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Issue #202
January 2, 2008

IRS Releases New Form 990

The IRS released the new Form 990 right before the holidays. Several of the modifications requested by MNA were implemented, including major changes to the summary page and the governance and compensation sections.

The basic structure of the new Form 990 consists of an 11-page core form that must be completed by each Form 990 filer. Nonprofits can describe their exempt purpose and accomplishments on the first two pages. Additionally, the 16 schedules included in the form are designed to require reporting of information only from those organizations that conduct particular activities.

The new Form 990 goes into effect for the 2008 tax year (for tax returns filed in 2009); however, smaller organizations will have the option of filing the simpler Form 990-EZ for a period of years. The new form will be phased in as a requirement for smaller nonprofits, with a schedule based on the organization's assets and gross receipts. 

• If a nonprofit's gross receipts are less than $1 million or its assets less than $2.5 million, the organization may file the 990-EZ for the 2008 tax year (filed in 2009).
• If gross receipts are less than $500,000 or assets less than $1.25 million, the organization may file the 990-EZ through the 2009 tax year (filed in 2010).
• If gross receipts are less than $200,000 or assets less than $500,000, the organization may continue to file the 990-EZ past 2010.

The smallest nonprofits will be required to file a new electronic postcard (Form 990-N) beginning in 2008. The threshold for the Form 990-N is annual receipts under $25,000 for tax years 2008 and 2009, and annual receipts under $50,000 for 2010 and subsequent years. The filing thresholds for the full Form 990 will be set permanently at $200,000 gross receipts and $500,000 total assets beginning with the 2010 tax year.  

Some of the more substantive portions of a couple of the schedules in the Form 990 (Schedule H - Hospitals; Schedule K - Tax Exempt Bonds) will have their implementation delayed for one year to give organizations time to alter record keeping and other procedures. Only the portions of those schedules that provide certain identifying information regarding hospital facilities and bond issues must be completed for 2008.

Other important changes to the Form 990 from the discussion draft include:

• One added page and a new schedule (Schedule O) allowing space for organizations to provide explanations and narrative responses to the form's questions;
• Elimination of misleading ratios, percentages and metrics, instead incorporating a two-year summary of financial information that compares the current and prior years;
• Organizations with a group exemption ruling can continue to file group returns;
• The threshold for reporting on highly compensated employees was raised from $50,000 to $100,000;
• Quantity reporting of non-cash contributions by many small nonprofits has been simplified by increasing the threshold of reporting from $5,000 to $25,000, combining clothing and household goods as a single line, and eliminating quantity reporting for these items and for books; and
• It appears there will be no or limited reporting of membership relationships that provide for the payment of dues and confer voting rights.

For more information and to view the new Form 990, visit the IRS website.