IRS Releases FAQs Clarifying 2006 Form 990 For Exempt Organizations

On April 26, the Internal Revenue Service (IRS), in a significant tax planning and governance development for exempt organizations, released new "FAQs" supplementing the instructions for the 2006 Form 990 (that is, the Form 990 used as the tax return for the fiscal year beginning in 2006). This new informal guidance from the IRS provides additional clarity on the controversial new Form 990 questions relating to board structure, when to report compensation for directors and officers who have relationships with other organizations, how to report compensation for all "disqualified persons," and relationships between directors, officers and other insiders (the notorious line 75b).

This development is relevant to all Section 501(c) organizations, including those recognized as exempt under Sections 501(c)(3), (c)(4) and (c)(6). Many organizations with tax years in the months ending July through December are just now filing their Forms 990 for the tax year beginning in 2005, and as a result