The New IRS Form 990: Nonprofit Corporate Governance and Management

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Robinson Bradshaw Publication
March 2009

The Internal Revenue Service has substantially revised its Form 990, which is the annual information return filed by tax-exempt entities, for the 2008 tax year. The stated goals of the IRS in overhauling the Form 990 were "enhancing transparency, promoting tax compliance, and minimizing the burden on the filing organization." All nonprofits should be aware that the new Form 990 includes a series of questions focused on governance and management.

These Form 990 questions reflect emerging best practices for nonprofit governance and management but are not requirements of law. Although these standards are not legally required, keep in mind that the IRS believes that "good" governance (as defined in the new Form 990) correlates with tax law compliance. Accordingly, it is possible that nonprofits deviating from the Form 990 standards may be targeted for audit more frequently than organizations that are in compliance.

Also consider that information provided in the Form 990 is not only reviewed by the IRS, but also is subject to public disclosure. Potential donors, the media and other interested parties may request copies of certain recently filed Forms 990 directly from the nonprofit or easily access copies on the Internet (see www.guidestar.org). Increasingly, the Form 990 is used by multiple stakeholders to gather information about nonprofits and to evaluate their efficiency and effectiveness.

Some of these governance and management questions appeared in the prior version of the Form 990, but most are entirely new. Furthermore, never before have these issues been segregated in a separate and easily accessed section of the form. For these and other reasons, it is critical that nonprofits prepare themselves for the new Form 990 (see the IRS website - http://www.irs.gov/charities/article/0,,id=201398,00.html - for the new Form 990 and instructions). Following is a checklist of various governance practices and policies that should be considered:

We recommend that all nonprofits filing the Form 990 carefully assess their governance practices using this checklist and other available tools. With planning, most nonprofits will be able to adapt their governance policies and practices to conform to the new Form 990 standards.

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