Another year, another set of changes for tax-exempt organizations.
In what’s lately become an annual ritual, the IRS has released revised instructions (.pdf) for the 2011 Form 990. The changes contain a number of new provisions related to joint venture and investment partnerships, foreign activity reporting, and compensation reporting bringing greater complexity to the process.
From the IRS’s perspective, the goal of these changes is to help redesign and clarify Form 990 to enhance the transparency of an organization’s mission, finances, and operations. As a result, however, the information your organization presents to investors and donors could be affected. Let’s examine some of the more significant changes.
Joint Venture and Investment Partnership Income Reporting
The instructions provide that an organization should report the amount of its distributive shares of investment income, royalties, and rental income from joint ventures separately. In addition, it should report its distributive share of assets in any entities treated as partnerships for federal tax purposes according to its ending capital account in the partnerships as reported on Schedule K-1.
Note that both of these reporting requirements may not be consistent with your organization’s financial statement reporting and might require additional disclosures on Schedule D and Schedule O.
Foreign Activity Reporting
An additional reporting trigger requires an organization to complete Schedule F, Part I, if it had foreign investments (foreign domiciled partnerships, corporations, or other entities) with a book value of $100,000 or more at any time during the tax year, regardless of income.
Compensation Reporting
Reportable compensation for officers and employees now includes compensation reported in Form W-2, Wage and Tax Statement, box 1 or 5 (whichever amount is greater). In addition, an organization should report the annual increase or decrease in actuarial value of a defined benefit plan (but disregard any decrease in actuarial value when determining whether the individual’s total compensation was more than $150,000). Independent contractor compensation should be reported for the calendar year ending with or within the tax year.
We're Here to Help
For more information about changes to the instructions for Form 990, or for help on how to navigate the effect of the changes on your organization’s operations, contact your Moss Adams LLP professional.