The 2009 Form 990: Significant Changes Will Demand Significant Attention

Filing organizations should evaluate the changes to Form 990 and determine the impact on their reporting requirements.

On February 12, 2010, the Internal Revenue Service (IRS) announced significant changes to the Form 990 for fiscal year 2009 (i.e., forms for fiscal years beginning on or after January 1, 2009, to be filed in 2010). The revised form affects program service accomplishment disclosures, provides a new checklist for determining when certain schedules must be completed, and clarifies governance and compensation disclosures. The significant changes to the form provide clarity on various reporting items as the exempt organization sector acclimates to the redesigned format. Filing organizations should evaluate the changes to Form 990 and determine the impact on their reporting requirements.

Statement of Program Service Accomplishments

Effective with 2009 Form 990, filing organizations must report significant changes in their program services during the year using Part III of Form 990. Historically, such information could be submitted to the IRS Exempt Organizations Determinations Office in the form of a letter.

Governance

On the updated governance portion of the Core Form, it is more apparent that questions under Section B (Policies) are not required under U.S. tax laws for tax exemption. The draft 2009 form reshuffles the governance questions, and shifts to Section B the questions on local chapters, branches and affiliates, and on providing a copy of this Form 990 to the organization's governing body.

Relationships Between Officers, Directors, Trustees and Key Employees – The IRS emphasizes that if two officers, directors, trustees or key employees (ODTKEs) of the filing organization each serve in one of those capacities for a different tax-exempt organization, their services for the otherwise unrelated organization is not a reportable business relationship for purposes of line 2.

Significant Organizational Changes – A new "Tip" in the instructions to Line 4 explains that filing organizations must report significant organizational changes using the Form 990, Part VI and in Schedule O, rather than sending a letter to the IRS. This change is similar to that described above for program service accomplishments. EO Determinations will no longer issue letters confirming the tax-exempt status of organizations that report significant changes to their organizational documents. It will, however, issue letters confirming an organization's...