Annual Returns and Inspection Rights

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Most organizations that are tax-exempt under Sections 501(c)(3) or (4) must file annual information returns with the IRS on Form 990 except that (i) private foundations are required to use Form 990-PF, (ii) organizations with less than $1,000,000 in gross receipts and less than $2,500,000 in total assets may use Form 990-EZ, and (iii) small tax-exempt organizations (less than $25,000 in annual gross receipts) only need file an annual "e-post card."  Unrelated business income over $1000 in a taxable year must be reported on Form 990-T.

 Form 990 has a new section on governance and disclosure requirements.  This section asks organizations to answer questions on whether they have adopted policies on conflicts of interest, whistleblower protection, document retention and destruction, gift acceptance, executive compensation and joint venture participation.  While the IRS does not require organizations to adopt these policies, not having them could trigger enhanced scrutiny by the IRS. Forms 990, 990-T, 990 PF and 990 EZ are available at http://www.irs.gov/pub/irs-pdf/f990.pdf and http://www.irs.gov/pub/irs-pdf/i990.pdf.

The annual information returns and the application for tax-exempt status, together with related correspondence and documents, that have been filed by a tax-exempt organization with the IRS must be made available by that organization for public inspection and copying at its principal office and any regional offices. While the organization is allowed to withhold from public inspection the names and addresses of its contributors (if it is a public charity) and patents and trade secrets, it must disclose all other information including the compensation of its 5 highest-paid employees. An organization may meet the public inspection requirement by making the returns available on its website.

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