Issue

We continually get questions with regard to providing copies of Form 990 to your Board of Trustees and how to report this activity on Form 990, Part VI.

Situation

Saltwater Christian College (SCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  They are required to file Form 990 annually.  SCC provides a full copy of Form 990 to their Audit Committee and a copy of Form 990 minus Schedule B to the rest of the Board of Trustees.  Form 990 is reviewed by the CFO, SCC’s outside CPA firm who performs their audit and prepares the Form 990, and the Chairman of the Audit Committee.

They ask us if Form 990, Part VI, Line 11a should be answered, “Yes”.  We tell them that they would be required to answer “No” on this line because “a complete copy of the organization’s final Form 990 (including all required schedules), as ultimately filed with the IRS, was provided to each person who was a voting member of the governing body at the time the Form 990 was provided, whether in paper or electronic form, before its filing with the IRS.”

If you have to answer “No” at Form 990, Part VI, Line 11a, it is always good to include a narrative on Schedule O explaining what you do and/or why you don’t provide to the full board a full copy of the return. 

Rules

From Form 990 Instructions (Part VI, Line 11a):

Answer “Yes” only if a complete copy of the organization’s final Form 990 (including all required schedules), as ultimately filed with the IRS, was provided to each person who was a voting member of the governing body at the time the Form 990 was provided, whether in paper or electronic form, before its filing with the IRS. The organization can answer “Yes” if it emailed all of its governing body members a link to a password-protected web site on which the entire Form 990 can be viewed, and noted in the email that the Form 990 is available for review on that site. However, answer “No” if the organization merely informed its governing body members that a copy of the Form 990 is available upon request. Answer “No” if the organization redacted or removed any information from the copy of its final Form 990 that it provided to its governing body members before filing the form. For example, answer “No” if the organization, at the request of a donor, redacted the name and address of that donor from the copy of its Form 990, Schedule B…

Bottom Line

Some see a “stigma” attached to answering “No” to any of the questions in Form 990, Part VI, Section B, Policies (Lines 11a – 15b).  However, if your institution decides not to provide a complete copy of Form 990 to the entire Board, Line 11a must be answered “No”.  Talk with your experienced not-for-profit tax advisor about this.  Also, we will be providing insight on “governance issues” at the Tax Forum for Christian Higher Education on February 9, 2017 –  to find out more click HERE.

Specific questions? Email Dave Moja.

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.