November 2007

ARTICLE TOOLS

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The IRS has completed a draft revision of Form 990, the main document nonprofits file with the government. The redesigned tax form is expected to roll out in time for 2008 filings.

Proposed changes to the form are intended to increase transparency and accountability—both for the IRS and for donors—and to make filing simpler for nonprofits, according to the IRS website.

Ken Behr, president of the Evangelical Council for Financial Accountability (ECFA), said the IRS is also responding to the need for information on terrorist organizations' financing.

The new design expands the core form from eight pages to ten pages, and increases the number of supplementary charts from two pages to fifteen pages. Organizations' earning and spending information will be featured on a summary page in the new design.

The new form also requires a breakdown of executive compensation of more than $150,000. According to Charity Navigator, the average compensation for a charity CEO is $141,947.

Organizations like Charity Navigator, Guidestar, and Wall Watchers use the publicly available Form 990s to guide donors and evaluate nonprofits.

"Increased transparency is critical to maintaining the public trust on which nonprofit organizations depend to do their work in improving people's lives," said Diana Aviv, president and CEO of Independent Sector, a coalition of nonprofit organizations, in a statement.

However, Behr says that not all transparency is helpful. He is concerned about security for mission organizations. "The one issue that the ECFA continues to bring to the IRS's attention regarding the 990 is the redaction of information related to foreign activity, especially for ministries that are operating somewhat covertly, typically in Muslim lands. The government continues to want to have all of that stuff available to anybody."

Richard Hammar, senior editor of Church Law & Tax Report, said that many religious organizations—including almost all mission groups—have no reason to be concerned about the more detailed forms, because they are often exempt from filing Form 990s.

Churches, interchurch organizations, church-affiliated primary and secondary schools, and mission agencies do not have to file. However, nonprofit colleges and universities, nonprofit hospitals, charity organizations such as World Relief, and other Christian organizations must file annually.

Rusty Leonard, CEO of the watchdog group Wall Watchers, is enthusiastic about the changes. "There's no question that it was a step in the right direction," he said. "So three cheers for the IRS on this one. It was long overdue, but anything that increases transparency allows us as donor advocates to do our work for the average donor."

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