Most not-for-profit organizations are required to file Form 990, Return of Organization Exempt from Income Tax. Form 990 is the IRS’ primary tool for gathering information about tax exempt organizations, educating organizations about tax law requirements and promoting compliance. Organizations use Form 990 to share information with the public about their programs while states rely on the form for performing charitable and regulatory oversight and satisfying state income tax filing requirements.
The American Institute of CPAs (AICPA) recently submitted a letter to the Internal Revenue Service urging them to consider more than 30 changes for Form 990. Eighteen of the thirty changes were ranked as high priority items. According to the May 7 letter, the most urgent items include:
- Deleting the following Glossary terms and associated definitions in the Instructions to Form 990 and in all parts of the form and related schedules that have changed under the tax law:
- Permanent true endowment
- SFAS 116
- SFAS 117
- Temporarily restricted endowment
- FIN 48
- Updating the Glossary in the Instructions to Form 990 to define the terms used in Accounting Standards Update (ASU) 2016-2014, Presentation of Financial Statements of Not-for-Profit Entities, issued by the Financial Accounting Standards Board as defined in the FASB Accounting Standards Codification Master Glossary.
- Updating the trigger question for Schedule D to reflect the changed classification of net assets under FASB ASC 958, while still recognizing that the focus of the question is on reporting for donor restricted and board designated or quasi-endowments. The AICPA provided specific sample language in its letter to the IRS.
- Aligning the trigger questions in Form 990, Part IV and Part X so that they agree with the definition of “interested parties” in the Schedule L instructions.
- Updating the net assets or fund balances portion of the balance sheet to reflect ASU 2016-14.
- Updating the question and instructions related to the Office of Management and Budget/Uniform Guidance rules, and updating the instructions to reflect the new single audit threshold of $750,000.
- Updating the instructions for Schedule I, Part II, Line 1 so they are consistent with the instructions for the trigger question in Form 990, Part IV, Line 21.
We are closely monitoring these requests and will provide an update when the IRS responds. If you have questions or would like to discuss how these potential changes will impact your organization, please contact me at firstname.lastname@example.org or 609-689-9700.