AICPA Comments on Revised Form 990

By Joyce Underwood, CPA

In June 2011, the IRS released Announcement 2011-36 requesting public comments on transitional issues and frequently asked questions involving the redesigned Form 990. On August 9th the AICPA released its comments developed by their Exempt Organizations Tax Technical Resource Panel and approved by their Tax Executive Committee in a letter to Stephen Clarke of the IRS. A summary of the areas commented on are as follows:

• Activity codes for Activities on Part III

• Reporting compensation to management companies and leasing companies owned or controlled by officers, directors, trustees or key employees

• Thresholds for reporting compensation to key employees, highest compensated employees, independent contractors, and former officers, directors, trustees, and key employees

• Reporting revenue from governmental units

• Net asset reconciliation

• Reporting on audited financial statements

• Names and Employer Identification Numbers (EINs) of foreign grantees

• Indirect foreign expenditures

• Reporting bank deposits as loans or business transactions on Schedule L

• Reporting of component parts of community trusts on Form 990-series returns

• Scope of related organization reporting on Schedule R

Complete details on the AICPA comments can be found both on the IRS and AICPA websites under “Announcement 2011-36.”

Additionally, the AICPA released a separate letter to Ms. Lois Lerner, the IRS Director of Exempt Organizations, which provides the AICPA’s current year comments on Form 990 and its instructions. These comments were developed by an AICPA Task Force of practitioners serving tax-exempt organizations and approved by the AICPA’s Exempt Organizations Tax Technical Resource Panel. As such, they are based on hands-on practitioner experiences and describe issues seen in the real world application of the new form. AICPA comments are in the form of a table with issue areas referencing the IRS form or schedule section and line number. Each weights the items by their importance and urgency, and describes the issue and a potential suggested resolution. Items addressed include straightforward matters such as uncertainty of the inclusion of unpaid board members under the definition of total number of “volunteers” on Part I, line 6, to more complex matters requiring theoretical analysis such as disclosures regarding significant dispositions of assets, relationships, and policy matters. Some questions also focus on issues arising from differences between financial statement and tax reporting of contributions, fundraising, and expenses, and the desire to include nonmonetary items in disclosures.

It is expected that the IRS will take into consideration comments from the AICPA and others responding to IRS Announcement 2011-36, as well as other public and private comments such as the IRS letter to Ms. Lerner when considering future revisions and guidance on the Form 990. All comments under Announcement 2011-36 were due to the IRS on or before August 1, 2011, and will be open for public inspection.