Exempt Organizations Advisory - Draft Instructions for Redesigned Form 990 Released by IRS

Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)

On April 7, the IRS released draft instructions for the 2008 Form 990.  The new instructions are to be used with the redesigned Form 990 for the 2008 tax year (returns filed in 2009), which was released in final form in December 2007.

The draft instructions include a general overview of the form or schedule explaining its purpose, an explanation of who must file that particular schedule, and then line-by-line instructions to aid in answering each question on the form or schedule.  The draft instructions also reflect major changes, including:

• A glossary of key terms containing 176 definitions that are also included elsewhere in the instructions, which provides the filing organization with a quick reference guide;
• Comprehensive instructions to help organizations answer questions about the activities they conduct through disregarded entities (e.g., single member limited liability companies) and joint ventures;
• Additional instructions for those who file group returns;
• Movement of educational material applicable only to certain types of organizations from the front of the instructions to the appendices;
• Revised compensation instructions, including a compensation matrix, more examples, and clearer definitions, to provide more certainty and objectivity in reporting executive compensation;
• Increased use of examples;
• A sequencing list to help organizations complete the form in a step-by-step order; and
• Comprehensive instructions for the form’s new reporting requirements, including governance, foreign activities, hospitals, and tax-exempt bonds.
  

The IRS seeks public comment on the 2008 Form 990 instructions by June 1, 2008.  The IRS has published a list of highlights, which indicates items in the instructions about which the IRS would especially like to receive public comments.  Comments on the instructions should be e-mailed to the IRS at the following email address: Form990Revision@irs.gov. Comments may also be mailed to:

IRS
Draft 2008 Form 990 Instructions, SE:T:EO
1111 Constitution Ave., NW.
Washington, DC 20224

The redesigned Form 990 has many new questions on it that tax-exempt organizations must answer for the first time when they file their returns reporting on activities for 2008 (returns filed in 2009).  Tax-exempt organizations should begin reviewing the form now to insure that they are in a position to provide answers to all the new questions.