IRS has posted comments received thus far on its web site. Most of the substantial comments received so far appear to involve compensation (no surprise there), independent contractors, key employees. Of greatest interest (and most controversial) to trade associations, hands-down, is the proposed expansion of the "key employee" definition. Per the new 990 draft Glossary, a key employee is "an employee of the organization (other than an officer, director, or trustee) who has responsibilities, powers or influence over the organization as a whole that is similar to those of officers, directors, or trustees; (2) manages a discrete segment or activity of the organization that represents 5% or more of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole; or (3) has or shares authority to control or determine 5% or more of the organization’s capital expenditures, operating budget, or compensation for employees."
Clearly, defining a "key employee" as a person with at least 5% control will greatly expand the universe of "key employees" for most, if not all, organizations -- which is why it's controversial. Expect several heavy-hitting organizations to weigh in on this definition before the comment period ends.
On balance, I found the instructions to be sensible, logical, and (mostly) orderly. I noted some confusing sections: the "lobbying" definitions in the Schedule C instructions did not clearly distinguish between charitable and non-charitable organization lobbying rules; the standard for reporting compensation for "former" key employees in Part VII is inconsistent with the standard for "current" key employees; and some employee salary reduction amounts (401k/403b) are essentially being double-counted in the compensation sections of Part VII and Schedule J. Still, the draft gets an "A" in my book, at least for orderliness and clarity.
Debbie
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