New IRS Form 990 Requirements Could Impact You
School Advisor, 2007 Issue No. 1  

Many schools now have a foundation affiliated with their district. In some instances, school district personnel serve on the foundation board (or in some similar capacity). In all likelihood, the foundation is classified as “a supporting organization of the school district as defined in Section 509 (a)(3).”

Because the IRS perceives some supporting organizations (not necessarily foundations) as “abusive,” they are now requiring additional information on the annual Form 990 filed by the foundation.

So you ask, “Why should I care?” In addition to the possible increased IRS scrutiny over this type of organization, the additional disclosure requirements include the requirement to disclose the compensation paid by a related entity (i.e., school district) to officers/directors/key employees of the foundation. So, if for example, the district superintendent also serves on the foundation board, the foundation Form 990 must disclose the superintendent’s compensation package (as paid by the district), including compensation, contributions to employee benefit plans and deferred compensation plans, as well as expense allowances.

In addition, the new rules will make it much more difficult for a private foundation to make a contribution to one of these “supporting organizations.” There are some options for possibly changing the foundation’s status to something other than “a supporting organization,” but that discussion is well beyond the scope of this article. For now, our goal is to make you aware of the new requirements. Let us know if we can help you sort through the maze of new Form 990 disclosure requirements.