Posted on January 2, 2008

2007: Internal Revenue Service Revamps Form 990

Throughout 2007, the Internal Revenue Service worked with the nonprofit sector to revamp Form 990, the main tax form used by charities. The new version of the form, which hadn't been substantially revised for twenty-five years, is expected to make it easier for the agency and the public to track tax-exempt organizations' finances, governance, and accomplishments.

The new form, which will be used for the first time in 2008, retains the format of a core form, released earlier in the year, along with a series of schedules. In response to public comments, the new core form allows organizations to describe their exempt accomplishments and missions upfront and also provides new opportunities for organizations to explain their activities. Major changes were made to the form's summary page, governance section, and various schedules, including those relating to executive compensation, foreign activities, non-cash contributions, and tax-exempt bonds.

With passage of the Pension Protection Act of 2006, small tax-exempt organizations that were not previously required to file returns became subject to a new filing requirement — the Form 990-N, also known as the e-postcard, which they must start filing next year. Starting in 2010, the IRS will raise the filing threshold for organizations required to file Form 990-N from $25,000 to $50,000.

The law also requires the IRS to revoke the tax-exempt status of any organization that fails to meet its annual filing requirement for three consecutive years. Exceptions to this requirement include organizations that are included in a group return; private foundations, which are required to file Form 990-PF; and section 509(a)(3) supporting organizations, which are required to file Form 990 or Form 990-EZ. The requirement does not apply to churches, their integrated auxiliaries, and conventions or associations of churches.

The effort to revamp the form was strongly supported by many in the sector. "We could not have done this without the tremendous input of the tax-exempt sector, the practitioner groups, and the states," said Lois G. Lerner, director of exempt organizations for the IRS. "The almost seven hundred public comment letters, the advice and counsel of numerous nonprofit experts and state regulators, and the input from the nonprofit sector's leaders were invaluable as we moved from the June discussion draft to the final form we released today."

Related News:

IRS Releases Revised Form 990, Announces Transition Relief (12/26/07)

Independent Sector Files Comments on IRS's Proposed Redesign of Form 990 (9/19/07)

Compliance Problems Among Tax-Exempt Groups Persist, IRS Says (7/25/07)

IRS Announces New Filing Requirement for Small Tax-Exempt Organizations (7/17/07)

Independent Sector Issues Analysis of Draft Form 990 (6/29/07)

IRS Proposes New Form 990 to Improve Nonprofit Transparency (6/19/07)

Council on Foundations Asks IRS for Guidance on Reforms (2/09/07)