If nothing else, the recent revisions to Form 990 provided insight as to how the IRS expects a nonprofit organization to comply with regulations, and they have resulted in an expanded understanding of best practices for tax-exempt organizations, as well as greater transparency for donors and members.
For example, the Form asks whether an organization has written policies concerning conflicts of interest, document retention and destruction, gift acceptance, and whistleblowers. Though the absence of these policies does not necessarily endanger the organization's tax-exempt status, the IRS believes that having such policies “generally improves tax compliance.” During the 2008 tax year, many organizations did not have some or all of the aforementioned policies in place. Officers and directors have since been further educated on the effectiveness of these policies and have subsequently developed and instituted them. These organizations have seen positive results, including the comfort of added safeguards and additional oversight and involvement from those charged with governance.
The expanded Form also provides current and potential donors and members the ability to look deeper into the organization. The Form sheds a bright light on gifts to and from the organization, political activity, and fundraising, to name a few. For charities, current donors can ensure that the organization is utilizing funds in the manner promised to them, and potential donors can assess whether the organization's goals and activities are in line with their own. For associations and other similar organizations, dues-paying members can see how the organization is spending their money and if any part of it is being used for a political cause. As hoped, the increased transparency is benefiting not only the IRS but also the local communities served by the organization.
Although the first year was challenging for most organizations as many more questions had to be asked and answered, hopefully you are seeing some of the benefits described above as a result of the expanded disclosures. Continue to work to implement the policies mentioned in the Form and work to provide greater depth to other Form questions - this will keep your organization moving in the right direction. Let us know if you have any questions.
By Megan Mulherin, Supervising Senior