Final 2011 Form 990 Notable Changes

As nonprofit organizations have increased in size and scope, the Internal Revenue Service (IRS) has continued to revise the Form 990 to facilitate financial and organizational transparency.

On January 21, 2012, the IRS issued the final 2011 version of Form 990, Return of Organization Exempt From Income Tax, and the related instructions and schedules. The latest version of the form contains notable changes, which include the following:

Report Foreign Investments

• Report foreign investments if value exceeds $100,000 or more during the year in Part I of Schedule F, Statement of Activities Outside the United States. Previously, Part I only needed to be competed if the foreign revenues or expenses exceeded $100,000.

In other words, any investment held outside the United States in foreign partnerships, foreign corporations, and foreign entities with an aggregate book value of $100,000 or more at any time during the tax year must be reported.

Funds transferred into non-interest bearing accounts outside the United States to be used in the organization's program services are not reportable as investments. Once the funds are used for the program services, however, they are reportable as expenditures in Schedule F.

Disclose Distribute Share of Joint Venture Assets Per Schedule K-1

• Report on Part X, Balance Sheet, the distributive share of assets in any joint venture and other entities treated as partnerships for federal tax purposes according to the ending capital account listed in the respective Schedule K-1 rather than amounts derived from its books and records as in previous years.

Explain Reliance Placed on Related Organizations for Establishing Compensation

• Add narrative descriptions that explain the reliance placed on a related organization (if any) for establishing the compensation of any of the reporting organization's officers, directors, trustees, or key employees in Schedule J.
• Add additional narrative descriptions for, among other items, any severance payments made by the reporting or related organization and compensatory benefits issued by the reporting organization.

Explain Delegation of Authority to Committee

• Explain if the governing body delegates broad authority to an executive committee or similar committee in Schedule O.

These are a few of the changes made to the 2011 Form 990. See the 2011 instructions at http://www.irs.gov/pub/irs-pdf/i990.pdf for more information.

By Paul M. Doetsch, CPA, CMA, Partner, pdoetsch@legacycpas.com