Exempt Organizations Advisory - IRS Releases Draft Form 990

On October 7, 2005, the IRS released a new draft Form 990, Return of Organization Exempt from Income Tax. The revised draft Form 990 includes the following changes:

• Part V, "List of officers, directors, trustees, and key employees," has been broken into two parts, so that both current and former officers, directors, trustees, and key employees must be listed.
  
• Four new questions require the following information about current officers, directors, and trustees: (1) the number of officers, directors, and trustees permitted to vote on organization business at board meetings; (2) whether the current officers, directors, and trustees or the highest compensated employees or professional and other independent contractors listed in Schedule A are related to each other through family or business relationships; (3) whether the current officers, directors, and trustees listed in or the highest compensated employees or professional and other independent contractors listed in Schedule A receive compensation from any other organizations, whether tax exempt or taxable, that are related to the organization through common supervision or common control; and (4) whether the organization has a conflict of interest policy. Additional information must be supplied in attached statements for affirmative answers (Part V-A, question 75).
  
• Two questions related to foreign activities have been added, asking whether the organization has an interest in or a signature or other authority over a financial account in a foreign country, and whether the organization maintains an office outside of the United States (Part VI, Question 91).

The new form can be found here.

A new draft Schedule A to the Form 990 was released on August 4, 2005. This schedule, which 501(c)(3) organizations must file along with the Form 990, requests additional compensation information for employees and independent contractors who are paid over $50,000. Part I requests information regarding compensation of the five highest paid employees other than officers, directors, and trustees. The revised Part II is broken into two new categories: Part II-A, Compensation of the Five Highest Paid Independent Contractors for Professional Services; and Part II-B, Compensation of the Five Highest Paid Independent Contractors for Other Services.

Other forms revised in August, 2005 are Schedule B; Form 990-C, Farmers’ Cooperative Association Income Tax Return; and Form 990-EZ.

Comments on the draft Form 990 can be submitted here by November 7, 2005. (Include the word DRAFT in your response.)

For more information on this topic, please contact Catherine W. Wilkinson or Suzanne Ross McDowell.

The Exempt Organization Advisory is a general summary of the law and is not intended as specific legal advice for any organization.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

For more information on this topic, please contact the authors or the attorneys with whom you usually work at Steptoe.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.