IRS Releases Revised Form 990 for 2008; Announces Transitional Relief for Smaller Organizations

December 21, 2007

On December 20, 2007, the Internal Revenue Service released the final version of the revised Form 990. The final version released yesterday incorporates some of the 650 comments received in response to a discussion draft released on June 14 of this year. Exempt organizations are to use the revised form for the 2008 tax year (returns filed in 2009). The Internal Revenue Service expects to release instructions for the new Form 990 early in 2008.

Highlights of the differences between the final version and the June 14 discussion draft are listed below:

• The Statement of Program Service Accomplishments to the first page.

• Questions regarding general activities and tax compliance are consolidated.

• Questions regarding executive compensation, governance and other financial statement information questions are moved to the back of the form.

• A new Schedule O allows additional space for supplemental information.

• The electronic version of the final form will allow inclusion of additional explanatory material.

• The financial ratios included on the first page of the discussion draft have been eliminated. The final form elicits information regarding revenues and expenses for the prior and current year.

• Part VI requests information regarding management and the governing body, but notes that the responses to many questions are not legally required.

Of particular interest to hospitals, the Internal Revenue Service announced that the new Schedule H will be phased in over a two year period. For returns related to the 2008 tax year (returns filed in 2009), Part V is the only portion of Schedule H required to be completed. Part V requests information on the types of services provided by the hospital. The remaining parts of Schedule H are optional. Completion of all parts of Schedule H is required for the 2009 tax year (returns filed in 2010). The final version of Schedule H also eliminates the "Billing Table" contained in the discussion draft. The Billing Table required a hospital to provide information regarding gross charges, discounts, expected collections and actual collections for various payors, including Medicare, Medicaid and other government programs, and insured and uninsured patients.

As with Schedule H, Schedule K relating to tax-exempt bonds will be phased in as well. For the 2008 tax year, organizations are required to complete only Part I which requests basic information regarding outstanding bond issues. All other parts are optional. Completion of the entire schedule is required for the 2009 tax year.

For smaller tax-exempt organizations, there is a transition period allowed for use of the final Form 990. During the transition period, smaller organizations will be allowed to file the Form 990-EZ instead of the Form 990. The phase in of the new form is tied to an organization's gross revenue or assets. For the 2008 tax year (returns filed in 2009), organizations with gross receipts over $1.0 million or total assets over $2.5 million will be required to file the Form 990. For the 2009 tax year (returns filed in 2010), organizations with gross receipts over $500,000 or total assets over $1.25 million will be required to file the Form 990. Beginning with the 2010 tax year, organizations with gross receipts over $200,000 gross receipts or total assets over $500,000 total assets will be required to file the Form 990. Finally, organizations with gross receipts of up to $50,000 will be allowed to file the new Form 990-N (a/k/a, the "e-Postcard"), an increase from $25,000 for the 2007-2009 tax years.

The revised form and its schedules may be viewed at the following address: www.irs.gov/charities/article/0,,id=176637,00.html