“The more we can use the Form 990 to figure out who needs our attention and who doesn’t, the less likely we are to show up on your doorstep when you are a compliant taxpayer,” said IRS Tax Exempt and Government Entities Commissioner Sarah Hall Ingram.

Speaking at a nonprofit governance conference cosponsored by the Independent Sector and IRS, Ingram also said it is too early to discuss trends, but IRS is exploring why some organizations have failed to answer new questions or fill out new schedules on governance on the revised Form 990.

“We would like to look a little more closely at the patterns on blank spaces,” she said, “and we will be talking with some folks on some of those.” The IRS may address the lack of compliance by talking to stakeholders, sending letters to charities, or adding clarifications to the instructions for the Form 990 for the coming year, she said, in case there is any “ambiguity” on whether IRS wanted something filled out.

Information provided by BNA.com – posted April 21, 2010

Please contact Tom Denson or Ginny Gunther at 804-747-0000 if you would like to discuss your nonprofit’s Form 990.

Generally speaking, most pass-through entities do not have income tax exposure as the income passes through to the shareholders.  However, we have seen that most of our clients’ pass-through entities are still being affected by FIN 48.  Documentation needs to be provided to substantiate that there are no uncertain tax positions.  Some positions that need to be considered are multi state nexus, exposure due to acquisition transactions and built in gains tax for S elections after a company had been a C corporation.  We are seeing these issues with our clients that have previously taken aggressive positions by not filing state tax returns or documenting fair market values in the year an S election was made.

Impact of FIN 48 on Nonprofit Organizations in 2009

Beginning in 2009 all exempt organizations became subject to FIN 48.   In applying FIN 48 to an exempt organization, the tax position in question could be the organization’s tax exempt status itself.  As the exemption is a tax position, there should be documentation that establishes the level of certainty of that position.  The organization’s Form 1023 or 1024, Application for Exemption, could confirm that the current activities of the organization are actually those which were stated in their application.   Other potential uncertain tax positions for exempt organizations could be unrelated business taxable income, alternative investments, and taxable subsidiaries.  FIN 48 is intended to promote transparency and must be adopted with the new Form 990, which was revised by the IRS to also promote greater transparency.

Do you have issues regarding FIN 48?

Have you taken uncertain tax positions such as not filing in states in which you have physical presence?

The number of participants in your plan determines whether your organization will be required to file audited financial statements for the plan.  “Large” ERISA-covered 403(b) plans (generally plans with 100 or more eligible participants) will be required to file audited financial statements.  “Small” 403(b) plans (generally fewer than 100 eligible participants) will be able to use a new Short Form 5500 and will not be required to have an audit of the plan’s financial statements.

For large 403(b) plans, there may be significant challenges in establishing the documentation needed for your first Form 5500 filing and the related audit requirements.  The AICPA’s Employee Benefit Plan Audit Quality Center has developed a 10 step guide for organizations to prepare for the upcoming changes “Section 430(b) Retirement Plans ~ Getting Started: Meeting the New Form 5500 Reporting and Audit Requirements.”