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Form 990: The Public Window Into Your Nonprofit

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There are lots of reasons why your nonprofit’s annual IRS Form 990 is critically important. Chief among those reasons is that it is legally required that your organization file one each year. But another important consideration is the public transparency Form 990 provides your nonprofit.

Transparency Comes with the 501(c)(3) Territory

Operating a nonprofit is a lot like living in a house with floor-to-ceiling windows, but no curtains. Virtually everything you do is visible to the public, or at least it’s supposed to be. It is the grand bargain that comes with the privilege of being a tax-exempt 501(c)(3).

Obviously, you’re not likely going to be operating your programs in a fully-glass building. So practically speaking, how does this transparency manifest? There are a number of ways, but the most critical is your annual IRS Form 990.

What Form 990 Reveals About Your Nonprofit

Whether you are filing Form 990, 990-EZ, or 990-PF, each of these information returns are divided into sections, each one reporting specific things about your nonprofit’s most recently completed fiscal year. These sections include:

  1. Income and expenses by category
  2. Asset and liability balances
  3. The names and titles of officers, directors, and key employees
  4. The compensation amounts for the above
  5. Detailed descriptions of the nonprofit’s programs conducted in the reporting year, including how many people were served and how much income and expenses were allocated to the activity
  6. Fundraisers described and detailed by event, income and expense
  7. Lots of yes/no/explain questions about your compliance with certain issues
  8. Investment related activity
  9. Grants given
  10. Grants received
  11. If you’re a public charity, a break-down of your past 5 years of revenue by category, and the resulting public support test calculation
  12. If you’re a private foundation, a complex calculation of your asset base subject to annual distribution requirements
  13. And much, much more!

Like I said, it’s a lot. If your organization brings in $200,000 per year or greater and subsequently files the full Form 990, you potentially have sub-schedules A through O to think about in addition to the core Form 990. I have seen final returns exceed 50 pages for larger organizations.

What’s not included is Schedule B of Form 990/990-EZ, which reports details of gifts of $5,000 or greater. The IRS allows this data to remain private, though some states, like California, are trying to make that information public, as well. As you can imagine, there’s a huge fight going on over that particular issue.

How Is Form 990 Data Made Public?

I’m glad you asked!

In the past, Form 990 data was collected from the IRS each year by the nonprofit organization called Guidestar. One of Guidestar’s purposes is make such data readily available to the public, so that anyone interested can go see what a particular charity is up to financially and with regard to their activities. Unlike services such as Charity Navigator, Guidestar does not make subjective judgements or rankings based on the data… it simply reports it.

Starting in 2016, the IRS began making this data available at IRS.gov, as well. You can search there by the name or EIN number of the charity, and review the most recently filed tax years’ returns.

Are There Exceptions?

In case you’re wondering, there is no “opt-out” available. As stated above, if your organization is required to File Form 990, 990-EZ, or 990-PF, your return will be made publicly available on both Guidestar and the IRS website.

But, there are exceptions to this transparency, namely:

  1. Churches, and
  2. Public charities with less than $50,000 per year in annual gross revenue

Churches, while being 501(c)(3) public charities, have always been exempt from filing Form 990. As such, virtually no churches file one. That doesn’t mean, however, that their financial activity is exempt from transparency. Churches are required to provide financial reports upon request to those who ask and have standing to inquire.

As for the second category, the micro-charity, those nonprofits file the electronic Form 990-N e-postcard. Both Guidestar and the IRS will report that those returns have been filed. But, because there is no financial or other data provided, there is really nothing for a member of the public to see, other than that fact that they were filed.

Conclusion

Most nonprofits are well aware of their requirements to file Form 990.  What many fail to appreciate, however, is the fact that they live in a glass house. Filing an accurate and timely return is critical, as the public has full visibility into your living room… metaphorically speaking, of course.

If you need help with your Form 990 filings, let us know. Our Compliance Team would love to help!

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Greg McRay, EA

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

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