The Internal Revenue Service recently released the 2018 Form 990 (Return of Organization Exempt From Income Tax) and the Instructions for Form 990. Form 990 is an annual information return required to be filed with the IRS by most organizations exempt from income tax under Section 501(a) of the Internal Revenue Code, including (but not limited to) those described by Sections 501(c)(3), 501(c)(4), and 501(c)(6).
- Excise tax on executive compensation, Part V. New section 4960 imposes an excise tax on an organization that pays to any covered employee more than $1 million in remuneration or pays an excess parachute payment during the year starting in 2018. See section 4960 and Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, for more information.
- Excise tax on net investment income of certain colleges and universities, Part V. New section 4968 imposes an excise tax on the net investment income of certain private colleges and universities. See section 4968 and Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, for more information.
- FASB changes, Part X. Instructions to Form 990 reflect the financial statement reporting changes under the Accounting Standards Update (ASU) 2016-14 (ASU 2016-14), Presentation of Financial Statements of Not-for-Profit Entities, issued by the Financial Accounting Standards Board (FASB). ASU 2016-14 changes the way not-for-profit organizations classify net assets.
- Increase in UBTI by disallowed fringe. For organizations that have employees, unrelated business taxable income (UBTI) reported on Form 990-T, is increased by any amount for which a deduction is not allowable because of section 274 and which is paid or incurred by the organization after 2017 for any qualified transportation fringe (as defined in section 132(f)), or any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C), or any on-premises athletic facility (as defined in section 132(j)(4)(B)). This rule does not apply to the extent the amount paid or incurred is directly connected with an unrelated trade or business which is regularly carried on by the organization.
- Note. A deduction for expenses paid or incurred for on-premises athletic facilities is disallowed due to application of section 274 only if it discriminates in favor of highly compensated employees.
- Change to Schedule B (reporting of donor information). A tax-exempt organization, other than a section 501(c)(3) organization (including a section 4947(a)(1) nonexempt charitable trust) or a section 527 political organization, is no longer required to report the names and address of its contributors on the Schedule B (Schedule of Contributors) attached to its Form 990 or Form 990-EZ for tax years ending on or after December 31, 2018. See Rev. Proc. 2018-38 for more information about this revised filing requirement.
5 Additional Resources
Form 990 Series Which Forms Do Exempt Organizations File Filing Phase In (IRS)
Seven Steps for Your Board When Reviewing the Form 990 (Clark Nuber)
Form 990 Checklist (BoardSource)
Reviewing the IRS Form 990: Five Tips and Best Practices (BDO)