The Top 5 Changes to the Revised IRS FORM 990

After much debate and anticipation, the IRS has issued a revised Form 990 to be used by organizations filing for years ending December 31, 2005 and later. As expected, the new form has expanded disclosures with respect to related individuals, compensation and board members. The Top 5 significant changes are discussed in the following article, please read below for more information.

• The Form 990 has expanded the disclosures for compensation to officers, directors and key employees to now include compensation for individuals who formerly held such positions. The disclosure of officers, directors and key employees also includes the identification of any related members and whether or not they are compensated by other organizations related to the filing entity.
  
• Another new disclosure is the requirement that the organization state whether or not it has a conflict of interest policy. If the organization maintains relationships that may fall into a conflict situation, the relationship and the related financial terms must be disclosed.
  
• The Form 990 disclosure requirement for payments to independent contractors has also been expanded. Previously, information was required for contractors who provided “professional services”. The disclosure requirement now also includes the five highest paid contractors for “other” services.
  
• Another change involves the disclosure of compensation paid to officers, directors and key employees from related organizations. Prior to 2005, this disclosure was required when more total compensation to the individual was over $100,000 with at least $10,000 coming from the related organization. The new disclosure threshold has been reduced to $50,000 in total from all related organizations.
  
• To further complicate the disclosure requirements, the definition of a related organization has been broadened. Previously, the definition included the direct/indirect ownership test. The new standard now includes organizations with a "close connection" to the reporting organization. The IRS guidance indicates that a close connection includes direct or indirect ownership, but is also broader than that. Additionally, by default, all supporting organizations, whether Type 1, Type 2, or Type 3, will be considered related entities with respect to the organization(s) they support.

We realize that this short summary might not answer all of the questions you have regarding the new IRS Form 990, so please call or email us to discuss this or any other tax related topics in more detail. A copy of the new IRS Form 990 can be found on the IRS web site at: http://www.irs.gov/pub/irs-pdf/f990.pdf

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Feeley & Driscoll Health Care Services Group

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