One of the more interesting objectives of the new Form 990 Redesign is the IRS goal to make financial and program services information more readily available both internally and to other public researchers. The changes in the Program Services section of the core form and the addition of the new Activity Codes should make accessibility to this information a reality.
These new Activity codes are not to be confused with the current Exclusion Codes found in the Analysis of Income Producing Activities section. In fact, the Exclusion codes will not be part of the new design. The Activity codes will not be required for the first returns filed on the new 990 forms, to allow the IRS more time to determine which code system will be the most effective. The most likely system is an abbreviated version of the National Taxonomy of Exempt Entities.
The National Taxonomy of Exempt Entities (NTEE) was created in the 1980's as a special project of the Center on Nonprofits and Philanthropy(CNP), one of ten research centers of the Urban Institute, a think tank located in Washington, D.C. The Institute was established as an independent organization in 1968 by the Lyndon B. Johnson administration to study the nation’s urban problems and evaluate the Great Society initiatives embodied in more than 400 laws passed by that administration. Gradually, its research and funding base broadened. Today, the Center's mission is to promote understanding of civil society and improve nonprofit sector performance through rigorous research, clear analysis and informed policy.
In a recent brief published by the CNP titled What Drives Foundation Expense & Compensation, the first large-scale, long-term, systematic study of independent, corporate, and community foundations' expenses and compensation patterns and the factors behind them, the authors pointed out the need for improvement to IRS Forms 990 and 990-PF, the main sources of data for the three year study, "the forms do not allow for adequate reporting of new types of expenses, such as technology, communications and evaluation, or non-grantmaking activities, in-kind gifts, and donated labor, which makes it difficult to fully assess foundations' administrative costs and to provide a complete picture to stakeholders and the public," said coauthor Loren Renz, senior researcher for special projects at the Foundation Center.
We won't know which set of codes will be the basis for the new Activity Codes until the final version of the forms and instructions are released. But it will be important to bear in mind that the more precise and exact an organization is in its understanding and use of the the new Activity codes the more precise and exact future research aimed at helping the entire nonprofit community will be.
Subrina
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