IRS ASKS FOR PUBLIC COMMENT ON FORM 990

By Chad Robinson, CPA - Senior Accountant

The new Form 990 that was redesigned in 2008 provided much more detail of an organization than the previous version. The intention was to provide for better transparency. In many areas the redesign was successful, but there remain a few areas that could still use some improvement. The IRS has recognized some of these issues and concerns and has issued an announcement that asks the public to provide comments on several areas of the Form 990. A few of the issues open for comment will affect most, if not all, nonprofit organizations. These issues relate to activity codes, thresholds for reporting compensation, the net asset reconciliation, and reporting compensation to management companies.

A brief description of these issues follows:

1. Activity Codes -Many nonprofits have found that the activity codes in Part III are vague and do not represent the program services offered. Because of this, the IRS is considering removing the activity codes.


2. Thresholds for reporting compensation to key employees, highest compensated employees, independent contractors, and former officers, directors, trustees, and key employees – there has been some concern that the increased thresholds in 2008 decreased transparency. As a result, the IRS is requesting comment on whether the threshold should be lowered, raised or remain the same.


3. Net asset reconciliation – for the 2010 Form 990, the IRS has moved the reconciliation to the main form in Part XI, which has resulted in redundancy on Schedule D. The issue open for comment is whether the reconciliation on Schedule D is still needed.


4. Reporting Compensation to management companies and leasing companies owned or controlled by directors, officers, trustees or key employees – current practice has generated concern that compensation could be shielded through payments to management companies. Because of this, the IRS is requesting comment on how this type of compensation should be reported.

Additional issues open for comment include the following:

5. Reporting revenue from governmental units


6. Reporting on audited financial statements


7. Names and EINs of foreign grantees


8. Indirect foreign expenditures


9. Reporting bank deposits as loans or business transactions on Schedule L


10. Reporting of component parts of community trusts on Form 990 series returns


11. Scope of related organization reporting on Schedule R

The full IRS announcement which details each issue open for comment can be seen by clicking here. The comment period is open until August 1, 2011. Comments can be provided through mail or via email. Providing comments on these issues may help to make the Form more effective for users and more efficient to prepare in future years.