Last revised in 1979, Form 990 "failed to keep pace with changes in the law and with the increasing size, diversity, and complexity of the exempt sector," according to the Internal Revenue Service. "As a result, the current form fails to meet [the IRS'] tax compliance interests or the transparency and accountability needs of the states, the public, and the local communities served by the organization."

Last June, the IRS published a draft version of a revised Form 990 for public comments. After a six-month comment period that generated more than 650 letters and emails, the IRS released the final version of the form this last December. The new form is required for 2008 tax returns, filed in 2009, and draft instructions will be made available in early 2008.

It's important that you review the new form well in advance of the filing deadline to ensure that your accounting and information systems can provide the necessary information.

Major Design Changes to Form 990
As a result of public input, the new Form 990 design allows your organization to tell its story before it reports other, detailed information--and also provides more opportunities to describe your activities. The basic structure includes a summary page, a ten-page core form, and approximately 15 schedules, as well as a checklist of the schedules. 

There are significant changes to the summary page, governance section, and schedules relating to executive compensation, related organizations, foreign activities, hospitals, non-cash contributions, and tax exempt bonds. Compared to the previous form, questions are grouped by subject to a greater degree, making for a more logical and easy-to-use arrangement.

Although the IRS' discussion draft proposed eliminating group returns, these returns will continue to be allowed based on public comments to the proposal. The IRS continues to study changes to group-filing requirements and procedures, with assistance from organizations in the not-for-profit sector.

Form 990 Phase-in Period for Smaller Organizations
You'll begin using the new Form 990 for tax year 2008--i.e., the return you file in calendar 2009. However, to reduce the burden of transition to the new form for smaller organizations, there is a three-year phase-in period.

If your organization satisfies the gross receipts and assets tests listed below, you can choose to file either Form 990-EZ or the new Form 990 during this period. If your gross receipts or assets exceed these amounts, you must file the new Form 990.

Form  990-EZ	Gross Receipts	Assets
2008 tax year, filed in 2009	> $25,000 and < $1 million	< $2.5 million
2009 tax year, filed in 2010	> $25,000 and < $500,000	< $1.25 million
2010 and later tax years	> $50,000 and < $200,000	< $500,000

If your organization's gross receipts are less than $25,000--i.e., below the 990-EZ's minimum threshold--you won't file either Form 990 or Form 990-EZ. Instead, beginning with the 2007 tax year, you'll file Form 990-N, an electronic-only notice, or e-postcard. As of the 2010 tax year, the 990-N/990-EZ threshold increases from $25,000 to $50,000.

There are separate transitions rules for two new schedules to Form 990: Schedule H, Hospitals and Schedule K Supplemental Information on Tax Exempt Bonds. Although these schedules are fully implemented in tax year 2009, certain portions of the schedules that provide identifying information regarding hospital facilities and bond issues must be completed for 2008.

For more information on the Form 990 redesign, you can refer to the IRS website at http://www.irs.gov/charities/article/0,,id=176613,00.html

Sharron O'Donnell is a CPA and a senior manager in the Bader Martin accounting and assurance practice. She also leads the firm's not-for-profit practice, providing audit and consulting services to not-for-profit organizations and private foundations. Sharron is a recognized expert in the not-for-profit sector and has earned the AICPA's Certificate of Achievement in Not-for-Profit Accounting and Auditing.

Scott Usher is a CPA and a senior manager in the Bader Martin tax practice. He is a member of the firm's not-for-profit and real estate practices. Scott provides a blend of tax and business consulting services for not-for-profit organizations, as well as privately held businesses and their owners. He is well versed in real estate and international tax matters.

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