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IRS
Rewrites 2008 Tax Return
The
IRS recently released a new Form 990, Return of
Organization Exempt from Income Tax, that charities
will be required to file for the 2008 tax year.
The redesigned Form 990 is dramatically different in
many respects. Most notably, it will affirmatively
ask whether your board of directors has adopted written
policies regarding the following:
-
Conflicts of Interest;
-
Whistleblowers;
-
Document Retention and
Destruction;
-
Executive Compensation;
-
Joint
Ventures (if you participate in joint venture
arrangements);
-
Expense Reimbursements (specifically
addressing certain luxury services);
and
-
Gift
Acceptance.
On
October 1, 2008, Ron Schultz, a senior IRS official,
described a multi-step compliance effort with respect to
the new Form 990, noting that the first step will be to
"make sure [charitable organizations] have [the]
policies." In describing the new Form 990, Mr.
Schultz emphasized that a focus upon governance,
compensation and insider transactions "are the guts of
this form."
It
is important to note, that the IRS does not have the
authority to mandate that an organization adopt these
written policies. However, while we cannot predict
with any level of certainty how the IRS and general
public will react, we believe that responding on Form
990 that an organization does not have these written
policies could increase your IRS audit risk and could be
perceived negatively by the general public as they
review the organization's Form 990, which is publicly
available.
In
order for an organization to be able to report that
these policies are in place on the 2008 Form 990, such
policies must be duly adopted by the board of directors
by the end of the taxable year (December 31, 2008 for
calendar year taxpayers). Following IRS and other
industry guidance, Ice Miller has developed model
policies that can be tailored to meet an organization's
specific needs. In order to allow adequate time
for board discussion, review and adoption, we recommend
that organizations begin to consider these new changes
now.
If
you have questions or need assistance on these matters,
please call Gina
Giacone or Marilee Springer
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