The Internal Revenue Service has recently released its new 2005 Form 990 that includes some significant changes from the previous year. Most notably, Part V of the form, regarding current officers, directors and key employees, has been renamed Part V-A, and it now includes four new questions:

  1. the number of parties permitted to vote at board meetings;

  2. whether key employees, officers, directors or highest paid professionals and independent contractors listed on Schedule A, are related, through family or business; 

  3. whether key employees, officers, directors or highest paid professionals and independent contractors listed on Schedule A, received compensation from another organization (whether taxable or tax-exempt) that is related to the reporting organization through common supervision or control; and

  4. whether the reporting organization has a conflict of interest policy. 

These related-party questions require disclosure of both business and family relationships and disclosure of relationships involving the organization’s highly-paid professionals and independent contractors.

The form also adds a new Part V-B, asking for the amount of compensation paid to former officers, directors, trustees, or key employees during the year. This is the first time that compensation paid to former directors must be reported.

Finally, the 2005 Form 990 adds new check boxes for foreign grants in Part III Statement of Program Service Accomplishments, and in Part VI Other Information, asks if the organization has an office in a foreign country, or at any time during the year had an interest in, or access to, funds by virtue of being an authorized signatory over any foreign financial accounts. If the answer is "yes," the foreign country must be disclosed.

These revisions to the 2005 Form 990, involving related parties, foreign accounts and foreign grant-making, as well as board voting policies and whether the organization has a conflict of interest policy, are intended to address perceived, and sometimes real abuses in these areas. They also reflect Congress’ concern that nonprofits have adequate board procedures, post Sarbanes-Oxley, and in particular, that they adopt and adhere to a comprehensive conflicts policy.

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