The good news for nonprofits from the IRS is two-fold: the new Form 990 will be phased in over three years, beginning with 2008; and controversial ratios were dropped from the final form.

Smaller nonprofits will only have to file the Form 990-EZ until the 2010 tax year. At that time, nonprofits with less than $50,000 annual revenue will file the new Form 990-N. Previously, nonprofits with less than $25,000 annual revenue did not have to file anything.

Originally, when the draft of the new Form 990 was released last June, it required charities to disclose additional information such as the ratio that compared top staff salaries with total expenses, and the ratio that compared fund-raising expenses with total contributions. Those requirements have been dropped from the final version.

Not everybody is happy about that however. Senator Charles E. Grassley, Republican from Iowa, has said that the elimination of those ratios waters down the new form's impact to the detriment of donors. Sen Grassley said:

“I just submitted testimony at a House hearing on veterans charities that spend more money on salaries and fund-raising than helping veterans....The IRS easily could have done more to help donors readily understand where their money goes.”

For more information on the Form 990:

• IRS Releases Final 2008 Form 990 for Tax-Exempt Organizations, Adjusts Filing Threshold to Provide Transition Relief (News Release, IRS Website)
• IRS Gives Small Groups Grace Period for Filing New Form 990 (Chronicle of Philanthropy - subscription may be required)
• Things You Need to Know About Form 990 (About.com)

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