The 2019 Form 990 contains key changes that not-for-profit organizations need to be aware of. This updated form will be utilized by calendar year organizations to report the activity for their 2019 tax year, and fiscal year organizations to report their fiscal 2020 finances (as the version of the form utilized is dependent on the year in effect at the onset of the fiscal year).
New Electronic Filing Requirement
Exempt organizations are required to electronically file Form 990 for tax years beginning on, or after, July 2, 2019. This means organizations with a calendar year end will need to electronically file their Form 990 for the 2020 tax year. There are a few limited exceptions to this requirement, including name change and short-year change of accounting period returns.
Form 990 Instructions Updates
The 2019 instructions for Form 990 contain the following adjustments:
- Due to the repeal of the qualified transportation fringe benefit tax, references to unrelated business taxable income (“UBTI”) regarding IRC Section 512(a)(7) have been removed from the instructions. This, in turn, caused them to change the references to Form 990-T line 39.
- Part VII, Section A: Additional guidance regarding the order of reporting compensation was included in the instructions. “List the persons required to be included in Part VII, Section A, in order from highest to lowest compensation based on the sum of columns (D), (E), and (F) for each person.” Organizations that preferred itemizing these individuals alphabetically or according to their respective titles should take note of this change.
Form 990 Filing
The Form 990 and applicable schedules are updated for the 2019 filing year as follows:
- Penalties for late/delinquent filing have been increased for the 2019 return filing.
While organizations will have their exempt status automatically revoked for three consecutive years of non-filing, there are significant penalties that can be assessed for late filing of any individual return as follows:
- A penalty of $20 a day, not to exceed the lesser of $10,500 (previously $10,000) or 5% of the gross receipts of the organization for the year, can be charged when a return is filed late.
- Organizations with annual gross receipts exceeding $1,067,000 (previously $1,046,500) are subject to a penalty of $105 (previously $100) for each day failure continues with a maximum penalty for any one return of $53,000 (previously $52,000). The penalty applies on each day after the due date that the return is not filed.
- Part IV, Checklist of Required Schedules, lines 26, 27 and 28 regarding related party transactions expands the individuals included in each question to include “creator or founder” or “substantial contributor.”
- This definition was modified to conform with the definition of “interested person” for purposes of Schedule L, Part II, to include: the creator or founder, a substantial contributor, a family member of an interested person, and a 35% controlled entity of any interested person(s).
- It should be noted that the Instructions to Schedule L define a “substantial contributor” as “an individual or organization that made contributions during the tax year in the aggregate of at least $5,000, and whose contributions are required to be reported on Schedule B.”
- Part X, Balance Sheet
- Line 5 regarding receivables from related parties and line 22 payables to related parties expands the question to specifically include “creator or founder, substantial contributor, or 35% controlled entity or family member of any of these persons.”
- Balance Sheet has been updated to include a line for net assets without donor restrictions and a line for net assets with donor restrictions to coincide with FASB ASU 2016-14, Not-for-Profit Entities (Topic 958) Presentation of Financial Statements of Not-for-Profit Entities. Previously this was categorized as unrestricted net assets, temporarily restricted net assets and permanently restricted net assets.
- Schedule B: The instructions state that under proposed regulations, only filers exempt under IRC Sections 501(c)(3) and 527 are required to report the names and addresses of contributors on Schedule B — all other filers may enter “N/A” in place of contributors’ names and addresses.
- Schedule E: Instructions have been updated to reference Revenue Procedure 2019-22, which modified Revenue Procedure 75-50 to include a third method for private schools to meet the racial nondiscrimination publicity requirement. “An organization may answer ‘Yes’ to line 3 if the organization has publicized its racially nondiscriminatory policy on its primary publicly accessible Internet homepage at all times during its tax year in a manner reasonably expected to be noticed by visitors to the homepage.”
Although there are relatively few changes to the 2019 990, there are some key additions and clarifications which adjust reporting requirements for this filing. Organizations should ensure that they are familiar with these as we approach 990 filing season.
Additionally, with the already severe penalties for late filing of Form 990 being increased, Organizations should ensure they are current with their required filings. For organizations that may have missed a filing, Mazars has extensive experience assisting with achieving and maintaining compliance with these requirements and can help your organization get back in compliance.
Please contact your Mazars USA LLP professional for additional information.