Brian Todd

The IRS recently released the finalized 2009 Form 990 and instructions. The 2009 forms are required for calendar year 2009 and fiscal years beginning in 2009. While many of the changes are minor clarifications, several changes are worth noting. Click here to view the complete list of changes.

Transition Relief

For 2008 Form 990s, only one section of Schedule H, Hospitals, and Schedule K, Supplemental Information on Tax-Exempt Bonds, was required for organizations completing those schedules. As previously announced, organizations completing these schedules in 2009 will be required to complete the entire schedule. If your organization is required to complete these schedules, you should begin reviewing the schedules and assessing your ability to gather the required information as soon as possible.

The IRS greatly expanded the number of organizations eligible to file Form 990-EZ in 2008 by implementing higher thresholds for eligibility. Fewer organizations will qualify to file Form 990-EZ in 2009, as the thresholds will be reduced. To qualify for filing Form 990-EZ in 2009, an organization must have less than $500,000 in gross receipts and less than $1.25 million in total assets. Those thresholds are reduced further in 2010 to $200,000 in gross receipts and $500,000 in total assets. Certain organizations are not eligible for the 990-EZ regardless of gross receipts or total assets. Contact your BKD advisor for assistance in determining if your organization qualifies for filing Form 990-EZ.

Core Form 990 Changes

There were many minor changes and clarifications made to the core Form 990 and instructions. Some of the more significant changes are as follows:

• The 2008 Form 990 asked if an organization received an audited financial statement that was prepared in accordance with generally accepted accounting principles (GAAP). Organizations were instructed to answer "no" if it was included in a consolidated audited financial statement unless that organization also received a separate audited financial statement. An additional question was added on the 2009 Form 990 that asks if the organization was included in consolidated, independently audited financial statements.
• The trigger questions for Schedule L, Part IV, Business Transactions Involving Interested Persons, were simplified.
• A question was added to ask if the organization completed Schedule O, Supplemental Information to Form 990. All filers of the full Form 990 are required to complete Schedule O.
• The instructions clarify that if two officers, directors, trustees or key employees of the filer serve in similar positions with another tax-exempt organization, that involvement does not create a reportable business relationship between the two.
• The instructions clarify that emailing the governing body members a link to a password-protected website on which the entire Form 990 can be viewed, and noting in the email that the Form 990 is available for review on that site, is sufficient to say that a copy of the Form 990 has been provided to all members of the governing body.
• Several clarifications were added regarding compensation, including how compensation paid by common paymasters and compensation paid to leased employees should be reported. The instructions also changed the manner in which employee deferrals to 401(k) and 403(b) plans are reported.
• Organizations are instructed to report business codes derived from the North American Industry Classification System (NAICS) for program service revenue and miscellaneous revenue.
• The instructions clarify the reporting of revenue related to donated goods sold at auctions.

Supplemental Schedule Changes

There were also minor changes and clarifications to most of the supplemental schedules. Some of the more significant changes are:

• Schedule A, Public Charity Status and Public Support – The instructions clarify the IRS does not update its records if an organization changes its public charity status on Schedule A. The filer may submit a request (but is not required to) for a determination letter on its new public charity status to the EO Determinations office.
• Schedule B, Schedule of Contributors – Organizations are instructed to specifically identify a donor, rather than reporting the donor as anonymous, if it knows the donor’s identity.
• Schedule F, Statement of Activities Outside the United States – The instructions explain the types of foreign activities to be reported include investments, conducting board meetings and sending agents of the filer to attend and speak at seminars or conferences outside the United States. Expenditures to be reported include travel expenses to, from and within the region.
• Schedule R, Related Organizations – The instructions explain the filer can control or be controlled by another organization for purposes of determining related organizations and several examples of control were added. Another clarification is that governmental units and instrumentalities and foreign governments should be treated as tax-exempt organizations for purposes of Schedule R, Part II, Identification of Related Tax-Exempt Organizations.

Considerations for 2009

As previously discussed, the changes to the 2009 Form 990 are relatively minor and consist primarily of needed clarifications. However, do not underestimate the additional time and record keeping associated with completing Schedule H and Schedule K, if applicable to your organization. The same holds true if your organization was eligible for filing Form 990-EZ in 2008 but will be required to file the full Form 990 in 2009.

Contact your BKD advisor for further guidance on preparing for these new requirements.