Recently the IRS has introduced a new Form 990. Exempt Organizations ("EOs") are required to file an IRS Form 990 each year. Tax returns for the year 2007 will still use the old Form 990. The new Form 990 will come into use beginning with returns filed in 2009 for tax year 2008. The new Form 990 is very comprehensive and specifically addresses the increased demand for transparency and accountability in the non-profit world.

The new Form 990 has a core section consisting of 11 pages that must be completed by all tax-exempt organizations. There are also 16 schedules (lettered A through O), but not all organizations will be required to fill out every schedule. The final version of the form features a checklist that will allow preparers to determine quickly which schedules are applicable to their organizations. Other changes from the current Form 990 include a summary page designed to provide a financial "snapshot" of the organization and a section that requests information concerning the organization's board and governance policies.

The Timeline
The good news is that the new Form 990 will be phased in over a three-year transition period beginning with tax year 2008 returns filed in 2009. Smaller tax-exempt organizations – like most Pregnancy Resource Centers/Clinics – will be permitted to file the simpler 990-EZ, at least the first year. For tax year 2008 (returns filed in 2009) if an organization has gross receipts of less than $1 million and assets of less than $2.5 million, it is eligible to file a 990-EZ form. For tax year 2009 (returns filed in 2010) a 990EZ will be permitted if gross receipts are less than $500,000 and assets are less than $1.25 million. For tax year 2010 (returns filed in 2011) the 990EZ will only be permitted if gross receipts are less than $200,000 and assets are less than $500,000.

Policies to have in place
The IRS is working under the reasonable assumption that a well-governed Exempt Organization (EO) is also more likely to be in compliance with the Internal Revenue Code. Therefore, the new Form 990 and the schedules ask several questions regarding whether the EO has a written policy related to a particular area. Incorrect answers to these questions could increase the likelihood of an audit. These policy questions include:

• Does the EO have a written conflict of interest policy?
• Does the EO have a written whistleblower policy?
• Does the EO have a written document retention policy?
• Does an EO with local chapters, branches, or affiliates have a written policy ensuring that their activities are consistent with its own?
• Did the EO follow a written policy regarding payment of travel and entertainment expenses?

Smaller Non-Profits no longer exempt
Another IRS change is that, beginning in 2008, small nonprofits that had been exempt from filing the Form 990 because they have annual gross receipts of $25,000 or less will be required to file a new Form 990-N Electronic Notice (e-Postcard). The threshold for the Form 990-N is annual receipts under $25,000 for tax years 2008 and 2009, and $50,000 for 2010 and subsequent years. The e-Postcard/Form 990-N is meant to inform the IRS of the organization's current address and contact information. This new form is part of the Pension Protection Act of 2006 and is supposed to help the IRS fight fraud. Organizations that fail to send the IRS an e-Postcard within three years will automatically lose their tax-exempt status and have to re-apply for exemption.

More 990 Tips on the way
Over the course of the next year NIFLA, in its monthly Legal Tips publication, will be addressing the parts of the new Form 990 that will apply to most Pregnancy Resource Centers and Clinics in order to make sure your organization has the policies and procedures in place to answer the new Form 990 correctly. (To find out how to subscribe to Legal Tips, visit www.nifla.org.)

The IRS plans on releasing draft instructions for the revised Form 990 sometime in the first quarter of 2008. More information on the new Form 990 and 990-N can be found at www.irs.gov.

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Used with permission from National Institute of Family and Life Advocates; Legal Tips, January 2008, Volume XV, Number 1. NIFLA, PO Box 42060, FREDERICKSBURG, VA 22404