For the first time since 1979, the Internal Revenue Service (IRS) is revising Form 990, the annual return tax-exempt organizations use to report information about their operations. The IRS released a draft of the redesigned form for public comment on June 14.

After a preliminary review, AAM is concerned about the addition of a new Schedule M form, which is devoted to institutions' reporting of non-cash contributions. Schedule M is required of any nonprofit that reports more than $5,000 of non-cash contributions—such as donated works of art—on Form 990 in its statement of revenue. Among the information the IRS requests on the new schedule are the type of property, the quantity, the method of valuation and the dollar amount reported on the balance sheet portion of Form 990.

What is unclear from both Schedule M and its accompanying instructions is how the IRS will expect museums to report donations of objects that are destined for a museum's collection. For most museums, these objects are not considered financial assets, and value is assigned only for insurance purposes.

The IRS reports that less than 20 percent of the nonprofit community will have to complete Schedule M. However, AAM projects that the majority of actively collecting museums that make their acquisitions through private donations of objects will be faced with the prospect of filling out the new form, which can be confusing and will not necessarily aid the IRS in improving public transparency.

According to the IRS, the redesign of Form 990 is based on three principles:

• Enhancing transparency to provide the IRS and the public with a realistic picture of the organization
• Promoting compliance by reflecting the organization's operations so that the IRS may assess the risk of noncompliance
  
• Minimizing the burden on filing organizations

The redesigned form has increased from eight to ten pages and from two schedules to a series of fifteen. The core form includes a summary page to provide each organization's identifying information and a snapshot of its key financial, compensation, governance and operational information. As IRS Acting Commissioner Kevin Brown stated, "The new 990 aims to give both the IRS and the public an improved window into the way tax-exempt organizations go about their vital mission."

The IRS is soliciting public comments through Sept. 14 and aims to have the form ready for the 2008 filing year (returns filed in 2009). The redesigned form, instructions and background materials are available on the Charities and Nonprofits section of the IRS website.

As comments on the new form are collected, AAM will consult with the leadership of the Standing Professional Committees—in particular Museum Management, Development and Membership, Small Museum Administrators and Registrars—as well as lawyers from the Museum Attorneys Group on the proposed redesign. Through its membership in Independent Sector and other coalitions, AAM also will assess the views of other charities to identify areas of alignment and divergence with the changes.—Eileen Goldspiel

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