The 2014 Form 990, Return of Organization Exempt from Income Tax, accompanying schedules, and instructions have been released by the Internal Revenue Service (Service). Significant reporting changes are in store for supporting organizations reflecting the Service’s interest in these organizations, as well as to incorporate regulatory changes related to distribution requirements for certain Type III organizations.
Changes to the core Form 990 are minimal but clarify that accrued bonuses do not have to be reported as deferred compensation on Part VII if the bonus is paid out within 2½ months after the calendar year-end. This provision reflects some parity with the deductibility of accrued compensation by for-profit organizations. The instructions for Part IV, Reconciliation of New Assets, have been slightly modified; however, readers of the Form 990 will not see any material changes.
Filers of group returns with supporting organizations, as well as supporting organizations themselves, should be prepared to address technical answers regarding their tax-exempt status and their relationship with their supported organization or organizations. It is recommended that careful due diligence be exercised when completing Schedule A as many questions require a detailed factual understanding of the use, by the supported organization or organizations, of funding provided by the supporting organization.
Schedule L filers may, however, see reduced disclosure due to refinements of the definition of interested persons for purposes of identifying business transactions with interested persons. Organizations with large boards may see reporting relief, as well as an increase in the number of “Form 990” independent directors or trustees on their return.
In closing, the Form 990 continues to require a detailed understanding of the organization’s operations and governance structure in order to prepare a complete and accurate return. Supporting organizations would be well advised to familiarize themselves with reporting changes before the close of their 2014 fiscal year in order to address the increased disclosure.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.