NACUBO Comments on Form 990

NACUBO Comments on Form 990

News story posted in IRS Announcements on 18 August 2011| comments
audience: National Publication | last updated: 18 August 2011


The National Association of College and University Business Officers (NACUBO) has submitted comments in response to IRS Announcement 2011-36 about Form 990, Return of Organization Exempt from Income Tax. NACUBO has made recommendations of relevance to colleges and universities and offered some general considerations related to the continued utility to the Service of information gathered on the Form 990.

Full Text:

August 1, 2011

Internal Revenue Service
Attn: Stephen Clarke (Announcement 2011-36)
SE:T:EO (3C1)
1111 Constitution Ave., N.W.,
Washington, DC 20224

Re: Announcement 2011-36

Dear Mr. Clarke:

On behalf of the National Association of College and University Business Officers (NACUBO), and the associations listed below, we submit the following comments in response to IRS Announcement 2011-36 about Form 990, Return of Organization Exempt from Income Tax. NACUBO is a nonprofit professional organization representing chief financial and administrative officers at more than 2,000 colleges and universities. We are grateful for the opportunity to provide input into the Service's considerations about changes to the Form 990.

This letter will address the specific issues raised in Announcement 2011-36 of relevance to colleges and universities, as well as offer some general considerations related to the continued utility to the Service of information gathered on the Form 990.

Specific Issues Set Forth in Announcement 2011-36

Activity codes. We recommend the removal of activity codes from the Form 990 entirely. The Service has acknowledged that existing codes do not reflect meaningful information about a filing organization's program services. The detailed descriptions provided in Part III, lines 4a-4c provide adequate information on program services.

Reporting compensation to management companies and leasing companies owned or controlled by directors, officers, trustees, or key employees. This information should be required in keeping with the objective of transparency around compensation. The information should be readily available to the exempt organization, in the contract or agreement with the management company.

Thresholds for reporting compensation. We recommend that the existing thresholds related to compensation be retained, but the Service may wish to consider future indexing for inflation. To address the concerns of small organizations that the threshold is too high to allow for desired transparency, perhaps IRS can provide an alternative requiring the five most highly compensated employees and independent contractors to be reported, regardless of the threshold.

Further, it would be beneficial and add clarity to provide a way for filers to explain instances when board members are compensated by the organization, however, unrelated to their service on the board. For instance, individuals serving on the boards of higher education institutions are typically not compensated for performing the governance role. However, faculty, staff, or student employees sometimes hold positions on college and university boards. Currently, the Form 990 does not enable the organization to distinguish that the compensation paid to those individuals is not related to their capacity as board members.

Net asset reconciliation. Since the net asset reconciliation is required to be reported in Part XI of the Core Form, Schedule D, Part XI is redundant and should be eliminated.

Reporting on audited financial statements. In the interest of greater transparency, we believe that it would be helpful to donors and other reviewers of the form to have additional information on the audit of the exempt organization's financial statements. For instance whether the statements were separately audited and whether the resulting opinion was qualified, nonqualified, adverse, etc.

Names and EINs of foreign grantees. Generally, the existing required reporting for Schedule F presents a significant administrative burden for universities with global activities. We strongly recommend against a requirement to report the names and EINs of foreign grantees on Schedule F. The disclosure of grantee names could needlessly jeopardize the confidentiality of sensitive operations as well as the safety of the grantees. Further, many foreign grantees do not have U.S. EINs.

Indirect foreign expenditures. We recommend against requiring this information. Indirect expenditures are rarely captured in institutional data bases, and overhead rates vary widely among institutions and organizations, based on a multitude of factors. Consequently, the resulting information would be inconsistent among institutions and of uncertain value to the IRS and the public. If the Service deems this information essential, it should be reported separately in a column clearly identified as indirect expenses with space to include an explanation about how the organization calculates or estimates these costs.

Also, Column F currently requires the reporting of a meaningless total combining expenses and book value of investments. We recommend these categories be separated for greater precision and clarity.

Reporting bank deposits as loans or business transactions on Schedule L. Routine banking transactions should not be reported as either loans or business transactions. This reporting requirement would add an administrative burden without adding substantively valuable information. Cash management strategies may move money daily for zero balance accounts. In cases where actual revenue or expense occurs, the transaction becomes reportable. Deposits in banks produce investment income which is a Schedule L transaction (if the ODTKE is involved).

Scope of related organization reporting on Schedule R. Most institutions find this schedule overly burdensome. In the case of a university, there may be numerous related organizations, but few with any substantive financial impact on the institution, such as student organizations, etc. We suggest a requirement for organizations to report the top five related organizations, based on revenue. Further, we recommend the following:

  • Eliminate the requirement to report Charitable Remainder Trusts (CRTs) in which filing organization holds a majority beneficial interest. The requirement to disclose CRTs and report related information, including name, address and EIN, could jeopardize donor confidentiality as the donor name is often included in the name of the CRT. Further obtaining certain financial information (e.g., share of total income, end of year assets, etc.) would be administratively burdensome.
  • Eliminate the requirement to report indirectly held majority-owned entities. Reporting information related to indirectly held entities may create confusion as the public may not recognize the duplicative nature of financial information reported with respect to both the directly held entity and its lower tier indirectly held entities.
  • Eliminate the reporting of names, addresses and EINs of foreign organizations from Schedule R, similar to Schedule F due to the concern that this disclosure could needlessly jeopardize confidentiality and safety related to these organizations.

General Considerations

We appreciate the Service's outreach to the regulated community and our opportunity to provide helpful insight and information as the Form 990 evolves over time to meet the needs of policymakers, donors, and the general public. We understand that the Service is aware of the enormous burden the expanded and redesigned form places on higher education institutions. The administrative onus of collecting and tracking data and preparing the annual Form 990 and attendant schedules is ongoing for colleges and universities. Moving forward as the IRS plans for future improvements and changes to the Form 990, we recommend focused reviews of the form based on some or all of the following considerations:

  • articulations of clear and specific purposes for requesting information;
  • ensuring information reported can readily be analyzed by the Service, donors, and other stakeholders in an unambiguous and meaningful way; and
  • identification of alternative data sources from which government agencies or other stakeholders can obtain or already obtaining the information.

If NACUBO can be helpful in any way or shed further light on these issues, please contact Mary Bachinger, director, tax policy, at 202-861-2581 or

              • Sincerely,

                John Walda
                President & Chief Executive Officer
                National Association of College
                and University Business Officers
                Washington, DC

NACUBO Tax Council

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