

Advance Ruling Period Change in Process

On September 9, the IRS announced that they were simplifying the exempt organizations process. In the past, most organizations that wished to be recognized as being publicly supported, as opposed to being a private foundation, would receive an advance ruling period. They were given five years to prove that they were publicly supported. At the end of this time, a filing was required to show the public support.

The IRS has concluded that the information contained in the redesigned Form 990 is sufficient for this process, and that no separate filing at the end of the advance ruling period is necessary. Organizations that have already received an advance ruling may treat their letter as a final determination letter.

For organizations that have questions of whether they will be able to show their public support, this means that they need to pay close attention to the representations they are making on their Forms 990.

Sunday, September 14, 2008

Form 990-EZ Form Now Amended

There have been some minor modifications made to the Form 990-EZ form. Essentially, some of the attachments to the new Form 990 have been incorporated into the 990-EZ as well.

It should be noted that there is a transition period for the use of the new Form 990; therefore, many organizations will be able to use the Form 990-EZ in 2009 (for 2008) and/or 2010.

If an organization has less than $25,000 in income, it needs to file the e-postcard, also referred to as Form 990-N. See the IRS Website for more information and filing.

Thursday, September 4, 2008

IRS Issues Final Instructions for Form 990

Instructions for the new and improved 990 have been issued by the IRS. Click here to see them. It is important that all exempt organizations that file a Form 990 know what is now expected by the IRS, as the form and the instructions have been completely revised.