Tate & Tryon's Form 990 Forum

Emphasize Your Achievements

Do you toot your own horn? You should -- on your Form 990, that is. Your 990 can be one of your best PR tools, if you let it. Here's how.

The current Form 990, in Part III, requires you to describe your "program service accomplishments" -- in other words, the activities that you carry on that advance your exempt purpose. While some organizations give these descriptions short shrift (I hope yours is not one of them), others make it a point to fully describe their operations. The IRS wants details: how many people were served by the activity? How many books or magazines did you publish? What did you do that was not concretely measurable, but still important? This narrative is important, not only for IRS reporting, but to provide an accurate picture of your organization and its activities. You never know who may be looking at your 990 on Guidestar: prospective members? Potential sponsors? Possible donors? Give them the big picture; let them know what you're about.

The new form 990 preserves and somewhat amplifies this requirement. You'll still be reporting on your top three activities (renamed "exempt purpose achievements"), and you'll also describe your organization's mission or most significant activities, smack in the middle of Page 1. While we don't have instructions yet, you don't need instructions to know that this is an important question, and one you should give some thought to. You want to be brief, but concise. It may be a good idea to keep your response short enough so that it fits completely within the space provided. There no doubt will be overflow space available, and that may come in handy for the new Part III, where you will (re)state your organization's mission and describe your achievements in further detail. But for Page 1: keep it simple, keep it accurate, keep it positive. It's part of your overall Page 1 "snapshot" . . . and you know what they say about first impressions.

Debbie

Schedule G - It's Not Just For Gaming

If you're a trade association, will you be required to file Schedule G -- as in "gaming?"

Maybe. It depends on what sort of special events you hold throughout the year: at your annual trade show or convention, at regional meetings, at conferences. Schedule G's not just for gaming activities, though that's the obvious focus. Special fundraising events of any kind -- even use of a professional fundraiser -- may trigger Schedule G. Here are the thresholds for filing:

• Reporting more than $15,000 from actual gaming activities (Form 990, Part VIII, line 9a, or 990-EZ, line 6a)
• Reporting more than $15,000 from fundraising events (Form 990, Part VIII, line 8a, or 990-EZ, line 6a)
• Reporting more than $15,000 in professional fundraising fees. (Form 990, Part IX, line 11e)

A "special event" is one that does not advance your exempt purpose -- it's main goal is to merely raise funds. A golf outing at your annual meeting qualifies as a special event; so does a gala, or a dinner dance.

Furthermore, you may even be conducting a gaming activity, and not be aware of it. The term "gaming" or "gambling" usually brings to mind a bingo game, or perhaps a pull-tab operation. But there's more under the "gaming" umbrella than the usual suspects. A raffle, for example, is considered a gaming activity, as is a drawing. If you hold a "casino night" at your annual trade show, you're doing gaming.

What sort of information will you be reporting on Schedule G? Well, some of it will be very similar to what you might be reporting now, on Page 1 of your Form 990, for "special events." Page 2 of the schedule actually lays out what you need to report; frankly, it's a lot easier than what you're doing now.

Now, if you're actually doing any gaming, you'll need to answer a few new questions: for example, where you did the activity, and whether you were licensed to do it. Yes, do be aware that many states want you to register your gaming activity, even if all you do is give away an automobile. Furthermore, you may have a lot of reporting to do to that state, as well as a few extra rules to follow. So, when you're doing event planning, go check the state's gaming rules.

Want further information on gaming? IRS has a nice overview in the form of a phone forum transcript from 2007. Also, much more info is available in Pub 3079, "Gaming Publication For Tax-Exempt Organizations."

Happy gaming!

Debbie

A Contribution by Any Other Name

Our March 10th posting, The ghosts of the past-now even harder to avoid! pointed out the new requirements for comparative data of key line items in the redesigned Form 990. But, a first reading of the newly designed Statement of Revenue Part VIII might lead you to think that in the first year of using the form you might compare apples to oranges. A closer look reveals more evidence of the Service's attempt to simplify the use of this form.

The new form's "Contributions, gifts, grants and other similar amounts" Part VIII, Lines 1a-h will be compared with the prior form's "Contributions, gifts, grants and similar amounts received" Part 1, Lines 1a-e.  However, the line items in the new form's Contribution received section are almost all retitled. "Donor-advised funds", "Direct public support" and "Indirect public support" have completely disappeared. In fact, the only titles remaining unchanged are "Government" and "non-cash" contributions, which just might be telling us what the IRS thinks haves consistency.

For those who deal with the new 990 forms in ways other then preparing or other wise living and breathing it...this might seem to thwart that mantra of consistency and comparability, but it is in fact making some things that have been ambiguous to some "direct"  vs "indirect" support or "donor-advised funds" clearer and more easily understood by everyone.

Here's a quick run down of the title changes and their match ups to the former return:

                  New Form                                            Current For

         Line 1a Federated campaigns            Line 1c Indirect public support

         Line 1b Membership dues                  Line 1b Direct public support

         Line 1c Fundraising events                Line 1b Direct public support

         Line 1d Related Organizations          Line 1c Indirect public support

         Line 1e Government grants               Line 1d Government grants

         Line 1f All other contributions, etc.    Line 1a Donor-advised funds

         Line 1g Non-cash                               Line 1e Non-cash

And with apologies to Juliet Capulet, the new titles, by any other name, clearly describe the types of contributions received by a tax exempt organization by leaving out the not so sweet smelling IRS defined terms. Again, the new form may take a little getting used to, but the changes generally make logically sense. 

Subrina

Taxable Subs and new planning opportunities

Traditionally, exempt organizations have established taxable subsidiaries as a means to permit the organization to engage in certain activities that might otherwise jeopardize it's exempt status.  Examples of such activities include the sale of certain commercial-type insurance policies and substantial unrelated business income.  With the new requirement in Schedule D for organizations to disclose the entire FIN 48 footnote from the organization's financial statements, exempt organizations with tax positions that might require a FIN 48 footnote are looking for another alternative to having to make this disclosure on the Form 990.

The federal Form 1120 is the tax return filed by taxable corporations.  The 2007 Form 1120 contains no requirement for organizations to disclose a FIN 48 footnote appearing in the corporation's audited financial statements.  As a matter of fact, corporations with total receipts and total assets of less that $250,000 are not required to prepare the balance sheet portion of the Form (Schedule L on page 4).  Therefore, the FIN 48 liability, should one exist, would be completely unknown to the IRS!

Exempt organizations that have a taxable corporate sub may want to consider conducting activities that may give rise to a FIN 48 footnote through the taxable sub.  Doing so will not necessarily prevent the FIN 48 footnote disclosure in the financial statements, but it will prevent raising a red flag on the exempt organization's Schedule D.

Fred

The ghosts of the past - now even harder to avoid!

"Consistency and Comparability" - two guiding tenets of accounting that are drilled into every second year business student's brain.

Prior to the 2008 version of the 990, it was relatively difficult to assess whether an exempt org. was accounting for revenues and expenses in a consistent fashion.  The reason for this difficulty was simple; there was no place on the form to report prior year revenues and expenses.  Thus, a reader would have to obtain a copy of an organization's prior year and current year form in order to start the task of seeing how the year over year numbers compared.

(It's worth noting that the "old" version of the 990 did contain prior year and current year data for the balance sheet.  Thus, some quick trend analysis was possible for assets, liabilities, and net assets.)

Well, apparently champions of easy comparability have scored a victory with the 2008 version of the 990.  Page one of the "Core Form" of the 990 now prominently displays "big picture" data for both prior year and current year revenues and expenses.  In addition, page one also displays prior year and current year total assets, liabilities, and net assets. 

For revenue, the IRS will now require side by side current and prior year comparative data for (1) contributions and grants, (2) program service revenue, (3) investment income, and (4) all remaining revenue.  (A comparative revenue grand total is also required.)

For expenses, the IRS will now require side by side current and prior year comparative data for (1) grants paid, (2) benefits paid to or for members, (3) salaries, compensation, & employee benefits, (4) professional fundraising expenses, and (5) all remaining expenses.  (A comparative expense grand total is also required.)

Comparative data for the organization's change in net assets (revenue less expense) is also shown on page one.

As a result, it will now be quite simple for a reader of the 990 to do a quick trend analysis of the organization's financial statements.  An in-depth trend analysis would still require having a copy of each year's 990 handy.  However, page one of the "Core Form" will enable a reader to determine at a glance whether there are areas with unusual fluctuations that might bear greater scrutiny.

Therefore, it will be even more critical for organizations to make sure they are adhering to the guidance of our old accounting friends "Consistency" and "Comparability" when reporting data on the 990.

Let the fluctuation analysis begin!

Doug Boedeker