The 2011 Form 990: More than Simple Tinkering at the Margins


While recent changes to the Form 990 make it more reader friendly, filing organizations must carefully review it for substantive changes to determine the impact on their reporting requirements, particularly tax-exempt hospitals filing Schedule H.

On January 21, 2012, the Internal Revenue Service (IRS) released an updated Form 990 for fiscal year 2011 (i.e., forms for fiscal years beginning on or after January 1, 2011, to be filed in 2012). This version is more reader friendly, resizing questions to fit on one line of text, eliminating redundancies and trimming “of” phrases. Substantively, the revised form updates financial datareporting requirements for joint ventures and investment partnerships, clarifies governance and compensation disclosures, and expands Schedule H reporting for tax-exempt hospitals. These changes modify or clarify various reporting items as the exempt organization sector grows increasingly familiar with the redesigned 990 format. Filing organizations should evaluate the changes to Form 990 and determine the impact on their reporting requirements.

Financial Reporting of Joint Ventures

An organization must proportionately report the activities of a joint venture, partnership, limited liability company or any entity treated as a partnership for federal tax purposes (collectively, a “joint venture”) as its own activities based on its ownership interest in the entity. On prior forms, organizations could rely on their own books and records to report how joint venture activities affected their financial statements. Now, for Core Form, Parts VIII and IX, organizations must report their distributive share of joint venture income and expenses using Form 1065, Schedule K-1. Further, the instructions for Part X, Balance Sheet, Line 12, explain that the organization should report its distributive share of assets according to its ending capital account as reported on Schedule K-1. Filers should use information from the Schedule K-1 for the joint venture’s tax year ending with or within the organization’s tax year. If a Schedule K-1 is unavailable, the instructions to Schedule H permit hospitals to use other business records to make reasonable estimates, including the most recently available Schedule K-1. The IRS should consider adding such flexibility to the financial reporting requirements.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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