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March 2011 Focus On The 990 (3)

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Hot Topics: the 2010 IRS Form 990

Hot Topics: the 2010 IRS Form 990


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  • Transcript

    • 1. The New 990— Hot Topics and Current Issues Special Issues Relating to Governance and Compensation Reporting for Nonprofit Organizations March 3, 2011
    • 2. Speakers
      • Cynthia R. Rowland
      • Coblentz, Patch, Duffy & Bass
      • (415) 772-5747
      • [email_address]
      • John Panetta
      • Burr Pilger Mayer
      • (415) 288-6256
      • [email_address]
    • 3. Overview
      • History of Recent Revisions to the 990
      • Which one?
        • 2010 2011
        • 990 N “Postcard” - < $25,000 < $50,000
        • 990 EZ Receipts - $25,001-$499,999 $50,001-$199,999
            • Assets - <$1,250,000 <$500,000
        • 990 Receipts - > $500,000 > $200,000
              • Assets - > $1,250,000 > $500,000
        • 990PF Always Always
    • 4. Hot Topics for 990 Filers
      • Governance Issues
        • IRS Objectives
        • AG’s views
      • Compensation Issues
        • Roadmap to 990 and Schedules
        • Compensation Analysis
    • 5. Charity Governance on the 990
      • Part VI
        • Section A: Governing Body and Management
          • Independence of Board Members
          • Family & Business Relationships
          • Changes to Governing Documents
          • “ Material diversion” of Assets
        • Section B: Policies
          • Conflict of Interest, Whistleblower, Record retention
          • Determination of Compensation; Joint Venture Policy
        • Section C: Disclosures
          • Availability to Public of Governing Documents
    • 6. Section A: Governing Body and Management
        • Independence of Board Members (reflecting 990-definition of “independence”)
          • Not compensated by filing or related organization
          • Paid $10,000 or less by filing or related organization as an independent contractor, and
          • Member or a family member not required to report a transaction with filing or related organization on Schedule L – excess business transaction, loan, grant,
        • Family & Business Relationships amongst Managers
          • Family = spouse, siblings, children, grandchildren, great grandchildren + spouses of all
          • Business relationship = one employed by the other, or one does business with another for over $10,000 (if not in the ordinary course of the first person’s business)
          • The two are ODT or >10% owners of a business or investment entity
    • 7. Section A (continued): Governing Body and Management
        • Delegation of Authority by the Board
        • Changes to Governing Documents
        • Fact that there has been “Significant diversion” of Assets
        • Rights held by “Voting membership” (also, Description of Members, even if Non-voting)
    • 8. Section B: Policies
        • Oversight of 990 review process by Board/managers
        • Conflict of Interest (“COI”) policy enforcement/management
        • Nature of Inputs for Compensation-setting on CEO/Executive Director, along with other Officers and “Key Employees”
        • Whether organization employs Whistleblower and Record retention policies
        • Whether Policies are Employed to Protect Tax-Exemption if Engaged in Joint Ventures with Taxable Entities
    • 9. Section C: Disclosures
        • Governing Documents
        • COI Policy
        • Financial Statements
    • 10. Compensation on the 990
      • Part VII, Compensation Disclosure
        • Who : Officers, Directors, Trustees, “Key” employees(>$150K in Comp), Highly Compensated (>100K in comp) + Former OKHC + Former D or T (if >$10K in capacity as former D or T)
        • What : W-2/1099 Comp for Calendar year + Employer contribution to retirement plans + Employer paid health benefits + Other if over $10K (e.g. Employer provided housing, legal, financial, dependent care or adoption assistance) + Comp from “Related” Org if >$10K)
      • Schedule J
        • If above >$150K, then detail on Base + Bonus + Retirement/Deferred Comp + Non-taxable benefits + Severance + Change in Control payments + Longevity Awards
      • Schedule L
        • Loans – To/From Current or Former Officers, Directors, Trustees, Key Employees, Highly Compensated Employees, “Disqualified” Persons & Substantial Contributors
        • Grants – To Current or Former ODTK + Substantial Contributors + “Related” Parties; Reasonable Effort
        • Transactions – With Current or Former ODTK + Family Members (if >$10K/1% of Revenue); Reasonable Effort
    • 11. Part VII, Compensation Disclosure
        • Who :
          • Officers, Directors, Trustees,
          • “ Key” employees(>$150K in Comp),
          • Highly Compensated (>100K in comp)
          • Former Officer, Key Employee, or Highly Compensated
          • Former Director/Trustee (if >$10K in capacity as former D or T)
        • What : W-2/1099 Comp for Calendar year + Employer contribution to retirement plans + Employer paid health benefits + Other if over $10K (e.g. Employer provided housing, legal, financial, dependent care or adoption assistance) + Comp from “Related” Org if >$10K)
    • 12. Part VII, Compensation Disclosure
        • What :
          • W-2/1099 Comp for Calendar year
          • Employer contribution to retirement plans
          • Employer paid health benefits
          • Other if over $10K (e.g. Employer provided housing, legal, financial, dependent care or adoption assistance)
          • Comp from “Related” Org if >$10K)
    • 13. Schedule J
        • If amounts exceed $150K, then detail on
          • Base
          • Bonus
          • Retirement/Deferred Comp
          • Non-taxable benefits
          • Severance
          • Change in Control payments
          • Longevity Awards
    • 14. Schedule L – Transactions with Interested Persons Part I – Excess Benefit transactions
      • A transaction whereby the public charity or social welfare organization provides value to a “disqualified person” greater than what it receives.
      • A Disqualified Person is one in a position to exercise substantial influence over the organizations, e.g. CEO, CFO, member of the Board. It also includes:
        • family members of a DP
        • an entity controlled 35% or more by the DP or a family member
        • a donor or donor advisor of a Donor Advised Fund (DAF)
        • an investment manager to a DAF.
      • Must report name of DP + description of transaction + whether the transaction was “corrected” + amount of tax imposed on DP or Org + whether tax was reimbursed by Org.
    • 15. Part II – Loans to/from Interested Persons
      • Interested persons for this section include:
        • current or former ODTK + 5 highest paid employees
        • for public charities and civic organizations, also DPs
      • Must report:
        • Name of IP = purpose of loan
        • Original amount
        • Balance Due
        • In Default + approved by Board + Written Agreement
    • 16. Part III – Grants Benefiting Interested Persons
      • Interested person for this section includes:
        • Current or former ODTK,
        • A substantial contributor (gave at least $5,000),
        • Member of grant selectio0n committee,
        • Family member of any of above,
        • Entity 35% controlled by any of above, and
        • Employee (or child of employee) of a substantial contributor or entity 35% controlled by a substantial contributor but only if the employee (or child) received the grant y direction of the substantial contributor or entity 35% controlled by the substantial contributor.
      • Report: name of IP + relationship to Org + amount and type of assistance.
      • Reasonable efforts to obtain this data (e.g. questionnaire) will be sufficient.
    • 17. Part IV – Business transaction Involving Interested Persons
      • Interested Persons for the section include:
        • Current or former ODTK
        • Entity 35% or more controlled by any of above or family member,
        • A non Tax –exempt entity in which a current or former ODTK serves as ODTK or partner/shareholder with >5% ownership interest.
      • Transaction includes contracts for services, sale, lease, license or joint venture where the IP holds >10% profits or capital interest.
      • Transaction thresholds = $10,000 or 1% of the Org’s revenue but must report if all transactions with an IP >$100,000 or compensation >$10,000 to family member of current or former ODTK.
      • Report name of IP, relationship of IP to Org, amount, description of transaction & whether the transaction involved a sharing of Org’s revenue
      • Reasonable efforts to obtain this data (e.g. questionnaire) will be sufficient.
    • 18. The New 990— Hot Topics and Current Issues Special Issues Relating to Governance and Compensation Reporting for Nonprofit Organizations