IRS Update

From the IRS comes this announcement:

IRS Sends Compliance Questionnaires to 400 Colleges and Universities
Approximately four hundred U.S. colleges and universities will begin receiving compliance questionnaires from the Internal Revenue Service in the next few days as part of the agency’s focused effort to study key areas in the tax-exempt community. The college and university questionnaire will focus on unrelated business income, endowments and executive compensation practices. The questionnaires are being sent to a cross-section of small, mid-sized and large private and public four-year colleges and institutions.

Private nonprofit universities are generally exempt from tax under Internal Revenue Code section 501(c)(3) and like state universities are to unrelated business income tax.

Click here to read the rest.

This is part of a new compliance project for colleges and universities by the IRS. Will this effort by the IRS broaden out to other 501(c)3 organizations? Probably. I think they are looking at the biggest fish first but I'll bet it is just a matter of time until more of these types of letters will be sent.
Are there any lessons to be learned here? I think two at least:

• I'd say make sure that if you are doing any activities that might generate unrelated business income you should learn the rules (link opens a PDF) that apply.
• Make sure your salaries are justified.

Probably making sure your ready in general for the new 990 reporting will help as well.

Public Inspection of Form 990-T

And other things from the IRS.

This week guidelines were released on how to request a copy of the form 990-T which is now a publicly available document. The 990-T is used to report a nonprofit organization unrelated business income (which is taxable income).

Below is an excerpt from this PDF:

The Tax Technical Corrections Act of 2007, Pub. L. 110-172, H.R. 4839, provides that
the Internal Revenue Service is required to make Forms 990-T that are filed by a section 501(c)(3) organization publicly available for inspection and copying pursuant to section 6104(b). This provision is effective for returns filed after August 17, 2006, the date of enactment of the Pension Protection Act of 2006, Pub. L. 109-280 (PPA).

Form 4506-A, Request for Public Inspection or Copy of Exempt or Political Organization IRS Form, is used to request from the Internal Revenue Service a copy of an exempt or political organization’s return, report, or notice pursuant to section 6104(b). The Form 4506-A does not currently contain a check box for a Form 990-T, although the Internal Revenue Service is in the process of revising the Form 4506-A to include this provision. If you want to inspect or copy a Form 990-T that was filed after August 17, 2006, please mail or fax a copy of the Form 4506-A to the Internal Revenue Service following theinstructions for that form. In line 7 of the Form 4506-A, however, please write in “Form990-T”.

A Copy of the Form 4506-A can be found here.

The IRS also updated it's Form 990-N FAQ's, click here to check them out.

990-T Disclosure Rules

I have mentioned this before but it looks like there is new guidence out there for how it will work.

The Internal Revenue Service recently issued interim guidance (Notice 2007-45) regarding the public disclosure of Form 990-T by tax-exempt organizations. The new disclosure requirements were initially set forth in the Pension Protection Act of 2006; Notice 2007-45 now provides the following additional specifics:

• The new Form 990-T public disclosure rules apply to all Forms 990-T filed after August 17, 2006
• The public disclosure rules for Form 990-T are the same as they are for Form 990
• Any religious or governmental entities not currently required to file a Form 990, but who file a Form 990-T, are required to publicly disclose their Form 990-T
• The Internal Revenue Service will not be making copies of the Form 990-T available to Guidestar
• The tax-exempt organization is not required to put a copy of the Form 990-T on their web site
• Tax-exempt organizations preparing a Form 990-T solely for purposes of claiming the telephone excise tax refund are not required to make such Form 990-T available for public inspection

Thanks Brian for the heads up!

New Tax Law Changes: The Pension Protection Act of 2006 (H.R. 4)

Here is the latest information from CAN's Public Policy Update, which you can subscribe to here if you are so inclined, From our Public Policy Director Ken Larsen. There are some big changes that will affect our reporting.

The Pension Protection Act of 2006 (H.R. 4) contains numerous changes to the federal laws affecting tax-exempt organizations. To help nonprofits and donors to be in compliance, the IRS has posted guidances on its web site (http://www.irs.gov/charities/article/0,,id=161145,00.html).

Key provisions of the legislation include the following:

• Section 501(c)(3) organizations that file unrelated business income tax returns (Forms 990-T) must now make them available for public inspection.
• Private foundation and excess benefit penalty excise taxes are doubled.
• Beginning in 2008, exempt organizations with gross receipts under $25,000 must file an annual notice with the IRS.
• Controlling organizations must report income from and loans to controlled organizations as well as transfers between controlled and controlling organizations. This provision is effective for returns due (without regard to extensions) after the date of enactment.
• Donor advised funds, supporting organizations, and credit counseling organizations are subject to new requirements.
• Supporting organizations that want to change their public charity classification should follow the procedures outlined in Announcement 2006-93.
  
• Notice 2006-109 provides interim guidance on issues affecting supporting organizations and sponsoring organizations of donor advised funds.
• Individual Retirement Account (IRA) owners age 70 ½ or older are permitted to directly transfer tax-free, up to $100,000 per year to an eligible charity. Notice 2007-7 clarifies several issues related to this provision.
• Charitable contribution deductions for food, book, and certain conservation property are increased.
• Charitable contribution deductions for monetary donations, certain easements, taxidermy property, clothing and household goods, and certain other items are limited.
• Notice 2006-96 provides guidance regarding appraisal requirements for non-cash charitable contributions, including transitional guidance relating to the definitions of qualified appraisals and qualified appraiser.
• Notice 2006-110 provides guidance on new recordkeeping requirements for charitable contributions made through payroll deductions.
• The IRS highlighted changes that may affect charitable giving in News Release IR-2006-92.