1 No December 23, 2013 Form 990 instructions for Summary of changes December 23: The IRS publicly posted the final version of the instructions for Form 990 for tax years beginning in There are changes to the Instructions for Form 990 Return of Organization Exempt From Income Tax from the instructions for Form 990 filed in The following discussion focuses on the significant changes from the 2012 instructions. KPMG tax professionals have annotated a version of the new instructions with new language noted with yellow highlights. Read Form 990 instructions [PDF 2 MB] Changes to instructions for 2013 The General Instructions Clarify that a short period return cannot be filed electronically unless it is an initial or final return for which the Initial return or Terminated box is checked in Item B of the Form 990 Heading Explain that if a Form 990-N filer changes its accounting period, it must report this change either on Form 990, Form 990-EZ, or Form 1128, or by sending a letter to the IRS The heading items A-M Clarify what documentation must be attached to Form 990 to support an organization s name change Clarify what documentation must be attached to Form 990 by an organization that has terminated, dissolved, merged, or had its exemption revoked by the IRS Part I, Summary Line 16a instructions clarify that professional fundraising fees must be reported, regardless of whether or not the recipient is an employee. Part IV, Checklist of Required Schedules Line 2 instructions clarify that certain organizations must complete a public support test computation in Schedule A if excluding Schedule B contributors based on the $5,000 / 2% threshold, even if the organizations
2 would not otherwise have a public support requirement. Line 26 instructions are revised to clarify that an organization must file Schedule L, Part II, if it reported any amounts on Part X, Lines 5, 6, or 22 for receivables from or payables to interested persons. Part V, Statements Regarding Other IRS Filings and Tax Compliance Line 4a instructions updated to inform filers that FBAR (formerly known as TD F ) is now FinCEN Form 114, Report of Foreign Bank and Financial Accounts Part VI, Governance, Management, and Disclosure Line 1b instructions clarify that for purposes of determining independence, compensation includes any amounts received during an organization's tax year, even if no compensation is reportable in Part VII (e.g., compensation received during a short year). Line 3 instructions clarify that compensation from a management company for management duties provided to the filing (and any related) organization during that tax year must be listed in Schedule O. Line 15 instructions clarify that a "Yes" answer only applies if the filing organization (not a related organization) used a process for determining executive compensation that met the rebuttable presumption of reasonableness. Line 15b instructions clarify that the filing organization is to answer No to the question addressing the use of the rebuttable presumption if it did not directly compensate any of its other officers or key employees during the tax year, even if such individuals were compensated by a related organization. Part VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors instructions Clarify that directors compensation for non-director independent contractor services to the organization and related organizations must be reported in Part VII, Section A Clarify that compensation from a management company to one of the organization s officers, directors, trustees, key employees or highly compensated employees is generally not reportable in Part VII, Section A, even though it may be reportable elsewhere on the form Clarify that key employees and highly compensated employees include individuals who were employed at any time during the calendar year ending with or within the organization's tax year Part VIII, Statement of Revenue
3 Line 1 instructions clarify that discounts on services cannot be reported as contributions. Line 10b instructions clarify that the cost of donated goods may be reported as the FMV at the time of acquisition. Part IX, Statement of Functional Expenses Line 11 instructions clarify how to report expense payments and reimbursements to independent contractors. Part X, Balance Sheet instructions Clarify that Line 22 generally does not include loans and other payables not required to be reported in Schedule L. Glossary Clarifies that contributions include neither donations of services nor discounts provided on sales of goods in the ordinary course of business Clarifies that for purposes of Form 990, disregarded entities are not controlled entities Includes a new definition of domestic individual Clarifies that compensation for "professional fundraising services" does not include the portion of employees' salaries allocable to fundraising, except to the extent reported on Part I, Line 16a Clarifies that a sponsoring organization or contributing employer is not to report a VEBA as "related" unless a factor other than its relationship as a sponsoring organization or contributing employer causes it to be related Appendix D, Public Inspection of Returns Clarifies that public inspection requirements apply to both original and amended returns Appendix E, Group Returns Clarifies how to determine, for purposes of group returns, whether a diversion of a subordinate s assets meets the 5% / $250,000 reporting threshold for Part VI, line 5 Clarifies when to report business transactions of subordinates and their interested persons in Schedule L, Part IV Appendix F, Disregarded Entities and Joint Ventures Inclusion of Activities and Items Clarifies when to treat a single-member LLC as a disregarded entity of its sole member/owner.
4 No significant changes The following sections do not contain significant changes. Part II, Signature Block Part III, Statement of Program Service Accomplishments Part XI, Reconciliation of Net Assets Part XII, Financial Statements and Reporting Appendix of Special Instructions to Form 990 Contents Appendix A, Exempt Organizations Reference Chart Appendix B, How to Determine Whether an Organization s Gross Receipts Are Normally $50,000 (or $5,000) or Less Appendix C, Special Gross Receipts Test for Determining Exempt Status of Section 501(c)(7) and 501(c)(15) Organizations Appendix G, Section 4958 Excess Benefit Transactions Appendix H, Forms and Publications to File or Use Appendix I, Use of Form 990 or 990-EZ to Satisfy State Reporting Requirements Appendix J, Contributions Appendix K, Business Activity Codes KPMG observation KPMG tax professionals have annotated a version of the new instructions with new language noted with yellow highlights: Form 990 Instructions. Read: TaxNewsFlash-Exempt Organizations: Form 990 for Instructions for Schedule D for a recent discussion of other final 2013 Form 990-series schedules and instructions. For more information, contact: Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group, at (202) ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents,
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