Nonprofit Accounting Basics

2010 Changes to Form 990: Mostly Good Tweaks

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

As you know, the Form 990 underwent drastic changes in 2008. Thankfully, it had a few mostly cosmetic changes for 2009; 2010 modifications are largely in the same vein. The changes generally make the 990 easier to understand or provide better clarity as to what the IRS is looking for in particular areas.

Filing Thresholds: As scheduled, the filing threshold for filing the much simpler Form 990-EZ has dropped so only organizations with gross receipts of $200,000 or less and total assets of $500,000 or less can file this form. 2010 was the final year of the phase-in for small organizations, so this threshold will not decrease in future years. Please note that the income limitation is gross receipts, which means you cannot net the cost of securities or cost of goods sold with gross proceeds from sales when making this determination.

On a positive side, very small organizations now have the option of filing the very simple 990-N electronic postcard if their gross receipts are $50,000 or less. This is an increase from the $25,000 threshold from prior years and should allow many more small organizations to file the 990-N.

Loss of Exemption: As a result of 2006 legislation, organizations that do not file a 990 series information return for three years in a row will automatically lose exempt status. The IRS will be sending letters out to many thousands of organizations that did not file for tax years 2007 through 2009, the first three years this requirement was in place.

Optional Filing: The IRS has made it clear that organizations qualifying for 990-EZ or 990-N filing may choose to file the complete Form 990. Sometimes this is a requirement for various charitable registration agency filings.

Significant Changes to the Form or Instructions:

  • The headings to Parts III, V, VI, VII, XI, and XII each include a box to check if there is a statement on Schedule O relating to this page. This tells the reader to look to Schedule O for more information.
  • Schedule O will now only contain statements relating to the Core 990 and not the schedules. New narrative sections have been added for Schedules E, G, K, L, and R. This should also make it easier for the reader.
  • Part IV Checklist of Required Schedules:
    • Line five clarifies that all Section 501(c)(4), (5), and (6) organizations receiving membership dues are required to complete Schedule C, Part III even if they do not engage in lobbying or political activity.
    • Line 20a has been added for hospitals requiring them to attach their financial statements to the 990.
  • Part VI, Governance, Management, and Disclosure:
    • Instructions clarify that policy questions can only be answered “yes” if the policy was adopted by the governing board (not by committees or departments) prior to the year end of the fiscal year.
    • Line two instructions clarify that only business or family relationships between active officers or board members must be disclosed (relationships with former such persons may be disregarded).
    • Instructions for line 11, concerning whether the 990 was sent to the board before filing, make it clear that in order to answer “yes,” the board has to be given the entire 990 without any portions being redacted (e.g., all officer salaries must be on the copy that they see).
  • Part VII, Compensation of Officers, Directors, Key Employees, Etc.:
    • Instructions make it clear that the Box in Section A, line 1a saying the organization does not compensate officers, directors, etc. can only be checked if no compensation is paid by the organization or related organizations.
    • Section A., Line 1a, column B notes that if anyone listed received compensation from a related organization, the hours they work for the related organization(s) must be disclosed on Schedule O.
    • The compensation table in the instructions clarifies how certain contributions to (and deferrals amounts for) qualified and non-qualified plans are to be reported on Part VII and Schedule J.
  • Part VIII, Statement of Revenue:
    • Instructions clarify that donations of services, including donated advertising, or use of facilities or materials, cannot be included here even if recognized for GAAP.
    • Instructions discuss how to report donations of certain items sold at auction.
  • Part IX, Statement of Functional Expenses:
    • Instructions clarify that expenses involved in securing grants and contracts for the specific use of the awarding organization are not fundraising and may be included in Column B as program expenses. Costs to solicit grants to provide services to the general public are considered fundraising expenses and should be included in Column D.
    • Line 24 instructions say that the top five miscellaneous expenses should be included on lines 24a through e, with the balance reported on line 24f. If the expenses on line 24f exceed 10% of total expenses, itemize these expenses on Schedule O.
  • Schedule F:
    • New Part IV asks questions about various foreign transactions that may cause the organization to file any of the following forms: 926, 3520, 5471, 8621, 8865, or 5713. This is significant disclosure as these forms generally are required to be attached to the 990 or 990-T. Answering yes may cause the IRS to look for the forms and make follow-up inquiries. This is an area of current interest to the IRS and potentially large penalties may be levied for non-compliance.

Conclusion: Most changes to the 2010 Form 990 and/or its instructions are fairly minor in nature and appear to make sense in terms of making the document more understandable. We have described those which we believe are most important to the majority of organizations. It is important to read and understand the instructions for each part or schedule completed.