Spring 2012 issue of Horizons

• The 3-year phase in of the redesigned Form 990 is over. All not-for-profits with gross receipts over $200,000 or total assets over $500,000 are now required to file the full Form 990. The IRS plans to use the enhanced information provided in the form to guide its efforts to uphold transparency and stewardship of not-for- profits as further explained below. The 2012 Exempt Organizations Division Work Plan identifies areas on which the IRS will focus resources in 2012. These are in addition to ongoing responsibilities such as determinations and examinations. • Under the Pension Protection Act (PPA) of 2006, even not-for-profits with gross receipts under $25,000 are required to file an annual return or notice with the IRS. If a not-for-profit does not file for three consecutive years, under PPA, it automatically loses its exempt status. In 2011, the IRS published a list of the not- for-profits that had lost their status due to non-filing. In November 2011, there were approximately 380,000 not-for-profits on the list. The IRS has reached out to these organizations and provided information with respect to reinstatement and the transition relief that is available for certain small organizations. This transition relief has already been utilized by more than 5,000 organizations. The IRS plans to continue to reach out to the organizations whose status has been revoked. As mentioned above, the IRS plans to use information obtained from the newly designed Form 990 over the past three years to develop risk models which will enable them to focus their examination resources more effectively. Areas of focus will include: - Enforcing rules relating to political campaigns

The new Form 990 instructions do not appear to address this change in a consistent and concise manner. Note: The IRS subsequently announced on its website that new partnership reporting is “optional” for the 2011 tax year. • Contributions: Refunds of contributions or uncollectible pledges should no longer be shown as netted against revenue or shown as an expense item. Rather, such items should be reported as an “other change in net assets.” In prior years, only items such as unrealized gains and losses were presented as an “other change in net assets.” • Independent Status: Outside directors who are “key employees” of for-profit entities involved in Schedule L “business transactions” will no longer lose their independent status on account of certain transactions for goods or services in excess of $10,000. The IRS has reiterated that reasonable attempts should be made by exempt organizations to obtain information from third parties for other required disclosures on the Form 990. • Small Employer Health Care Tax Credit: Form 990-T was revised to enable eligible organizations to claim the small employer health care tax credit under Internal Revenue Code Section 45 R. In addition, RubinBrown has summarized some highlights from the 2011 IRS Exempt Organizations Division Annual Report: • The IRS continues to look for novel ways of accomplishing its mission while facing the same budget constraints as not-for-profits. • In fiscal year 2011, the IRS reviewed 14,893 returns, of which 11,699 were traditional examinations and 3,194 were “less resource- intensive” compliance checks. This compares to a total of 15,342 in fiscal year 2010 (11,449 traditional and 3,893 compliance) and 16,960 in fiscal year 2009 (10,187 traditional and 6,773 compliance).

and campaign expenditures, as well as reporting and payment compliance with Section 527(f), during this campaign year. (See related article on page 46.)

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