Tax-Exempt Organizations: Reporting Changes You Need to Know for 2011 Forms
The IRS recently released the 2011 Form 990, “Return of Organization Exempt From Income Tax,” and its Instructions. The 2011 Instructions include a host of clarifications for this annual information return that most exempt Code Sec. 501(c)(3) organizations must file to report gross income, receipts, disbursements, and other information the IRS requires.
Among the more significant changes included in the 2011 Form 990 instructions are:
- Foreign Activities
- The instructions to Part IV, line 14b, state that an organization must complete Schedule F, Part I, if it had foreign investments (valued at $100,000 or more) during the tax year.
- New instructions to Part IV, lines 15 and 16, clarify when the organization should complete Schedule F, Part II or III, based on grants outside the United States and inside the U.S. for foreign activity.
- Governance
- Part VI, line 1a, was modified to note that if the governing body delegated broad authority to an executive committee or similar committee, the filing organization must explain in Schedule O.
- Part VI, line 2, instructions exempt from reporting certain business relationships in which an officer, director, trustee, or key employee of the filing organization was a key employee of another organization.
- Compensation
- Part VII, Section A, instructions now clarify that reportable compensation for officers and employees include compensation reported in Form W-2, Wage and Tax Statement, box 1 or 5 (whichever amount is greater).
- Section B, line 1, clarifies that independent contractor compensation should be reported for the calendar year ending with or within the tax year.
- Joint Venture and Partnership Investments
- The instructions for Part VIII, Statement of Revenue, clarify that the organization’s distributive shares of investment income, royalties, and rental income from joint ventures should be reported on lines 3, 5, and 6, respectively.
- The instructions for Part X, Balance Sheet, line 12, clarify that the organization should report its distributive share of assets in any entities treated as partnerships for federal tax purposes according to its ending capital account in the partnerships as reported on Schedule K-1.
- In addition to the instructions for the 2011 Form 990 core form, the IRS has also released forms and instructions for all accompanying schedules. Some of the most notable changes are included in the 2011 Schedule H, Hospitals (applicable only for hospital organizations that operated at least one hospital facility during the tax year).
- Among the most significant changes included in the 2011 Schedule H and its instructions are:
- Part III, Bad Debt, Medicare & Collection Practices
- The draft instructions for Part III, Section A, eliminate the requirement that the reporting of bad debt expenses be at cost. In addition, the draft instructions eliminate the optional worksheet that previously was used to estimate the filing organization’s bad debt expense at cost.
- The draft instructions provide clarification for Part III, Section B, line 9a regarding the “written debt collection policy” and what should be included within the policy.
- Part V, Facility Information
- The draft instructions for Part V eliminate the “measured by total revenue per facility” ordering requirement and now permit the use of a “reasonable method” (for example, the number of patients served or total revenue by facility).
- Although the Community Health Needs Assessment (“CHNA”) questions in lines 1 through 7 remain optional for 2011 filers, the draft instructions for Part V, Section B, require the balance of questions be completed by all 2011 filers.
- The draft instructions for Part V, Section B, lines 9 and 10, now require filing organizations providing “No” responses to explain in Part VI what criteria the hospital facility used to determine eligibility for free or discounted care or affirmatively state that the hospital facility did not provide such care.
- The draft instructions for Part V, Section B, line 19 now request information regarding the “maximum amounts” that can be charged to Financial Assistance Policy-eligible (FAP-eligible) individuals.
- The draft instructions for Part V, Section B, line 21 have been narrowed to request information regarding whether the hospital facility charged any of its FAP-eligible patients an amount equal to the gross charge for any service provided to that patient.
If you would like to discuss the impact of these form changes on your organization, please contact PYA’s the experts listed below at (800) 270-9629.
