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IRS Updates, May 2008: Intermediate Sanctions, Instructions for Filing the New Form 990, and Mor

Final Regulations on Intermediate Sanctions

If your organization is still struggling to understand fully the definition and implications of excess benefit transactions, take note. The IRS has issued its final regulations on intermediate sanctions, the penalty imposed on nonprofits that are deemed to have overcompensated CEOs, board members, and other "disqualified" individuals specified in the regulations. Rather than enacting substantive changes to the proposed regulations set forth in 2005, the final document attempts to clarify complex issues with specific examples and to serve as a guide for potentially troubled organizations.

Among other points, it emphasizes that any reasonable attempts at enacting safeguards against excess benefit transactions will be treated as a favorable factor if transactions are later deemed to be excess benefit transactions. Self-identification of excess benefit transactions and the implementation of corrective measures before the IRS becomes involved are also factors that the IRS will take into account when deciding whether or not to revoke tax-exempt status because of excess benefit transactions.

Draft Instructions for the New Form 990

A draft of the instructions for completing the redesigned Form 990 has been released by the IRS and is now open for comments from the public. Enhanced with such features as a glossary of terms and a table for determining how and where to report various forms of compensation, the instructions also include a line-by-line breakdown that guides filers through each question of the form and its attached schedules.

In the interest of increasing clarity and reducing complexity, the IRS is now soliciting comments on all aspects of the draft instructions. The IRS has also included with the draft a list of items within the instructions that the service is especially interested in receiving feedback on. Comments will be accepted until June 1, after which time they will be posted on the IRS Web site.

Requesting a Form 990-T

The IRS has also recently released an announcement outlining the procedure required to request a copy of Form 990-T, the form 501(c)(3) organizations file to report unrelated business income. Forms that were filed after August 17, 2006, are available for public inspection upon request, as dictated by the Tax Technical Corrections Act of 2007. In order to request a Form 990-T, members of the public must fill out a Form 4506-A and mail or fax it to the IRS. More information >

E-Postcard FAQs Updated

Finally, for those small organizations now required to file a Form 990-N, also known as the e-Postcard, the IRS has posted an updated list of FAQs. These questions cover basic information, such as "Who must file the Form 990-N?" and "What information do I need to provide on the e-Postcard?" as well as more specific topics.

Patrick Ferraro
© 2008, Philanthropic Research, Inc. (GuideStar)

Patrick Ferraro is a freelance writer in Seoul, Korea, and a former editor of the Newsletter.
Topics: Law and Regulations