By now everyone knows that the IRS has adopted a new 990 Form. It has a series of questions that pertains to governance issues that are not legal requirements. The IRS went through an exhaustive process in developing the new form and maintained a website for months where anyone could post their comments. You can check out my post in August 2007 on this topic or my Fall 2007 Newsletter for more details.
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The Advisory Committee on Tax Exempt and Government Entities (ACT) which has a formal advisory role to the IRS has weighed in on the new 990 in a 112 page report:
Advisory Committee on Tax Exempt and Government Entities Report
Please note that this is the second of several reports included in this pdf file and begins on page 83 of the file. The report is entitled “The Appropriate Role of the IRS with Respect to Tax-Exempt Organization Good Governance Issues.” Here are some highlights:
ACT acknowledges the IRS’s legitimate interest in governance issues as they relate to compliance with the law and applauds the transparent and open process used to develop the new form. But it expressed concern and urged the IRS to approach governance with caution. First of all ACT recognizes that the same set of governance standards cannot be a one size fits all applicable equally to a small food pantry and large hospital yet the same questions apply to both. ACT challenges the premise that having specific governance practices results in greater compliance with tax laws. Some highlights of the recommendations include:
•The IRS should continue to work collaboratively with the tax exempt community in connection with its governance initiatives. Specific governance practices should be mandated only in limited circumstances.
•The closer the nexus to tax compliance, the more appropriate the governance inquiry or recommendation.
•The IRS should explain the specific relationship between tax compliance and each governance practice about which it is inquiring or which it is addressing.
•Consistency and fair treatment is critical.
•Education, implemented thoughtfully, is more appropriate than pressuring change.
The report makes it clear that ACT thinks that the attitude of responsibility and accountability in regard to governance is more important than complying with a list of practices.
The report acknowledges that governance is an appropriate issue in five points of contact with the IRS and provides commentary on each point of contact:
1.Creating standards for exemption
2.Determination of exemption
3.Examination or other compliance initiatives
5.Education and outreach
The report has extensive references including an IRS educational publication about the new 990 and the Independent Sector 2007 landmark report on good governance in 2007.
I may cover this in more detail in a newsletter later this summer but that enough for now. Whew!
Marion Conway Consulting