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Vol. 37, No. 1

Form 990: For foundations, it’s a yearly chance to shine

by Marilyn Cavicchia

It’s not hard to fill out form 990 for the IRS. Just give it to your accountant to complete, a day or two in advance of the deadline. Send it to the IRS, post it on GuideStar, put a hard copy in a drawer, and don’t think about it again until next year. Right?

Actually, said Janice E. Rodgers, a partner at Quarles & Brady who focuses on tax-exempt organizations, if your procedure for form 990 is that perfunctory, your organization is missing out.

Most people call form 990 a tax return, Rodgers told members of the National Conference of Bar Foundations, at the group’s Annual Meeting in Chicago this August. But a better way to think of it is the way the IRS itself refers to it: as “an information return.” That is, she explained, you are not just filling out a form to meet an IRS requirement. Instead, you are gathering important information about your organization—and you are presenting it in a way that calls attention to the organization’s good work.

You are required to give a copy of your 990 to anyone who asks for it, Rodgers said, noting that you can charge a small fee for hard copies. Technically, telling someone that the 990 is available on GuideStar does not fill the requirement, Rodgers said, but in most cases, the requester is satisfied with this direction.

It’s important to realize that the IRS is not the only one who sees your 990, Rodgers said. The press is well aware that the forms are available via GuideStar, and so are “sophisticated potential donors.” That’s why some organizations post their 990 on their own website as well as on GuideStar, though only the GuideStar posting is required.

Because of that wider audience, Rodgers said, “the purpose is not just to tell the IRS you are doing good work, but to broadcast it to everybody who might look at that return, and to get your message out.”

Put yourself in the spotlight

On the first page of form 990, there’s a space in which you can briefly describe your organization’s mission—and the key word is briefly, Rodgers said. Most organizations just cut and paste their entire mission statement into that two-line space, she noted; the problem is, most mission statements are longer than that. Whatever doesn’t fit into those two lines ends up in Schedule O, an area toward the end of the form for supplemental information and miscellany. Only a few people will bother to look at Schedule O.

That’s why the Chicago Bar Foundation puts a shorter version of its mission statement on page 1, Rodgers said. The top of page 2 gives a four-line space for the mission, she added; if you put the condensed version on page 1 and your official mission statement on page 2, you can avoid having any part of it end up in Schedule O.

Page 2 also has three large spaces to describe your major programs; Rodgers said this area is “probably the best sales piece” on the whole form because it’s “an opportunity to talk about your work and the impact of your work for the community.” Fill each space completely, she advised, rather than describing each program in a line or two—or worse, just filling in their names.

Another small, but powerful place to promote your organization is in a line on page 1 that asks for your total number of volunteers. Make sure you count everyone, including board members and those who serve on committees, Rodgers said, explaining that this number is a powerful way to show that your foundation is successfully engaging a lot of people.

Good governance

Another portion of the 990 asks about your organization’s governance practices. Part VI is divided into Sections A and B, the latter of which is not required by IRS code but is used to help determine which tax-exempt organizations to audit. The theory, Rodgers explained, is that organizations that are governed well are more likely to be tax compliant.

In Section A is a question about whether any officers, directors, trustees, or key employees have business or family relationships with each other. The latter is generally thought to apply only to immediate family, Rodgers said. This question is another reason it’s a good idea not to wait until the last minute to fill out form 990, she added—it’s tough to know for sure that there aren’t any such relationships unless you can directly ask the board about it. Rodgers recommended building in a procedure to ask the board this question each year, or including it as part of your conflict of interest procedure.

Speaking of conflict of interest, Rodgers stressed that the IRS considers this to be very important. Section B doesn’t just ask whether you have a conflict of interest policy and review it once a year; it asks whether you monitor and look for potential conflicts all year long.

Section B also asks whether you have a written whistleblower policy. If you’re going to have one, Rodgers noted, it’s important that it’s tailored to you rather than borrowed from someone else or pulled from a website. “As an attorney, I’d rather you have no whistleblower policy than one you’re not going to follow or that doesn’t work for you,” she said, adding that she feels the same way about document retention policies.

Any time the organization makes a significant change to its articles or bylaws, Rodgers advised, “think about putting a copy in the tax file.” Section A asks whether any such changes were made, and it’s important to have the information on hand when it’s time to fill out the form.

One thing that isn’t required but that Rodgers considers to be a good practice is to let the board see the 990 form in advance—not for their approval, but for their review. This is a great communication tool, she explained, and it is “appropriate and important” for the board to know what it is you plan to say about the organization.

Not everything is for public view

Even if you treat form 990 as a valuable public platform, there’s some information you should keep private, Rodgers said. A portion of the form called Schedule B asks for information about your major donors. The IRS requires this information, but it should not be included in the version you post on GuideStar—and you should check to make sure that it’s not, Rodgers stressed.

Keep on hand a copy of form 990 that is clearly designated as your public disclosure copy and that has no confidential information on it, so you’ll be ready any time someone asks for it, she recommended. Check your website and anything else that can be viewed by the public, Rodgers added, to make sure you’re not accidentally giving out information about your donors.

Don’t put Social Security numbers on your 990, she advised. The IRS has no authority to remove them, so once they’re on the form, that information is available for anyone to see.

Don’t just file it and forget it

Even with these cautions in mind, Rodgers reiterated, “This is a public relations document” and not something you file and forget. Form 990 is your chance to tell the public what you’re doing, to “advertise” your organization, and to make your board members aware of and “energized” by the foundation’s mission and the good work it does.

“Use it to your best advantage,” Rodgers said, and your 990 can help you get your message out all year long.