Today I attended an online seminar hosted by The Chronicle of Philanthopy: Make Sure Your Board of Directors Complies with the New Form 990.  Although this is a little ahead of our sequence over here at Tuesday, Inc., as T and I are just starting to think about forming a Board, it was worth the jump ahead into unknown territory.

Before I highlight some key takeaways (and there were many),  there is some preliminary information that may be useful to you, our readers:

What is IRS Form 990?

IRS Form 990 is the tax document that nonprofits file.   IRS made major changes to reporting requirements beginning for the filing of 2008 taxes, issuing the NEW Form 990.  I remember hearing murmurings about this being a big change, but honestly had no idea what the implications were until today.  

Apparently, as stated in the webinar today, this regulation “was driven of course by  some abuse [of compensation] around the country and some perception that governance needs to be much more active”. 

In short, the New Form 990 requires more disclosure of compensation and potential conflicts of interest. This information can be used by the IRS, obviously, but more importantly and more poignantly by funders and/or potential funders of an organization. The New Form 990 doesn’t just mean tighter tax regulation for nonprofits, it provides more transparency and accountability for compensation, and even changes in responsibilities for members of the Board.  Click here for IRS New Form 990 FAQs.

What does this mean for us and for you, our readers?

  • It is very, very, very important that compensation for your organization be considered “normal”. This means finding data for your industry or other nonprofits to make sure that compensation is within this somewhat ambiguous ‘reasonable’ and ‘normal’ range.
  • It is not necessary to have a separate committee review compensation, but it is critical to have the Board approve compensation.
  • The “conflict of interest” piece requires transparency to ensure that no member or Board Members serves to benefit financially from the orgnization. This doesn’t mean that members cannot provide a service to the organization for a fee, but that the fee must meet all scrutiny.

So, The New Form 990 is something to keep in mind long before your organization’s first tax season, as early as decided on organizational structure and thinking about potential Board Members.  Very good to know!  Thank you to The Chronicle of Philanthropy for another helpful discussion!

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