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Some Fundraising Concerns Addressed in New Form 990

(Jan. 14, 2008) The Internal Revenue Service (IRS) released a redesigned version of the Form 990 in late 2007 that addresses many of the concerns raised by AFP and other fundraising organizations.

A key change was the elimination of references and disclosures related to fundraising percentages and ratios on the core form and in Schedule G (relating to fundraising and gaming). In comments to the IRS, AFP had noted that such ratios were overly simplistic and not accurate indicators of an organization’s intrinsic worth and effectiveness.

In addition, the redesigned form incorporates a two-year summary of financial information comparing the current and prior years, giving donors and others a more accurate perspective of an organization’s financial situation. The IRS also reorganized the core from, including a description of an organization’s program service accomplishments on page 2 immediately after the summary.

The new Form 990, which be filed in 2009 for tax year 2008, can be found on the IRS website.

“We’re very pleased that the IRS listened to the concerns of the fundraising profession with regard to the issues, especially fundraising ratios,” said Paulette V. Maehara, CFRE, CAE, president and CEO of AFP. “These changes will provide the public with a more balanced view of a charity, allowing for the disclosure of both important long-term financial information and program achievements while eliminating ratios and other  information that may mislead donors.”

Fundraising and Gaming

Several concerns still remain with Schedule G, where the IRS has continued to lump fundraising and gaming activities together, despite the suggestions of AFP and other organizations. AFP argued that while both activities raise funds, the purpose of fundraising is to develop a relationship and cultivate donors while gaming is for recreation and entertainment.

In addition, the fundraising community proposed that the threshold for having to complete Schedule G, which is required if an organization spends more than $10,000 on “professional fundraising activities” or raises more than $10,000 from special events, should be raised to $50,000. However, the IRS raised the threshold to only $15,000.

Another concern is a section requiring the disclosure of governance provisions. While AFP supports effective and accountable governance for nonprofit organizations, it argued in its comments that the Form 990 was not the appropriate document to address governance and that the IRS’ reasoning was flawed.

“There are definitely some areas, such as Schedule G, where we will continue to work with the IRS and urge it to make changes,” said Maehara. “However, overall, we are grateful for the IRS' efforts to reach out to the charitable sector for input and its willingness to make changes.”

New Filing Thresholds

The IRS also has announced that it will be phasing in new threshold levels for filing the Form 990 over the next few years, allowing smaller nonprofit organizations to file easier and less complex forms.

For the 2008 tax year (returns filed in 2009), organizations with gross receipts of more than $1 million or total assets of more than $2.5 million will be required to file the Form 990. 

For the 2009 tax year (returns filed in 2010), organizations with gross receipts of more than $500,000 or total assets of more than $1.25 million will be required to file the Form 990. 

The filing thresholds will be set permanently at $200,000 in gross receipts and $500,000 in total assets beginning with the 2010 tax year. 

Also, starting with the 2010 tax year, the IRS will increase the filing threshold for organizations required to file Form 990-N (the e-postcard) from $25,000 to $50,000.

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