Executive Alliance letter to the IRS regarding 990 revisisions

Form 990 Redesign, ATTN: SE:T:EO

1111 Constitution Ave., N.W.

Washington, DC 20224.

By e-mail to Form990Revision@irs.gov

Thank you for the opportunity to comment on the proposed revisions to Form 990.

Executive Alliance is an educational organization supported by nearly 200 public charities, associations, foundations and individuals with an interest in strong and successful nonprofit organizations. Its programs include conferences, peer coaching circles, workshops, online and imprint communications, and small group conversations around issues of nonprofit excellence, management, accountability and effectiveness.  These activities are concentrated in the central Puged Sound region of Washington state and are often conducted in collaboration with other centers serving nonprofits in other nearby areas.

The Executive Alliance Public Policy group has examined the proposed new Form 990 and engaged in a lively and probing conversation about this project. We strongly support the goals expressed by the Internal Revenue Service as its guiding principles.

We are concerned that two of the proposed changes may lead to damaging misunderstandings and impair the usefulness of the new Form 990 in meeting those goals.

First, we urge that the ratios requested on lines 24, 25 and 26 of the front page of the Core Form be removed.  These ratios are difficult to calculate and subject to troubling misinterpretation when viewed by people who are not versed in the complexities of nonprofit operations and accounting.  The space currently reserved for these ratios could be put to better use for a brief presentation of the mission or key goals of the filing organization.

Second, we ask that Part III of the Core Form – dealing with Governance, Management and Financial Reporting – be re-arranged and re-labeled so that the questions which reflect preferred practices in the field are clearly identified as such while the two questions that are directly related to the enforcement responsibilities of the IRS – question 2 and the fourth and fifth lines of question 11 – are presented separately. We have no doubt that organizations that embrace the practices suggested by the questions in Part III are less likely to encounter difficulties or lapses in their operations.  But it is nonetheless important that an official government form not convey, even by implication, the suggestion that these practices are universally required. The risk is great that groups without a genuine commitment to good management will conform to the minimum extent necessary to be able to answer “yes” in all cases without addressing the underlying management challenges necessary to make an organization-wide commitment to performing in this way.

Again, we want to express our appreciation for the effort underway by the IRS to develop a more effective form for reporting on the operations and financial affairs of organizations exempt from federal tax by virtue of their charitable purposes.  We are pleased to have been offered an opportunity to comment on the proposed new form and submit our requests for changes from the draft proposals in the hope that we can contribute to the design of a Form 990 that will serve America’s nonprofits well for many years to come.

Sincerely,

Melany Brown

Executive Director