The 2005 Form 990 required executive compensation reporting for compensation paid by organizations with a "close connection." Because of several comments and questions the IRS received related to that standard, the IRS attempted to change the standard for 2006 for reporting related compensation by establishing eight relationships that would require some type of reporting. Of immediate concern for many organizations was Relationship #8, which required that the name and EIN of entities be reported where individuals were in a position of control in each entity.

For example, an individual that owned his own business that served as a volunteer board member of an organization would have been required to disclose the name and EIN of his business on the organization's Form 990. After the resulting uproar from the nonprofit community, the IRS released several changes to the 2006 Form Instructions, including withdrawl of Relationship #6 and #8 for reporting executive compensation paid by related organizations.

Organizations with more than $10 million of assets and filing at least 250 returns are required to efile Form 990 for 2006. If you are efiling your own 990, make sure that you register with the IRS for an Electronic Filing Identification Number (EFIN). It can take up to 6 weeks. Form 990T cannot be efiled.

On June14, 2007, the IRS released for public comment a discussion draft of a redesigned Form 990, Return of Organization Exempt from Income Tax. The discussion draft constitutes a significant redesign of the form, which has been revised only on a piecemeal basis since 1979. The new form consists of a 10-page "core" Form 990 with potentially 15 additional schedules. The IRS anticipates using the form for the 2008 tax year (returns filed in 2009).

The redesign of Form 990 is based on three guiding principles: enhancing transparency, promoting tax compliance, and minimizing the burden on the filing organization. Changes relevant to higher education include:

• More prominent and standardized reporting of executive compensation, which will be based on calendar year, Form W-2 reporting
• More focus on governance procedures and policies
• Increased reporting related to tax exempt bonds and non-cash charitable contribution

Earlier in the year, the IRS provided interim guidance regarding the requirement that all tax-exempt organizations make their Form 990-T available for public inspection. This new requirement is effective for returns filed after August 17, 2006. Note that state colleges and universities that are not officially recognized as exempt under 501(a) are not required to disclose their Form 990-T. State colleges and universities that have received a determination from the IRS that they are an organization described under section 501(c)(3) are required to make their Form 990-T available for public inspection. Furthermore, organizations that make their Form 990-T widely available do not need to comply with individual requests for a copy of such return.