Published October 28, 2008

2008 Form 990 – Governance

2008 Form 990 – Governance Best Practices

The Internal Revenue Service (“IRS”) has revised Form 990 for the 2008 tax year. Pershing Yoakley & Associates (“PYA”) has identified a “Best Practices” approach for use by our clients and friends in preparing to use the revised form. This alert focuses on reviewing certain governance practices of the tax exempt organization.

Part VI – Governance, Management and Disclosure of the 2008 Form 990 requests new information regarding the filing organization’s governance practices. The information requested is not required by the Internal Revenue Code, but may be used by the IRS in a variety of ways, such as profiling an organization’s examination potential.

PYA recommends management study the questions contained in the revised Form 990, Part VI with a view towards revising existing policies and practices when appropriate. For example, a best practice organization may:

  • Ensure the governing board of directors has an “independent” majority
  • Adopt a written conflicts of interest policy at least as strict as the IRS model policy that is appropriately monitored and enforced
  • Maintain a written whistleblower policy
  • Maintain a written document destruction policy
  • Maintain a written policy that requires appropriate evaluation of significant joint venture investments that includes steps to safeguard the entity’s tax exempt status
  • Make certain documents (including its financial statements and conflicts of interest policy) available to the public
  • Make a copy of the annual Form 990 available to the governing board prior to filing
  • Document any family or business relationships that may exist among or between any of its officers, directors and trustees and the steps the organization undertakes to discover such relationships
  • Identify all “disqualified persons” as defined in the intermediate sanction (excess benefit) provisions of the Internal Revenue Code
  • Make use of the steps required to avail itself of the rebuttable presumption of reasonableness in all financial transactions with disqualified persons

If you have any questions regarding any of the issues raised in this alert or would like to understand how PYA can help your employer in the transition to the revised 2008 Form 990, please contact the experts listed below at (800) 270-9629.

WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT THE FOLLOWING DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, NOR RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW.  THE ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THE DISCUSSION.  EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

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