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Draft 2013 Form 990 Changes

On September 27, 2013, the IRS posted draft instructions for the 2013 Form 990, Return of Organizations Exempt from Income Tax.  Although these are draft instructions and the IRS usually has at least a few changes before the final is officially released, the draft instructions provide some insight about the changes that will be included in the final version.

While the draft of the actual Form 990 remains pretty much unchanged, the draft 2013 instructions list close to 20 “significant changes” in the “What’s New” Section.

A few highlights are:

  1. The instructions clarify that if a Form 990-N (e-Postcard) filer changes its accounting period, it must report this change either on Form 990/990-EZ or Form 1128, Application to Adopt, Change or Retain a Tax Year.
  2. The instructions clarify that organizations that change their accounting period must report any adjustment required by section 481(a) in Parts VIII – XI of Form 990 and in Schedule D (Form 990), Part XI and XII.
  3. The instructions clarify when an organization can exclude from Schedule B, Schedule of Contributors, contributors that fall below the “greater-than-$5,000/2% threshold” (Form 990, Part IV, Checklist of Required  Schedules, Line 2).  An organization filing Schedule B can limit the contributors it reports on Schedule B using the “greater-than-$5,000/2% threshold” only if it completes Schedule A, Public Charity and Public Support, Part II and checks the box for Line 13 (first five years), 16a (33 1/3% support test -2013) or 16b (33 1/3% support test – 2012) showing that it met the 33 1/3% public support test of the regulations under 509(a)(1) and 170(b)(1)(A)(vi). Generally, organizations that are required to file Schedule B must report any contributor that contributed $5,000 or more during the tax year (cash and non-cash contributions).  However, there is a special rule for certain 501(c)(3) organizations that allows the organization to only disclose contributors that made a contribution of the greater of $5,000 or 2% of the total gifts, grants or contributions received.  In order to qualify for this special rule, the organization must meet the public support test (33 1/3% of its total support must come from contributions from the public).
    • For example, a school or a hospital typically may qualify for this special rule but in the past, they have not completed Schedule A, Part II.  The new instructions require that going forward, an organization such as a school or a hospital, must check Schedule A, Part I, Line 7 (“An organization that normally receives a substantial part of its support from a governmental unit or from the general public described in section 170(b)(1)(A)(vi).”) rather than, for example, Line 2 (schools) or Line 3 (hospitals).
    • Checking a different box on Schedule A will not affect the organization’s public charity status and the instructions state that the IRS will not update its records for an organization based on a change in reporting on Schedule A.
  4. The instructions clarify that directors’ compensation for non-director independent contractor services to the organization and related organizations must be reported in Section A of Part VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent  Contractors.
  5. The instructions clarify that compensation from a management company to one of the organization’s officers, directors, trustees, key employees or highest compensated employees is generally not reportable in Section A of Part VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors.

Click here for the draft 2013 Form 990 instructions.

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