Fred L. Somers, Jr., P.C. Part VI of the new IRS Form 990 required for use for the 2008 tax year requests information regarding an organization’s governing body and management, governance policies and disclosure practices. As observed in the instructions to the new form, although federal tax law generally does not mandate particular management structures, operational policies, or administrative practices, every organization is required to answer each question in Part VI. For example, all organizations must answer line 10, which asks about the organization’s process, if any, it uses to review the Form 990, even though the governing body is not required by federal tax law to review the Form 990. We recommend private club governing boards consider requiring the opportunity for review of the completed Form 990 by its board members prior to its filing. The review will serve as a reminder to board members that they are responsible for overseeing the continued qualification for exempt status of the club. Even though governance, management, and disclosure policies and procedures generally are not required under the Internal Revenue Code, the IRS considers such policies and procedures generally to improve tax compliance. The absence of appropriate policies and procedures may lead to opportunities for excess benefit transactions, inurement, operation for non-exempt purposes, or other activities inconsistent with exempt status. Whether a particular policy, procedure, or practice should be adopted by an organization may depend upon the organization’s size, type, and culture. Accordingly, it is important that each organization consider the governance policies and practices that are most appropriate for that organization in assuring sound operations and compliance with the tax law. The new IRS form 990 required for use for the 2008 tax year reporting requires tax exempt organizations including private social and recreational clubs, to answer "yes" or "no" as to whether they have five distinct policies in place. While not having all of these policies in place is not a disqualifier for continued tax exempt status, if a club responds "no" it could result in further inquiry or increase the chances of audit. The five policies are as follows: conflict of interest; whistleblower; document retention and destruction; policy on the process for determining compensation; and joint venture policy. We recommend 501(c)(7) social and recreational clubs consider adopting the five policies to the extent they do not already have them. We have templates of policy resolutions available for your use upon request. Flsdocs/clubs/policies/form 990 governance questions.120108 |
NEWSLETTER
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Fred L. Somers, Jr., P.C.
2 Ravinia Drive, Suite 1200
Atlanta, GA 30346-2130
770-394-7200
770-454-0138 fax
fsomers@somerslawfirm.org
Atlanta, GA 30346-2130
770-394-7200
770-454-0138 fax
fsomers@somerslawfirm.org
© 2008 Fred L. Somers, Jr., P.C.