New 990 Requirments Checklist
Posted: 11/1/2008
Dear Client,
As a non-profit organization you may already know that the IRS has changed Form 990 for this coming tax filing. The length and detail of this tax form has increased significantly. The IRS redesigned Form 990 to require more reporting by non-profits in regards to compliance, governance, compensation and many other issues.
Policies and Procedures to Be Addressed For New Form 990
The following questions will be asked by the new Form 990. The IRS will use the answers of these questions to test compliance and help determine which entities to audit. Some of these questions will not be applicable to all non-profits. A “no” answer will catch the attention of the IRS.
Questions on New Form 990
- Has the Board of Directors adopted a mission statement?
- Has an Audit Committee been established?
- Does the organization have a written conflict of interest policy?
- Are officers, directors or trustees, and key employees required to disclose annually interests that could give rise to conflicts?
- Does the organization regularly and consistently monitor and enforce compliance with the conflict of interest policy?
- Does the organization make the following information public?
- Governing documents
- Conflicts of interest policy
- Financial statements
- Does the organization contemporaneously document meetings held or written actions undertaken by the governing body or each committee with authority to act on behalf of the governing body?
- Does the organization have a written whistleblower policy?
- Does the organization have a written document retention and destruction policy?
- Does the process for determining executive compensation meet the rebuttable presumption standard, i.e.:
- Review and approval by a board subcommittee of independent persons, using
- Comparability data, and
- Contemporaneously recording the deliberation and decision?
- Does the organization follow a written policy regarding payment or reimbursement or provision of all the expenses described below?
- First-class or charter travel
- Travel for companions
- Tax indemnification and gross-up payments
- Supplemental nonqualified retirement plan
- Discretionary spending account
- Housing allowance or residence for personal use
- Payments for business use of personal residence
- Health or social club dues or initiation fees
- Personal services
- Does the organization require adequate substantiation prior to reimbursing or allowing expenses incurred by all officers, directors, trustees, and CEO/Executive Director?
- Does the organization have a gift acceptance policy that requires the review of any non-standard contributions?
- Does the organization hire or use third parties or related organizations to solicit, process, or sell non-cash contributions?
- Does the organization provide a copy of the Form 990 to its Board prior to filing it? Does the Board or a committee thereof, review the Form 990?
- This should be a written policy
- Does the organization have a process in place for determining reportable relationships and transactions between your organization and related persons, and between your “interested persons” – board members, officers, directors, etc.?
- A practical application may be a questionnaire sent out to all board members, officers, directors and related persons asking for a listing of any transactions between themselves and the organization and sign and date the form.
- “Interested persons” also include substantial donors and their families as well as former board members, officers, and directors.
- Does the organization have a process in place to determine compliance with the conflict of interest policy?
- A practical application may be to send out a questionnaire to all board members and employees asking for them to list any conflicts of interest and to sign and date the form.
- Has the organization evaluated its board to determine which members are “independent” under the new 990 definition?
- A practical application may be to send out a questionnaire to all board members and employees asking for them to list any impairments of independence and to sign and date the form.
- Independent definition:
- The member was not compensated as officer or employee by the organization or related organization
- The member did not receive total compensation or other payments exceeding $10,000 during the tax year from the organization or related organization as an independent contractor, however payments for reasonable expense reimbursements and reasonable compensation as a director of the organization does not factor into the $10,000 limit.
- Neither the member nor a family member enters into a “transaction with an interested party” with the organization, which includes loans to/from the organization, grants or other payments benefiting the member and certain business transactions.
- Must make reasonable effort to obtain this information.
- Has the required compensation information, including most fringe benefits, been reviewed to determine if the organization has this data readily available?
- Have revenue sharing and other incentive plans been identified?
- Has the organization identified related organizations and developed a procedure to identify compensation paid from these organizations.
- Has the organization considered providing additional direct (W-2) compensation in lieu of certain perks?
Questions that may not be applicable:
- Has a policy regarding acceptance of gifts of conservation of easements been adopted?
- Has a policy to confirm that the organizations tax-exempt bonds are in compliance been adopted?
- Does the organization have written policies and procedures governing the activities of its chapters, affiliates, and branches to ensure their operations are consistent with those of the organization?
- For organizations that participate in a joint venture with a taxable entity, has the organization adopted a written policy or procedure requiring the organization to evaluate its participation in joint venture arrangements, and taken steps to safeguard the organization’s exempt status with respect to such arrangements?
- Has the organization developed due diligence for procedures for grants made to foreign individuals or organizations.
Questions for Healthcare Organizations Only
- Do you have a charity care policy?
- Is it written?
- Applied uniformly?
- Does the policy address the following issues:
- Utilize Federal Poverty Guidelines? If no, other criteria?
- Do you provide free or discounted care to the “medically indigent”?
- Do you budget an amount for charity care?
- Do you prepare an annual community benefit report?
- Is it made public?
- Does the organization have a written debt collection policy?
If “Yes,” does the organization’s collection policy contain provisions on the collection practices to be followed for patients who are known to qualify for charity care or financial assistance?
- If the organization is part of an affiliated health care system, have you documented the respective roles of the organization and its affiliates in promoting the health of the communities served?
- “Needs Assessment” – Has the organization documented how it assesses the health care needs of the communities it serves?
- “Patient Education of Eligibility for Assistance” – Has the organization documented how it informs and educates patients and persons who may be billed for patient care about their eligibility for assistance under federal, state or local governmental programs or under the organization’s charity care policy?
- Has the organization documented how the organization’s community building activities, if any, promote the health of the communities the organization serves?
Phase-In
The new form will be phased in over three years. Form 990-EZ may be used by smaller entities as follows:
- 2008 – Gross receipts less than $1 million and total assets less than $2.5 million
- 2009 – Gross receipts less than $500,000 and total assets less than $1.25 million
- 2010 and forward – Gross receipts less than $200,000 and total assets less than $500,000; threshold for Filing EZ versus N increases to $50,000 from $25,000.
Please review this checklist. A non-profit organization must implement all needed changes by the end of its tax reporting year. This means calendar year non-profits have until December 31, 2008 to implement these changes.
Give us a call if you have any questions.
Sincerely,
Arend, Laukhuf & Stoller, Inc.
Please contact us and we will be happy to meet with you.