IRS Form 990:
As of June 8, 1999, new Internal Revenue Service regulations provide the public with greater access to IRS Form 990, the financial form that most charitable organizations are required to file annually with both the IRS and many state government regulatory agencies. The new regulations [a revision of section 6104(d) of the Internal Revenue Code] are expected to bring more attention and significance to this form and may lead charities to complete this document more carefully. A brief overview of the IRS Form 990 and the new rules follow.
New Rules Improve Public Access
to Charity Financial Information
1. What is IRS Form 990?
A completed IRS Form 990 and Schedule A contain detailed financial facts on a charity including, but not limited to, information on income, expenses, assets and liabilities. With a copy of this form, a potential donor should be able to find out how much a charity spent on its programs, fund raising and administrative expenses in the past fiscal year. The financial position (health) of the organization is also provided.
2. Which Organizations Are Required to Complete IRS Form 990?
All tax-exempt organizations, including charities, with a total income of $25,000 or more are required to complete this document each year. Churches and similar religious institutions are not required to submit this information to the government. It is estimated that about 240,000 charities complete this form annually. About 20% of these are small charities (with less than $100,000 of income and less than $250,000 in assets) that complete the shorter, IRS Form 990-EZ.
3. What is the Difference Between an IRS Form 990 and an Audit Report?
- Additional Information IRS Form 990 includes information that is not typically found in an audit report: a description of each major charity program, compensation information on the charity's key staff members and compensation of the five highest paid independent contractors hired in the past year (such as a fund raising company).
- Income Recognition Differences Unlike the audit report, the IRS Form 990 does not permit the following to be included in the charity's income: (a) donated services and the use of facilities and (b) unrealized investment gains (e.g., stocks that have increased in value that the charity has not sold).
- Accuracy and Completeness Past studies have shown that the IRS Form 990 is often completed with less accuracy than an audit report and sometimes is missing required information (such as Schedule A).
4. What Are the New Public Access Rules?
In the past, charities were required to make an IRS Form 990 available for "public inspection" only if someone visited their offices. The new rules, which took effect on June 8th, require charities to provide copies on request to inquirers. Generally the IRS Form 990 copy should be made available by the charity on the same day if the request is made in person or within thirty days in response to written requests made via regular mail, e-mail, facsimile or private delivery. The charity is allowed to charge for actual postage and a modest copying fee as specified in the regulation. The regulation also notes that those charities that make their IRS Form 990 available on the Internet (in approved formats) would not be required to distribute photocopies.
5. IRS Form 990 also is Available from Government Agencies
The IRS Form 990 is a public information document and has been available directly from the IRS and many state government charity regulators for a number of years. The new rules only change the access of this form from the charity itself.
These changes should improve the ability of donors to quickly obtain these financial documents. CBBB's Philanthropic Advisory Service encourages donors to seek out such information in order to make more informed giving decisions.
Reprinted with the permission of Council of Better Business Bureaus, Inc.
Comments and questions may be
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www.qual990.org is maintained and hosted by the Urban Institute.