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Update on New Form 990—Follow-Up from March 2008 Round Table

Timeline

• Final draft of Form 990 released in December 2007
• Draft instructions released April 7, 2008
• Available for comments through June 1, 2008
• Final instructions to be published at the end of 2008
• New Form 990 effective for 2008 calendar years or fiscal years beginning in 2008

Part III—Statement of Program Service Accomplishments

• All entities must report revenue for program service activities.
• Revenue—Any revenue derived directly from the activity, such as fees for services or from the sale of goods that directly relate to the listed activity.

Part VI - Governance, Management and Disclosure

• Governing Body—The group of persons authorized under state law to make governance decisions on behalf of the organization and its shareholders or members.
• Independent Voting Member—A member of the governing body is considered "independent" only if all four of the following circumstances apply:
  1. Not compensated as an officer or other employee of the organization or of a related organization. An officer is defined as a person elected or appointed to manage the organization's daily operations such as a president, vice president, secretary or treasurer.
  2. The member did not receive total compensation or other payments exceeding $10,000 from the organization or a related organization as an independent contractor, other than reimbursement of expenses or reasonable compensation for services provided in the capacity as a member of the governing body.
  3. The member did not otherwise receive, directly or indirectly, material financial benefits from the organization or from a related organization.
  4. The member did not have a family member who received compensation or other material financial benefits from the organization or from a related organization.
• Delegation of Management to a Management Company—Organization used a management company or other person to perform management duties customarily performed or under the direct supervision of officers, directors, trustees or key employees. Such management duties include, but are not limited to, hiring, firing, supervising personnel, planning or executing budgets or financial operations, or supervising exempt operations of unrelated trades or businesses of the organization.
• Material Diversion of Assets—Any unauthorized conversion or use of the organization's assets, other than for the organization's authorized purposes, including but not limited to, an embezzlement or theft. A diversion is considered material if it exceeds the lesser of $250,000 or 5% of the organization's gross receipts for its tax year or total assets as of the end of the year.

Part VII—Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors

• Key Employee—An employee who (1) has responsibilities, powers or influence over the organization as a whole that is similar to those of officers, directors or trustees; (2) manages a discrete segment or activity of the organization that represents 5% or more of the activities, assets, income or expenses of the organization; or (3) has or shares authority to control or determine 5% or more of the organization's capital expenditures, operating budget or compensation for employees.
• A key employee does not include any person whose reportable compensation from the organization and related organizations is less than $150,000.
• Overview of Part VII compensation disclosures (and thresholds):
  • Current officers, directors and trustees (no minimum compensation threshold)
  • Current key employees ($150,000)
  • Current five highest compensated employees other than officers, directors, trustees or listed key employees ($100,000)
  • Former officers, key employees and highest compensated employees ($100,000)
  • Former directors and trustees ($10,000 in capacity as former director or trustee)
  • Five highest compensated independent contractors ($100,000)

Part IX—Statement of Functional Expenses

• Professional Fundraising Fees—Amounts for fundraising services including conducting solicitation campaigns and providing advice or other consulting services supporting in-house fundraising campaigns. Do not include the payment by the organization of fundraising expenses such as printing, paper, envelopes, postage, mailing list rental and equipment rental, which should be included on line 24 as other expenses.
• Professional Fundraising Services—Services performed (other than by an officer, director or employee of the organization in his or her capacity as an officer, director or employee) for the organization requiring the exercise of professional judgment or discretion consisting of planning, management, the preparation of materials (e.g., direct mail solicitation packages), or the provision of advice and consulting regarding solicitation of contributions or the direct solicitation of contributions. However, "professional fundraising" does not include purely ministerial tasks such as printing, mailing services, or receiving and depositing contributions to a charity (e.g., services provided by a bank or caging service).

Schedule H—Hospitals

Schedule H must be completed by an organization that operates at least one facility that is required to be or is licensed or certified in its state as a hospital.

If you have any questions or would like a copy of the materials from our March presentation please contact Lu Ann Trapp at 312-980-3281, ltrapp@BlackmanKallick.com or Kim Haumann at 312-980-3249, khaumann@BlackmanKallick.com.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.