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2008 Issue 2
2008 Issue 2
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Form 990 Revision -- Are You Ready? Form 990 Revision -- Are You Ready? Now that we are nearly one third of the way through the first tax year that will be covered by the new Form 990 (ending Dec. 31, 2008 and after), tax-exempt organizations would do well to consider what changes would be prudent before the end of 2008 to prepare for new questions on the revised form. One piece of good news from the IRS is that this new form will be phased in over a three-year period. For the 2008 tax year, the much simpler 990-EZ may be filed by organizations with gross receipts under $1,000,000 and assets less than $2,500,000. For 2009 these amounts drop to $500,000 and $1,250,000, and in 2010 and beyond they are again reduced to $200,000 and $500,000. (There are exceptions for some special types of organizations, such as 509(a)(3) supporting organizations. For the sake of simplicity, the discussion here focuses on the general rule.) A complete review of all the substantive changes to the new Form 990 is beyond the scope of this newsletter, and would doubtless serve as an effective insomnia treatment. In this article we will focus on the laundry list of questions about organizational governance and policies. For some of the questions, there is clearly a preferred answer. Those organizations answering differently have an opportunity to explain (Schedule O is used for all additional information and explanations, replacing free-form attachments), but may find that funders, supporters, and watchdog groups consider "wrong" answers to be a red flag. Nonprofits would do well to consider now whether they can provide comfortable answers to all these questions. If not, there is still time this year to adopt the types of policies the IRS clearly wants to see in place. These include:
Conflict of interest policies are not one-size-fits-all. They should be carefully tailored to the particular characteristics of your organization, considering the kinds of transactions you may enter into, the possible relationships that could create an appearance of impropriety, and the available structure and processes to handle potential conflicts. Document retention policies similarly need to be carefully tailored to consider the types of documents that may be created and the laws that could require or merit a specific retention period. More critically, because it is a criminal act to knowingly destroy documents with the intent to obstruct a government investigation or legal proceeding, it can be worse to have a document destruction policy that is not followed than not to have one. While it is best to have a good document retention and destruction policy and to follow it, organizations that are uncertain of their ability to do so should consider a more bare-bones policy which simply states that no one with custody of any of the organization's records may destroy, delete or alter any document in order to obstruct or influence a pending or anticipated investigation, and that any records potentially relevant to litigation or governmental investigation must be retained. Such a policy should be enforced through appropriate disciplinary action as necessary. If you seek more information on instituting these or other policies and procedures, please contact us. Also note that until June 1 interested organizations can file comments on the draft instructions for the new form. By Elizabeth Kingsley  This publication is designed to provide accurate and authoritative information about the subject matter covered. It is not distributed with the intent to render legal, accounting, or other professional advice. The services of a competent professional should be sought if legal advice or other expert assistance is required. Newsletter Home | HarmonCurran Home | |