The IRS has made some changes and additions to the form 990 to reflect changes made under the Tax Cut and Jobs Act passed in December 2017. Here is a summary of changes you need to know about:
- Excise tax on Executive compensation, part V. New section 4960 imposes an excise tax on an organization that pays to any covered employee more than $1 million in compensation or pays an excess parachute payment during the year starting in 2018. See sections 4960 and 4720 under the Internal Revenue Code for more information.
- Excise tax on net investment income of certain colleges and universities. New section 4968 imposes an excise tax on the net investment income of certain private colleges and universities. See sections 4968 and Form 4720 of the Internal Revenue Code.
- FASB changes, Part X. Instructions to form 990 reflect the financial statement reporting changes under Accounting Standards Update 2016-14, Presentation of Financial Statements of Not for Profit Entities, issued by the Financial Accounting Standards Board (FASB). The pronouncement changes the way not for profit organizations classify net assets.
- Increase in unrelated business taxable income by disallowed fringe benefits. For organizations that have employees, unrelated business taxable income (UBTI) reported on form 990-T is increased by any amount for which a deduction is not allowable because of section 274 and which is paid or incurred by the organization after 2017 for any qualified transportation fringe benefit under section 132(f) or any parking facility used with qualified parking under section 132(f)(5)(C).
- There has been an effort made to repeal this, and we will let you know if it happens. The easiest way to eliminate the UBTI is to eliminate the qualified parking benefit and pay additional compensation. The tax is only on the organization and not on the employees.
- Change to schedule B (reporting of donor information). A tax-exempt organization, other than a section 501© (3) organization or a section 527 political organization, is no longer required to report names and addresses of donors on Schedule B for tax years beginning on or after December 31, 2018. See Revenue Procedure 2018-38. This applies mostly to section 501©(4) organizations (social welfare) and section 501©(6) organizations (trade associations). However, 501(c)(4) and 501(c)(6) organizations must still keep a record of donors but are not required to include them with the return.
