Summary of legal and legislative issues The heightened scrutiny of taxexempt organizations as reported in Giving USA 2008 did not wane during 2008, particularly as the United States entered one of its worst financial downturns in history. Congress, agency regulators, and the courts all took actions that were relevant to tax exempt organizations. Most notably, the Internal Revenue Service (IRS) continued implementation of provi sions relating to charitable organiza tions that were part of the Pension Protection Act (PPA) of 2006, and Congress extended some provisions related to charitable donations that were set to expire. While federal activi ties concentrated on efforts to monitor nonprofit organizations, state courts and legislatures addressed important topics, including a continued exami nation of compliance with state tax exemption laws, donor disclosure through public records laws, and the recognition of a new financial entity, the L3C.
Federal Activity
The effects of the PPA continued
to be felt in 2008. The PPA contained
a number of provisions for charity
reporting requirements that were
implemented or extended in 2008.
During 2008, several other federal
initiatives related to taxexempt
charities were also announced,
including new nonprofit investment
rules, scrutiny of large endowments
at colleges and universities, the return
of the “commensurate” test, and plans for future scrutiny of nonprofits.
Continued implementation of the Pension Protection Act The Pension Protection Act of 2006 triggered a redesign of Form 990, the annual return filed by many tax exempt groups. For many organiza tions, the revised form requires more detailed information about income and community benefit. The other significant change to annual filing requirements is the addition of a new electronic short form that must be completed by small organizations with revenues of less than $25,000. Under the new rules, small organizations previously exempted from regular filings must now file annual notice with the IRS.
The New Form 990: On December 20, 2007, the IRS released the final version of Form 990. The IRS claims the revisions are intended to improve transparency among exempt organiza tions, increase compliance, increase accountability, and reduce the filing burden on organizations completing the form. 1, 2
The new form consists of an 11page “coreform” section completed by all filers. 3 Further, there are 16 different schedules that address a number of issues including: political activity, lobbying, fundraising, charity gaming activities, foreign activities, grant making, compensation, loans, valuation of noncash contributions, and relation ships and transactions with other
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