This Just In – IRS Form 990 Too Complicated (Duh!)
CCH’s Federal Tax Day newsletter recently dropped this bombshell of a news item on its subscribers: “Tax-exempt organizations complained about the difficulty of completing Form 990, Return of Organization Exempt From Income Tax, at a May hearing before the House Ways and Means Oversight Subcommittee. Industry officials told Subcommittee Chairman Charles W. Boustany Jr., R-La., that completing Form 990 requires too much detailed, and sometimes redundant, information…”
To which I reply: Why should tax-exempts be any different from the rest of us? A tax return is a tax return! We need a Congressional hearing to tell us this?
But seriously, from the moment I entered this profession, I have had trouble with the notion of tax exempt organizations filing tax returns. It all seems just a bit contradictory to me. Of course, the main purpose of such forms is not so much tax calculation but an effort to ensure that tax-exempt organizations are in fact tax-exempt and not just claiming to be. So the basic returns (form 990 for public charities and form 990-PF for private foundations) are really more regulatory compliance checklists than tax returns. Oh, these returns do provide financial data such as balance sheets and income statements, but as plain vanilla tax calculators – not so much. (Except, of course, for private foundations that are subject to a whopping 1% or 2% excise tax on investment income — and IRS better make sure that they collect these taxes or we may end up having to curtail vital governmental services in these great United States.)
But, protect the public these forms do – IRS can make sure that tax exempt organizations are who they say they are and that they are in compliance with the myriad regulations designed to protect the philanthropic public. As far as the rest of us are concerned – we too have the ability to check up on virtually any charity by viewing its 990 or 990PF online either at the charity’s website or at www.guidestar.org.
So, all kidding aside, these reports provide a valuable service for those who wish to invest in particular charities. Of course, like all financial reports, simplicity is not their overriding virtue — they are written not in English but instead in bureaucratic legalese, and it takes a fair amount of work for the casual reader to get through them in any sort of meaningful way. Think of them as a kind of prospectus for a tax exempt organization.
But because you can never tell a book by its cover (which is even harder in these days of Kindles and Nooks), this information is vital to the philanthropic investor. Just because an organization has a word like “Cancer” or “Youth” or “Jewish/Catholic/Protestant/Muslim” in its title does not mean that it is an efficiently run charity worthy of your support. Thankfully, the Internet has made the gathering of both qualitative and quantitative data about tax exempt entities far simpler and quicker that at any time in the past (thank you Al Gore!). Regardless of whether you have $10 or $10 million to invest/contribute, this data can help you make intelligent choices about which organizations deserve your support. In addition to an organization’s form 990, you can always read its annual report (often available at the organization’s website) or avail yourself of even easier-to-digest information from third party websites such as www.charitablenavigator.org, www.guidestar.org, or www.bbb.org.
Remember the old retailer’s slogan “An educated consumer is our best customer” – that slogan applies just as much in the marketplace of philanthropic choice. The information is out there. Use it or lose it.
