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Associations Now

Compensation Reporting in the New 990

ASSOCIATIONS NOW, December 2008 Intelligence

By: Charles F. Tate

Summary:
One of the most controversial changes to the redesigned Form 990 is the expanded disclosure of compensation of officers, directors, trustees, key employees, and highest-compensated employees in Part VII of the new form. These changes will be effective for the 2008 tax year (returns filed in 2009).

For some time now, the IRS and the public have been concerned about accurate and complete reporting of executive compensation, and the new compensation reporting is intended to provide what the IRS considers necessary information for tax compliance and transparency purposes.

The instructions for Part VII require the reporting of

  1. Current officers, directors, and trustees, regardless of whether they are compensated;
  2. The top-20, highest-paid key employees who received more than $150,000 in reportable compensation;
  3. The top-five, other highest-compensated employees (HCEs) who received more than $100,000 in reportable compensation;
  4. Former officers, key employees, and HCEs who received more than $100,000 in reportable compensation;
  5. Former directors and trustees who received more than $10,000 in reportable compensation for services in their capacity as a director or trustee.

Identifying who is reportable in Part VII depends on the position and when that position was held. A "current" officer, director, or trustee is a person who was an officer, director, or trustee at any time during the organization's tax year. On the other hand, a "current" key employee or highest-compensated employee is a person who was a key employee or highest-compensated employee for the calendar year ending with or within the organization's tax year.

The new compensation reporting can become complicated for organizations with multiple key employees and HCEs. The decision tree tools contained in the following pages should help you comply with these confusing new Form 990 requirements. But compensation reporting isn't the only part of the Form 990 that is changing; be sure to speak with your tax advisor early and often about the new Form 990 requirements to ensure that your association is prepared for them.

Charles F. Tate, CPA, is a partner with the accounting firm Tate & Tryon and coauthor of the book Guide to the 990, coming in early 2009 from ASAE & The Center. Email: ctate@tatetryon.com

CURRENT: Who Should Be Reported in Part VII?
BEGIN WITH
  • All officers, directors, trustees
  • All employees and independent contractors  
GROUP 1
  • Officers, directors, trustees
  • Top management official (CEO)
  • Top financial official (CFO)

REPORT THESE INDIVIDUALS ON PART VII REGARDLESS OF COMPENSATION  

GROUP 2

Persons with reportable
compensation* over $100,000

REPORTED IN PART VII IN THE REPORTING CATEGORIES BELOW, IN THE ORDER SHOWN  

GROUP 3 – KEY EMPLOYEES

Persons with reportable compensation* over $150,000 who:

  1. Have responsibilities, powers, or influence as a whole that is similar to those of officers, directors, or trustees; OR
  2. Manage a discrete segment or activity that represents 10 percent or more of the activities, assets, income, or expenses of the organization; OR
  3. Have or share authority to control or determine 10 percent or more of capital expenditures, operating budget, or employee compensation.

REPORT ONLY THE 20 HIGHEST COMPENSATED  

GROUP 3 – FIVE HIGHEST-PAID EMPLOYEES

Employees with reportable compensation* over $100,000

REPORT ONLY THE FIVE HIGHEST COMPENSATED  

Part VII, Question 2 asks for total number of individuals who received more than $100,000 in reportable compensation from the reporting organization only.

*From the reporting organization and any related organizations.

Former Officers and Key Employees: Who Should Be Reported in Part VII?

If not an officer at tax year end, did the individual serve as an officer at any time during the organization's TAX year?

If not a key employee at tax year end, did the individual qualify as a key employee during the CALENDAR year ending within the organization's TAX year?  

NOT REPORTABLE as "Former"
Did the former officer or key employee receive more than $100,000 of reportable compensation# during the calendar year ending within the organization's tax year?
NOT REPORTABLE
Was the person a an officer or key employee within the past five years?
NOT REPORTABLE

REPORTABLE

 
#From the reporting organization and any related organizations, during the CALENDAR YEAR ending within your organization's tax year.

Former Directors and Trustees: Who Should Be Reported in Part VII?
Was the individual a director or trustee at any time during the organization's tax year?
NOT REPORTABLE
Did the former director or trustee receive more than $10,000 in reportable compensation*?
NOT REPORTABLE
Was compensation paid in the capacity of a former director or trustee?
NOT REPORTABLE
Was the person a director or trustee within the past five years?
NOT REPORTABLE

REPORTABLE

 
*From the reporting organization and any related organizations.
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