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Exempt Organizations

Exempt Organizations
March 2011

Form 990 for 2010

For 2010, the filing thresholds have been reduced. Organizations with annual gross receipts of $200,000 or more or total assets of $500,000 or more must file Form 990.

Earlier this month, the IRS released the 2010 version of Form 990 and instructions. Following are some key highlights:

New narrative sections. Narrative sections have been added to Schedules E, G, K, L and R. Thus, organizations will be able to include narratives relating to those particular schedules within the schedules themselves, rather than in Schedule O.

Lobbying disclosure for certain 501(c)(4), (c)(5) or (c)(6) organizations. Part IV, Question 5, has been clarified to remind organizations exempt under IRC §501(c)(4), (c)(5) or (c)(6) who receive membership dues, assessments or similar amounts that they should complete Schedule C, Part III. This section addresses disclosure requirements with respect to amounts spent by (c)(4), (c)(5) and (c)(6) organizations on lobbying.

Hospital financial statements. Question 20 has been added to Part IV as a reminder to hospitals that they must attach their audited financial statements to the Form 990.

Governance questions. The instructions clarify the following:

  • An organization should answer “yes” to questions regarding the existence of policies only if those policies were in effect at the end of the year.
  • Only business and family relationships between current (not former) directors, trustees or key employees should be reported. (Part VI, Section A, Question 2)
  • An organization must answer “no” if it redacted or removed any information (e.g., Schedule B information) from the copy of its final Form 990 that it provided to its governing body prior to filing. (Part VI, Section B, Question 11a)

Compensation.

  • Reportable compensation for officers and employees includes both compensation reported on Form W-2 and on Form 1099.
  • Organizations should describe in Schedule O the average hours per week worked by any person listed in that section for any related organizations.

Statement of Revenue. The instructions clarify that neither donations of services nor donation of the use of materials, equipment, or facilities should be reported in Part VIII, even if such donations are considered revenue under GAAP.

Statement of functional expense.

  • Clarifies that costs incurred to secure grants, or contracts, to provide program services to the grantor or the other contracting party should be reported as program expense, whereas costs incurred to secure grants to provide services to the general public should be reported as fundraising expense.
  • If the line 24f amount (“all other expenses”) exceeds 10% of line 25 (“total functional expenses”), Schedule O must be used to itemize the expenses included on line 24f.

Reconciliation. A new Part IX has been added for purposes of reconciling beginning-of-the-year and end-of-the-year assets.

Appendix K. A new Appendix K has been added to discuss charitable contributions rules. This is a useful resource that summarizes rules for noncash contributions, substantiation and disclosure, and the provision of goods and services. A copy of Appendix K is attached.

Statement of activities outside the U.S. (Schedule F)

  • The form clarifies that both the number of employees and independent contractors in a foreign region should be reported.
  • The total book value of investments in a foreign region should be reported.
  • The instructions clarify that the organization should report not only grants and other assistance to foreign organizations or entities, but also to U.S. organizations or entities for foreign activity.

Additional changes have been made to other schedules, including Schedules H (hospitals) and K (tax exempt bonds) which are beyond the scope of this current update.

Should you have any questions regarding the foregoing, please contact John Kikuchi at (925) 944-7666 or by email.


The information contained in this newsletter is general in nature and does not constitute tax advice or opinion. Applicability to specific situations should be determined through consultation with your tax advisor.

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