On April 7, 2008, the IRS posted draft instructions for the redesigned Form 990 released on December 20, 2007. The comment period for the draft instructions ends June 1, 2008. The draft instructions include highlight sections that indicate certain items on which the IRS would particularly like public comment. The IRS anticipates releasing the final instructions by the end of 2008, as organizations will begin using the redesigned Form 990 for the 2008 tax year.
In releasing the draft instructions, the IRS reaffirmed its guiding principles of enhancing transparency, promoting compliance and minimizing the burden on the filing organization. Moreover, the IRS stated that the proposed instructions were "designed to promote uniform reporting and help filing organizations report accurate and complete information."
There are a number of important changes in the draft instructions.
A glossary of key terms includes all 176 definitions in the instructions.
New definitions include:
Key Employee — An employee other than an officer, director or trustee whose reportable compensation exceeds $150,000 and who meets at least one of the following criteria:
- Has responsibilities over the organization as a whole that are similar to those of officers, directors, or trustees.
- Manages 5 percent or more of the "activities, assets, income, or expenses of the organization … as a whole."
- Controls or shares authority to control 5 percent or more of the organization's "capital expenditures, operating budget, or compensation for employees."
An individual who is not an employee of the organization (or of a disregarded entity thereof) will be treated as a key employee if such individual serves as a director or other fiduciary of a disregarded entity and otherwise meets the definition of key employee. Management companies and similar entities that are independent contractors are excluded.
Related Organization — The instructions now provide one definition applicable throughout the redesigned Form 990. An organization is a "related organization" if it "stands in one or more of the following relationships to the filing organization":
- "Parent — an organization that controls the filing organization"
- "Subsidiary — an organization controlled by the filing organization"
- "Brother/Sister — an organization controlled by the same person or persons that control the filing organization"
- "Supporting/Supported — an organization that is (or claims to be) at any time during the organization's tax year (i) a supporting organization of the filing organization within the meaning of section 509(a)(3), if the filing organization is a supported organization within the meaning of section 509(f)(3), or (ii) a supported organization, if the filing organization is a supporting organization"
The draft instructions also include the following appendices:
A — Exempt Organizations Reference Chart
B — How to Determine Whether an Organization's Gross Receipts Are Normally $25,000 (or $5,000) or Less
C — Section 501(c)(15) Organizations and Gross Receipts
D — Public Inspection of Returns
E — Group Returns: Reporting Information on Behalf of the Group
F — Disregarded Entities and Joint Ventures; Inclusion of Activities and Items
G — Section 4958 Excess Benefit Transactions
H — Ownership in a Subchapter S Corporation (Schedule reserved for inclusion in final instructions)
The appendices are intended to provide additional information on items that affect only certain types of activities or filers so that the core instructions are generally applicable to all filers.
Also in the draft instructions are:
- Separate instructions for each of the 16 schedules to the new Form 990 so that only organizations filing such schedules will need to review those portions of the instructions.
- A sequencing list to assist organizations in completing the form in a logical order.
- Specific instructions for organizations filing group returns.
- More examples to illustrate definitions, new requirements and items previously identified as complicated or confusing.
- Updated region identifiers based on the World Bank region identifications to assist the IRS in determining where foreign activities are being maintained.
- Special instructions and compensation tables to assist in properly reporting various types of compensation.