The Revised Form 990: Do s, Don ts, and Best Practices. Background Why the Change?

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1 The Revised Form 990: Do s, Don ts, and Best Practices Brought to you by CBIZ MHM, LLC Presented by Brenda A. Blunt Background Why the Change? The form 990 has not been significantly revised since 1979 nearly 30 years. Since that time we have seen: 1

2 Background Why the Change? During this same time frame: Enron, WorldCom, Tyco and other public company scandals helped usher in the passage of the Sarbanes-Oxley Act of 2002 Background Why the Change? Then, Congressional attention turned to the NFP Sector when on June 22, 2004, the Senate held a hearing entitled Charity Oversight and Reform: Keeping Bad Things from Happening to Good Charities Background Why the Change? On October 12, 2004, the Independent Sector, formed the Panel on the Nonprofit Sector. 2

3 Background Why the Change? In June 2005, the Panel issued Strengthening Transparency, Governance, and Accountability of Charitable Organizations, a final report to Congress and the Nonprofit Sector recommending more than 120 actions, in 15 major categories, to be taken by charitable organizations, Congress and the Internal Revenue Service. Background Why the Change? On August 18, 2006, Congress responded to many of the panel s recommendations via the charitable portions of the Pension Protection Act of 2006 addressing Donor Advised Funds, Support Organizations, non-cash contributions, credit counseling organizations and similar concerns. Background Why the Change? On December 19, 2007, the IRS responded to many of the panel s and other interested parties recommendations with the revised Form

4 Overview The redesign of Form 990 was based on three guiding principles: 1. Enhancing transparency to provide the IRS and the public with a realistic picture of the organization 2. Promoting compliance by accurately reflecting the organization s operations so the IRS may efficiently assess the risk of noncompliance 3. Minimizing the burden on filing organizations Redesigned Form Organization Forms Parts I and II - Summary and Signature Block Part III - Statement of Program Service Accomplishments Core 990 Part IV - Checklist of Required Schedules Part V - Statements Regarding Other IRS Filings and Tax Compliance Part VI - Governance, Management and Financial Reporting Part VII - Compensation of Officers, Directors, Trustees, Key Employees and Other Highest Compensated Employees or Independent Contractors Parts VIII-XI - Statements of Revenues and Expenses, Balance Sheet Schedule A Schedule B Schedule C Schedule D Schedule E Schedule F Schedule G Schedule H Schedule I Schedule J Schedule K Schedule L Schedule M Schedule N Schedule O Schedule R Public Charity Status and Public Support (990-EZ) Schedule of Contributors (990-EZ) Political Campaign and Lobbying Activities (990-EZ) Supplemental Financial Statements Schools (990-EZ) Statement of Activities Outside the United States Supplemental Information Regarding Fundraising or Gaming Activities (990-EZ) Hospitals Supplemental Information on Grants and Other Assistance to Organizations, Governments, and Individuals in the United States Compensation Information Supplemental Information on Tax Exempt Bonds Transactions with Interested Persons (990-EZ) Non-Cash Contributions Liquidation, Termination, Dissolution, or Significant Disposition of Assets (990-EZ) Supplemental Information to Form 990 Related Organizations and Unrelated Partnerships The new 990 is for full years beginning on or after January 1, For short year returns ending on or after December 31, Mid-size organizations have a transition period to get used to the new form 4

5 Organizations can file Form 990-EZ if: They meet both tests Tax Year Gross Receipts > $25k and < $1 million > $25k and < $500k > $50k and < $200k Total Assets less than $2.5 million less than $1.25 million less than $500k Sponsoring organizations and 512(b)(13) controlling organizations must file form 990. Most supporting organizations must file form 990 or 990-EZ. Form 990-EZ Essentially no change to the 990-EZ Added a few questions to determine which of the new schedules are required. Form 990-EZ Only Schedules that could apply are: Schedule A, Public Charity Status and Public Support Schedule B, Schedule of Contributors Schedule C, Political Campaign and Lobbying Activities Schedule E, Schools Schedule G, Fundraising and Gaming Schedule L, Transactions with Interested Persons Schedule N, Liquidation, Termination, Dissolution or Significant Disposition of Assets 5

6 The New 990-N Beginning for years ended on or after December 31, 2007, organizations with normal gross receipts under $25,000 will file form 990-N the new electronic postcard notification. Sample 990-N Tax Period: 2007 (05/01/ /30/2008) Employer Identification Number (EIN): Legal Name and Mailing Address: ACCOUNTING SOCIETY UNIVERSITY OF SAN DIEGO School of Business Administration 5998 Alcala Park San Diego, CA United States Other names the organization conducts business under (Doing Business As): Organization has terminated: No Gross receipts are normally $25,000 or less: Yes Website URL: Principal Officer's Name and Address: Mark Judd University of San Diego School Business Administration 5998 Alcala Park San Diego, CA United States The New 990-N Failure to file for three consecutive years will result in termination of organization s tax exempt status. Revocation will be as of the filing due date of the third year. To file, go to 6

7 General tip: The return, as designed, should not have any attachments to the forms unless specifically called for. Required attachments include: Name change amendment to organizing documents, list of subordinate organizations, request letter and determination letter for termination, articles of merger or dissolution and related documents. General tip: Complete Schedule R first, then Part VII of the Core 990, then the rest of the return. Knowing what organizations and people are related to the reporting organization is crucial to answering questions throughout the return. Header, Parts I and II If the organization does not have a determination letter from the IRS, check the Application Pending box whether or not it ever intends to file an application. Part I, line 1. You can choose to put in either the organization s mission or a description of its most significant activity. 7

8 Part III Program Service Accomplishments Line 1, Enter the mission statement as approved by the organization s governing body. If they have not adopted a mission statement, enter none. Line 4, list top three programs and what the organization accomplished under each program. Include measurable outcomes. 501(c)(3), (c)(4) and 4947(a)(1) trusts must report expenses, grants and revenue by program. Code is not used for Part V Other IRS Filings and Compliance This is the IRS Gotcha page!.. Be sure you understand the implications of each answer. If not, contact us and we can help. Use Schedule O to provide additional information to minimize impact or if, in the case of line 4b, there is not enough room to completely answer the question. Part VI Governance, Management and Disclosure With the exception of questions 17, 18 and 20, there is no right or wrong answer although some will read better than others. You may want to involve certain members of the Board, Management and Legal Counsel to help draft your responses. Remember, Schedule O is available to provide clarifying information if it would make the average reader feel better about an otherwise less than ideal answer. 8

9 Part VI Governance, Management and Disclosure Line 1, Independent board members are, essentially, members who have not been paid other than in their capacity as a board member see instructions for technical definition. Line 2, The organization is required to ask! If there are any, the only description required is whether the relationship is a family relationship or a business relationship. Part VI Governance, Management and Disclosure Line 10, there is no requirement that the 990 be reviewed. Whether you answer yes or no, you must describe the review process on Schedule O. Part VI Governance, Management and Disclosure Line 12 and 15, the instructions ask for very specific disclosures. Be sure to refer to them. Line 12, they are looking for the level responsible for review and enforcement, whether or not the conflicted person leaves the room during any discussion, etc. Line 15, they want to know who does the review, the year the review was last performed, etc. 9

10 Part VI Governance, Management and Disclosure Line 18, If the organization makes its 990 available on its website and the 1023 only available on request, you would check both boxes. Part VII - Compensation List persons in the following order: 1. Individual trustees or directors (whether or not paid) 2. Institutional trustees (whether or not paid) 3. Officers (whether or not paid) 4. Key employees 5. Highest compensated employees 6. Former such persons (only if paid) Part VII - Compensation Include name, title and average hours worked per week include volunteer time. Check all the boxes that apply to any given person. 10

11 Part VII - Compensation Compensation should be directly from the W-2, box 5 or 1099-MISC, box 7 that were filed for the calendar year ending within or with the reporting year. Institutional trustee compensation should be the amount paid pursuant to the contract whether or not reported on a Accordingly, compensation will rarely agree with Part IX, line 5. Compensation from related organizations would be those organizations listed as related in Schedule R. Part VII - Compensation Other compensation. Specifically list: 1. Tax-deferred contributions by the employer to a qualified defined benefit plan. 2. The annual increase in actuarial value of a qualified defined benefit plan. Part VII - Compensation Other compensation. Specifically list: 3. Value of non-taxable health benefits provided by the employer. Include health insurance premiums, medical reimbursement plans, amounts paid under self-funded plans. Do not include disability or long-term care premiums. 11

12 Part VII - Compensation Other compensation. Specifically list: 4. Tax-deferred contributions by the employer or employee to a nonqualified defined contribution plan. 5. Annual increase in actuarial value of a nonqualified defined benefit plan. 6. Any other benefit valued at $10,000 or more (see table in instructions). Part VII - Compensation Other compensation. Estimates of other compensation can be used if actual values are not readily available. Part VII - Compensation Key definitions: Officer Includes top management official and top finance official whether or not those persons are officers under state law. 12

13 Part VII - Compensation Key definitions: Key employee 1. Receives reportable compensation in excess of $150,000 from the organization and all related organizations. Part VII - Compensation Key definitions: Key employee 2. Has responsibilities similar to officers directors or trustees or Manages a discrete segment of the organization representing 10% or more of its activities, assets, income, or expenses or Part VII - Compensation Key definitions: Key employee 2. Has or shares authority or control to determine 10% or more of the organization s capital expenditures, operating budget, or compensation for employees. 13

14 Part VII - Compensation Key definitions: Key employee 4. Is one of the top 20 highest compensated employees who passed the first and second test using reportable compensation. Part VII - Compensation Key definitions: Highest Compensated Employees Five highest compensated employees not already listed who had reportable compensation of more than $100,000 from the reporting organization and any related organization. Part VII - Compensation Key definitions: Former such persons List former officers, key employees and highest compensated employees as listed in one or more of the prior 5 years of 990 s if reportable compensated is more than $100,000 from the organization or any related organization. 14

15 Part VII - Compensation Key definitions: Former such persons List former directors or trustees as listed in one or more of the prior 5 years of 990 s that received, in the capacity as a former director or trustee, more than $10,000 from the organization or any related organization. Part VII - Compensation Volunteer exception compensation from a related organization need not be disclosed if paid to a volunteer officer, director, or trustee of the organization if the related org. is a for-profit and is not owned or controlled directly or indirectly by the organization or one or more related exempt orgs. and does not provide management services to the organization. Part VII - Compensation De minimus rule for related organization comp. Unless paid to a former director or former trustee in their capacity as a former director or trustee, payments from a single related entity less than $10,000 can be disregarded. 15

16 Part VII - Compensation Management companies are considered independent contractors. Payments to management companies are not reported here unless they qualify as highest compensated independent contractors. If the management company is related, the comp they pay would be included in col. E. and the management fee may be reported on Schedule L. Part VII - Compensation Yes answers to questions 3, 4, or 5 will trigger the need to file Schedule J. Compensation to formers Reportable plus other compensation over $150,000 Compensation by an unrelated organization Schedule J All questions relate to activities that occurred during the calendar year that ended with or within the reporting period. Part I, line 1 for any item checked, describe in part III the type of benefit, who received the benefit, and whether or not any part of it was treated as taxable compensation. 16

17 Schedule J Line 3, do not check any boxes if the compensation is determined by a related organization instead disclose methods used by the related organization in Part III. Line 4, list the persons and the applicable amounts in Part III. Schedule J Line 7, discretionary bonuses paid will typically trigger a yes response to this question. Note: Part I questions must be answered relative to everyone listed on the core 990, Part VII, whether or not those persons triggered the need to file Schedule J. Schedule J Part II is only to be completed for those persons who triggered the need to file Schedule J. Much of this information overlaps or repeats what is reported in the core 990, Part VII only in more detail. 17

18 Schedule J Part II, row (i) reports comp paid by the reporting organization. Row (ii) reports comp paid by all related organizations. Comp. excluded from the core 990, part VII under the de minimus related org. rule or the less than $10,000 per other compensation rule must be reported here. Estimates are no longer allowed. Part VIII Statement of Revenue Contributions in line 1 does not include grants or fees from governmental agencies for a facility, service or product that provides a economic or physical benefit back to the governmental unit. Part VIII Statement of Revenue Contributions in line 1 also does not include donated services or rents; unreimbursed expenses of officers, employees or volunteers; or memberships dues that compare reasonably with membership benefits provided. 18

19 Part VIII Statement of Revenue Program service revenue includes income earned by the organization from activities that form the basis of the organization s tax exempt status. Enter the business code (from the form 990-T instructions) for each program service and miscellaneous income line item. Enter if none of the codes listed adequately describes the activity. Part VIII Statement of Revenue Related or exempt function revenue comes from activities that contribute importantly to the accomplishment of the organization s tax exempt status other than to provide funds. Part VIII Statement of Revenue Unrelated business revenue in excess of $1,000 will trigger the need to file form 990-T. Revenue excluded from tax is revenue that would be unrelated business income but for a specific exclusion in the code. 19

20 Part IX Statement of Functional Expenses Only 501(c)(3) and 501(c)(4) organizations need to complete columns B, C and D. All other entities complete only col. A. Part IX Statement of Functional Expenses The IRS expects organizations to separately state each listed item if they have it. For instance, line 11f, investment management fees should be separately stated even if netted with investment income in the organization s books. Part IX Statement of Functional Expenses Line 24 if miscellaneous or other expenses is listed on lines 24a - 24e, the line items cannot exceed 5% of total expenses. Expenses should not include donated services or rents. 20

21 Part X Balance Sheet When the schedule says see Part IV, line 11, it will ultimately point you to Schedule D. Schedule D Part I Donor Advised Funds A donor advised fund is, generally, a fund that is separately identified by reference to contributions of a donor, that is owned or controlled by a sponsoring organization and for which the donor reasonably expects ongoing advisory privileges. Schedule D Part I Donor Advised Funds Column (b) Funds and other accounts report funds that are similar to donor advised funds, but that for some reason (usually because they fall under an exception) are not. 21

22 Schedule D Part II Conservation Easements Also include other interests in real property that under state law have attributes similar to an easement (for example, a restrictive covenant or equitable servitude.) Line 3 explain the changes in Part XIV. Schedule D Part III Collections of Art, Historical Treasures Organizations that receive contributions of works or art, historical treasures, and similar assets, but that do not maintain collections are not required to complete this part. Schedule D Part V Endowment Funds. For 2008, only complete the rollforward schedule for the current year. The term Endowment here includes Term endowments, Permanent endowments and Board designated or quasi-endowments as those terms are defined in FASB

23 Schedule D Part V Endowment Funds Generally a Term Endowment is a fund that is maintained to provide a source of income for either a specified period of time or until a specific event occurs. Schedule D Part V Endowment Funds Generally a Permanent Endowment is a fund that is maintained to provide a permanent source of income with the stipulation that the principal must be invested and kept intact in perpetuity, while only the income generated can be used by the organization. Schedule D Part V Endowment Funds. Generally a Quasi-Endowment are funds functioning as an endowment that are set aside by the organization itself and that must retain the purpose and intent as specified by the donor or source of the original funds. 23

24 Schedule D Part X Separately state the organization s federal income tax liability no matter the size. List other liabilities by type. Organizations required to complete this Part must also provide the text of the FIN 48 footnote in Part XIV. Schedule D Parts XI XIII If the organization did not receive an audited financial statement, it is not required to complete these parts. These parts are also not required for group returns. Core 990, Part XI Line 2 a and b. Answer no if the reporting organization s financial statements were part of a combined compiled, reviewed or audited financial statement only. The organization may choose to explain in Schedule O that is was part of a combined financial statement. 24

25 Schedule A, Public Charity Status Part I, Choose the reason for public charity status that best fits the organization. Unless the organization is in its first 5 years of existence, this may or may not be the same one from the organization s IRS determination letter. If the organization is in its first 5 years, it must check the box that agrees with its IRS exemption letter. Schedule A, Public Charity Status Parts II and III Only complete one or the other as directed in Part I. Use the same method of accounting as used for the rest of the return. This may require converting prior year information to get it on the same method of accounting. Schedule A, Public Charity Status Parts II and III Unusual grants is a term of art. In general, it refers to grants that attracted because of the organization s publicly supported nature, are unusual and unexpected in amount and large enough to endanger the organization s public charity status. See Temp Reg (a)-3T(c)(3) and (4). 25

26 Schedule A, Public Charity Status Part II Line 5. Governmental support and contributions from other organizations that qualify as public charities under 509(a)(1)/170(b)(1)(A)(vi) are excluded from this line, no matter how large. Schedule A, Public Charity Status Part II Line 9. Net income from unrelated business activities. This number cannot be less than zero. Schedule A, Public Charity Status Part III Line 7. Disqualified persons are anyone who is a founder, Board member or substantial contributor or has ever been in any of those roles. A substantial contributor is anyone who has donated more than 2% of the donations the organization has ever received as of the time of the donation. 26

27 Schedule A, Public Charity Status Part III Line 10b. This number cannot be negative. Schedule B (990-EZ) Essentially unchanged from prior versions. Change in the instructions makes it clear that governmental contributors should be listed for 509(a)(2), and 170(b)(1)(A)(vi) organizations. Schedule B (990-EZ) 990-PF and 527 filers must make Schedule B available for public inspection in its entirety. All others can block out the names and addresses, but the rest of the information must be disclosed 27

28 Schedule B (990-EZ) General rule: list all contributors who donated $5,000 or more during the year using the organizations normal method of accounting. If the organization passes the 33 1/3% test under 170(b)(1)(A)(vi), (not just the 10% test), then report the greater of $5,000 or 2% of total contributions. Schedule B (990-EZ) 501(c)(7), (8) or (10) organizations list contributions over $5,000 unless contribution was exclusively for a religious, charitable, scientific, literary, or educational purpose or for the prevention of cruelty to children or animals, then the cutoff is more than $1,000 and complete Part III. Schedule B (990-EZ) Part II Be careful the description does not reveal the identity of the donor. Also remember, donated services and rents are not reported as contributions for the 990 so they don t go here either. 28

29 Schedule C (990-EZ) The instructions in the header of the form will tell you what parts to complete depending on the type of organization. It is important to understand the following key terms, all defined in the glossary: Legislation Lobbying activities Political campaign activities Schedule C (990-EZ) Key terms defined in the instructions: 527 exempt function activities: All functions that influence or attempt to influence the selection, nomination, election, or appointment of any individual to an federal, state, or local public office or office in a political organization, or the election of Presidential or VP electors. Schedule C (990-EZ) Key terms defined in the instructions: Political expenditures: Any expenditure for political campaign activities are political expenditures. An expenditure includes a payment, distribution, loan, advance, deposit or gift of money or anything of value. It also includes an agreement or promise to make such an expenditure whether or not enforceable. 29

30 Schedule C (990-EZ) Part III Only for 501(c)(4), (5) and (6) organizations Line 4, an organization cannot carry over excess lobbying and political expenditures to the next year if it did not send out any notifications to its members for the year. Note: there are exceptions for paying the proxy tax if all the members are individuals or exempt organizations (would not be deducting the dues.) Schedule E (990-EZ) The instructions emphatically state that organizations that are schools must complete Schedule E in the core 990, Part IV, line 12 and the instructions to Sch E. However, the questions only relate to private schools. What about charter schools which are public schools under state law? Schedule E (990-EZ) We will be tying this Sch. O disclosure to 990, Part IV, line 4 and not completing Sch. E for charter schools: ABC ACADEMY IS AN ARIZONA CHARTER SCHOOL, RATHER THAN A PRIVATE SCHOOL. ACCORDINGLY, WHILE IT IS CLASSIFIED AS A PUBLIC CHARITY UNDER 170(B)(1)(A)(II), IT IS NOT REQUIRED TO COMPLETE SCHEDULE E FOR PRIVATE SCHOOLS. 30

31 Schedule F, Part I Activities conducted outside the U.S. include grantmaking, fundraising, UBIT, program services, maintaining offices, maintaining employees or agents, and passive investments (other than financial accounts disclosed on Form 990, Part V, line 4a and 4b). Schedule F, Part I List by region. The Nine regions are defined in the instructions. Use more than one line per region if you need the room. Grantmakers must describe in Part IV the organization s procedures for monitoring the use of grant funds outside the U.S. Schedule F, Part II List information for each foreign organization (including foreign governments) who received more than $5,000. Check the box if there were none. Do not complete columns (a) or (b), but complete the remaining columns as if (a) and (b) were completed. 31

32 Schedule F, Part III List grants or other assistance to individuals by type of grant or assistance and by region. Col. (c), if exact numbers of recipients is not available, provide an estimate and explain in Part IV how the estimate was derived. Schedule G, (990-EZ) Part I is not required for 990-EZ filers. Col. (v) enter fees paid to or withheld by the professional fundraiser. If the agreement also provides for the payment of expenses such as postage, mailing list rental, etc. report those amounts paid on Sch. O and describe how the agreement distinguishes between fees and expenses. Schedule G, (990-EZ) Part I, Col. (v). Also describe in Sch. O if the organization paid a fundraiser just expenses and not fees. If the agreement does not distinguish between fees and expenses, put the entire payment in col. (v). 32

33 Schedule G, (990-EZ) Part II, list only events with gross receipts greater than $5,000. (Accordingly the total might not agree to 990, part XIII). Direct expenses are all the expenses (not just the direct donor benefit) of putting on the event itself. It does not include advertising or promoting the event. Do not include gaming (raffle) revenue or expenses. Schedule G, (990-EZ) Part III, combine all events. Part III is largely a laundry list of information State Attorney Generals wanted to know to help them monitor and enforce gambling law compliance in their states. How sensitive the question is will depend on your state. Knowledge of the gambling rules in your state is key. Schedule H For 2008, only Part V is required. A hospital is a facility that is, or is required to be, licensed, registered, or similarly recognized by a state as a hospital. This includes hospitals operated through a joint venture. It does not include hospitals located outside the U.S. This is different from the definition of Hospital for Schedule A. 33

34 Schedule H List each licensed facility Check all applicable boxes for each facility. The organization must (?) list in Part VI, the number of each type of facility other than those required to be licensed as a health care facility under state law (for example, 2 rehab clinics, 4 diagnostic centers) Schedule I Include grants paid through a joint venture treated as a partnership. The U.S. includes Puerto Rico, Northern Mariana Islands, Guam, American Samoa and the U.S. Virgin Islands. Part I, describe in Part IV the organization s procedures for monitoring the use of grant funds in the U.S. Schedule I Part II, list grants to any entity recipient over $5,000. Must use full legal name of the recipient (not the fund or event name). Col. (c) enter code section organization is exempt under or name of govt. entity if neither, leave blank 34

35 Schedule I Part II, list grants to any entity recipient over $5,000. Col. (h), do not use general terms such as charitable, or educational. Use specific descriptions such as general support, nursing services or free care for indigent hospital patients. For disaster assistance, name the disaster and the assistance Food for Charity A s assistance to Hurricane Katrina disaster victims. Schedule I Part III, list types of assistance to individuals. Do not use general terms such as charitable, or educational. Use specific descriptions such as nursing scholarships, educational supplies or direct cash assistance to indigents. For disaster assistance, name the disaster and the assistance Food for Hurricane Katrina disaster victims. Schedule K Only Part I is required for List each tax-exempt bond issue which, both had an outstanding principal amount in excess of $100,000 as of the last day of the year and was issued after December 31,

36 Schedule L (990-EZ) Be aware that the definition of Interested Person varies with each part of this form. Transactions listed in an earlier part do not need to be listed again even if they would fit under multiple categories. Use Schedule O, if more room is needed. Schedule L (990-EZ) Part I Only applies to 501(c)(3) or (4) organizations. Disqualified person is fully defined in the glossary, but generally is an officer, director, trustee, key employee, substantial donor or any one else in a position of influence, their family members and controlled organizations or anyone who has been in that position within the last 5 years. Schedule L (990-EZ) Part II Interested Persons are current or former officers, directors, trustees, key employees and five highest compensated employees listed in Form 990, Part VII, Section A. For 501(c)(3) and (4) organizations also include disqualified persons. 36

37 Schedule L (990-EZ) Part II Do not include: Advances under an accountable plan Pledges receivable Accrued but unpaid compensation Loans from a credit union made on the same terms as offered to other members Receivables created in the ordinary course of business. Schedule L (990-EZ) Part II Col. (e), (f), and (g) should not imply that the law dictates the answer. Organizations should follow best practices for the circumstances. Schedule L (990-EZ) Part III Interested Persons means a current or former officer, director, trustee, or key employee listed in From 990, Part VII, Section A and a substantial contributor or a related person. A substantial contributor is a person who has donated at least $5,000 and is listed in Sch. B. 37

38 Schedule L (990-EZ) Part III Do not include: Grants to employees (and their children) of a substantial contributor or their 35% controlled entity if awarded on an objective basis on preestablished criteria (see Reg (b)) Schedule L (990-EZ) Part III Do not include: Grants or assistance provided to an interested person as a member of the charitable class that the organization was formed to benefit if provided on similar terms as other members of the class. Grants for travel, study, or similar purpose are not excluded by this exception and must be reported. Schedule L (990-EZ) Part III Col (a). For Substantial Contributors, do not enter the name. Enter Substantial Contributor. For parties related to a Substantial Contributor, enter Related to Substantial Contributor. 38

39 Schedule L (990-EZ) Part III Col (b). Describe the relationship. For instance spouse of Director John Smith. For Substantial Contributors, do not enter the name. Enter Substantial Contributor. For parties related to a Substantial Contributor, describe the relationship such as Child of Substantial Contributor. If a person is a Substantial Contributor and another type of interested person, do not refer to the fact status as Substantial Contributor. Schedule L (990-EZ) Part IV Interested Person 1. A person listed in Form 990, Part VII, Section A 2. A family member to a listed person in 1 3. An entity owned more than 35% by 1 or 2 4. An entity (other than a tax-exempt entity) of which a person from 1, above, was serving at the time of the transaction was an officer, director, trustee, key employee, 5% partner (including family interests) or 5% shareholder (including family interests) in a professional corporation. Schedule L (990-EZ) Part IV Interested Person 5. A management company in which a former (within the last 5 years) officer, director, trustee, or key employee is a direct or indirect 35% owner or an officer director, trustee or key employee. 39

40 Schedule L (990-EZ) Part IV Do not include compensation reported in 990, Part VII, Section A Do not include transactions that did not exceed the greater of $10,000 or 1% of the organization s total revenue unless Total payments for all transactions between the parties exceeded $100,000 or The transaction was the organization s payment of compensation to a family member of a current officer, director, trustee, or key employee. Then reportable comp over $10,000 must be reported. Schedule M Do not include donations of services or rents. Do include all non-cash donations whether recorded as revenue on the organizations books or not even if sold immediately upon receipt. Schedule M See the instructions for some guidance on the meaning of each category. Use Lines for items that do not fit the provided categories. Also, use these lines for contributions that do not meet specific charitable contribution requirements such as clothing not in good used or better condition or self-created items. Also, donated items used at a charity auction (but not the auction items themselves), such as centerpieces or food. 40

41 Schedule N (990-EZ) Part I Used to report the details of the final disposition on assets upon termination. There are very specific instructions about the level of detail they want here. Prior to termination, you should read the instructions and/or consult with us to ensure your records capture the level of detail required. Schedule N (990-EZ) Part II Required for organizations that sell, exchange, dispose of, or have some other transfer of more than 25% of the fair market value of the organization s net assets. This is problematic for organizations with very small or negative net assets. No de minimus rules or guidance for negative net assets are provided. Schedule N (990-EZ) Part II Measure net assets as of the first of the year. Aggregate a series of related transactions. 41

42 Schedule N (990-EZ) Part II Include: Taxable or tax-free exchanges of assets for cash or other consideration Sales, contributions or other transfers to establish a partnership, joint venture or corporation. Sales of assets by a partnership Contraction of net assets resulting from a grant Schedule N (990-EZ) Part II Do not include: Change in composition of publicly traded securities held in a passive investment portfolio Asset sales made in the ordinary course of business A decrease in value due to market fluctuations Transfers to a disregarded entity of which the organization is the sole member. Schedule O Aside from the many, many uses already mentioned If a return is filed late, provide a statement for why the return was not filed on time. Use Schedule O to list each part or schedule that changed as part of an amended return. 42

43 Schedule R Part I list each disregarded entity whether owned directly or indirectly through another controlled entity. Schedule R Parts II, III, IV and V, a related organization stands in one or more of the following relationships to the filing organization: Parent (for trusts, the parent would be a greater than 50% beneficial interest, not the trustee) Subsidiary Brother/Sister Supporting/Supported organization Schedule R Part III, col. (F) Enter the distributable share (dollar amount) of the partnership s total income in accordance with the organization s profits interest as of the partnership s year that ends with or within the reporting organization s year. Generally, this is disclosed on the K-1 provided by the partnership. 43

44 Schedule R Part III, col. (G) Enter the distributable share (dollar amount) of the partnership s end-of-year total assets in accordance with the organization s capital interest for the partnership s year that ends with or within the reporting organization s year. Generally this is not on the K-1, you will need to ask the partnership for this information. Schedule R Part IV, col. (F), report the following: For corporations, total income times value of reporting organization s stock (all classes)/value of all outstanding stock (all classes). Note: most of the time this is not publicly traded stock hope for just one class. For S-corporations, enter the total from Sch. K-1, Part III, lines Schedule R Part IV, col. (F), report the following: For trusts, enter the total of Sch. K-1, part III, lines 1-8 For all, use information from the year ending with or within the reporting organization's year. 44

45 Schedule R Part IV, col. (G), report the following: For corporations, enter the share of total assets using the same formula used for Col. (I). For S-corps, multiply total assets by % allocable share For trusts, enter total assets by the % ownership of the trust For all, use information from the year ending with or within the reporting organization's year. Schedule R Part V, line 2 For transactions with a 512(b)(13) controlled entity list Receipt of interest, annuities, royalties, or rent from a controlled entity (usually UBIT) Loan made to a controlled entity Any other transfer of funds between the organization and a controlled entity. Schedule R Part V, line 2 501(c)(3) and 4947(a)(1) trusts must report transactions with related non- 501(c)(3) exempt organizations Disregard detailing transactions of a particular type that amount to $50,000 or less other than transactions with 512(b)(13) controlled entities which must be detailed regardless of amount. 45

46 Schedule R Part VI List all unrelated organizations treated as a partnership for federal filing purposes if the filing organization conducted more than 5% of its activities, figured as the greater of its total assets at year end or total revenue for the year, through the unrelated partnership. Example: Organizations ending capital account in partnership/organization s total assets Schedule R Part VI Disregard partnership investments for which 95% or more of the filing organization s gross revenue from the partnership is described in 512(b)(1)-(3) and (5), such as interest, dividends, royalties, rents and capital gains (including unrelated debt-financed income) and The primary purpose for investing in the partnership is the production of income and not the conduct of charitable activity. Schedule R Part VI, col. (D) Check Yes if all the partners are 501(c)(3) organizations, governmental entities or wholly-owned subsidiaries of either. 46

47 Other Important Information The information in this presentation is for informational purposes only. It is not intended to serve as legal or tax advice to your organization. As required by U.S. Treasury rules, we inform you that any U.S. federal tax advice contained herein, including handouts, is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service. For advice specific to your organization, please contact your tax and/or legal counsel or contact your local CBIZ MHM, LLC tax professional. 47