Part VII of the Form 990 requires the

directors, and trustees during the tax year;

employees” (not including officers and directors/trustees); that is, employees who had certain management responsibilities and received over $150,000 of reportable compensation from the organization and related organizations, in the aggregate;

ployees (not including officers, directors/trustees, and key employees) who received over $100,000 of reportable compensation from the organization and related organizations, in the aggregate;

ees, or highest compensated employees (who had served in such capacities in the prior five years but not in the current tax year) who received over $100,000 of reportable compensation from the organization and related organizations, in the aggregate;

(who had served in such capacities in the prior five years but not in the current tax year) who received over $10,000 of reportable compensation from the organization and related organizations, in the aggregate, for services provided in the person’s capacity as director or trustee; and

dent contractors that the organization paid more than $100,000.

These reporting thresholds became effective for tax year 2008. Prior to 2008, the Form 990 compensation reporting threshold for independent contractors and highest compensated employees was $50,000, rather than $100,000. Prior to 2008, the definition of key employee did not include

any compensation threshold. Also prior to 2008, all former officers, directors, and trustees who received compensation during the tax year were reportable, regardless of their level of compensation.

Some have expressed concern that these increased thresholds decrease transparency, and prevent reporting of some persons who receive unreasonable compensation. Others have suggested that a single, uniform reporting threshold be adopted. The IRS requests comment on whether some or all of these Form 990 compensation reporting thresholds should be lowered, raised, or retained as is.

4. Reporting revenue from governmental units.

The instructions for Form 990, Part VIII distinguish between reporting of contributions and program service revenue from governmental units. A payment from a governmental unit should be reported as a contribution on Part VIII, line 1e (government grants (contributions)) if its primary purpose is to enable the organization to provide a service to or maintain a facility for the direct benefit of the public, rather than to serve the direct and immediate needs of the governmental unit. A payment from a governmental unit should be reported as program service revenue on Part VIII, line 2 if it represents a payment for a service, facility, or product that primarily gives some economic or physical benefit to that governmental unit. The instructions provide various examples of how such payments should be characterized and reported.

Some have expressed concern that the Form 990 does not provide for sufficient transparency in reporting of revenue from governmental units because much of this revenue is included in program service revenue in line 2, rather than as “Government grants” in line 1e. Accordingly, the IRS requests further comments on whether and how it should change reporting requirements in this area. For instance, should Part VIII, line 2 be revised to itemize certain government payments, such as Medicaid and Medicare payments? Should Part VIII, line 1e and/or the instructions for that line be revised to clarify that government contributions may include grants made pursuant to government contracts?

June 27, 2011 934 2011–26 I.R.B.

requiring reporting of such deposits and withdrawals as business transactions in Schedule L, Part IV, or reporting deposits as loans in Schedule L, Part II.

10. Reporting of component parts of community trusts on Form 990-series returns.

Under Regulation §1.170A–9(T)(f)(11), any separately organized trust, not-for-profit corporation, or association that meets certain requirements may be treated as a component part of a community trust, and that trust may be treated as a single entity rather than as an aggregation of separate funds, for purposes of sections 170, 501, 507, 508, 509, and Chapter 42 of the Code. One benefit of an organization being treated as a component part of a community trust is that the organization is not required to independently meet the public support requirements for public charity status.

The IRS has not required separately organized component parts of community trusts to file separate Forms 990. Schedule A (Public Charity Status), Part I, line 8 asks a filing organization that is a “community trust described in section 170(b)(1)(A)(vi)” to check the box and complete Schedule A, Part II to establish its public support status. Otherwise, Form 990 and Form 990–EZ do not ask any specific questions about community trusts or their component parts.

The IRS requests comments on whether separately organized component parts of community trusts should file separate Form 990-series returns or, if not, how to increase transparency in reporting by community trusts and their component parts. In particular, what, if any, types of information regarding component parts of community trusts should be reported on a component part-by-component part basis rather than on an aggregate basis on Form 990-series returns? For instance, should reporting be required for each component part’s employer identification number (if any), trustees’ names and relationships to the trust ( e.g., donor, disqualified person, commercial trustee), compensation to trustees, annual income, annual expenses, total assets, closely held business interests, real estate holdings, and/or charitable distributions?

5. Net asset reconciliation.

The 2007 Form 990 included a “Net Assets” section that required filers to reconcile discrepancies between net assets or fund balances from the prior to current tax year. This section was removed from the redesigned 2008 Form 990, but an expanded section for net asset reconciliation was included in the new Schedule D, Supplemental Financial Statements, which most but not all Form 990 filers are required to complete.

In response to many requests to include a net asset reconciliation section in the Core Form, the IRS has added a new Part XI, Net Asset Reconciliation, to the 2010 Form 990. Subsequently, some have commented that Schedule D, Part XI is now redundant.

The IRS requests comments on whether the Net Asset Reconciliation section in Schedule D, Part XI is still needed and, if so, how it should be revised to avoid or minimize redundancy.

6. Reporting on audited financial statements.

Form 990, Part XII, line 2 requires organizations to report whether their financial statements were compiled, reviewed, or audited by an independent accountant, and whether those financial statements were is- sued on a separate or consolidated basis.

Suggestions have been made that Part XII should require additional reporting on audited financial statements. For instance, some have suggested that Form 990 filers should report whether their financial statements were audited on a separate basis by an independent accountant. Others have suggested that a Form 990 filer should report whether its auditor issued a qualified opinion, an unqualified opinion, an adverse opinion, or a disclaimer of opinion regarding the organization’s financial statements, and to explain in Schedule O if such opinion was qualified, adverse, or a disclaimer. The IRS requests comment on whether this additional reporting should be required.

7. Names and EINs of foreign grantees.

The redesigned Form 990 includes a Schedule F, Statement of Activities Outside the United States . Part II of this Schedule, Grants and Other Assistance to Or-

ganizations or Entities Outside the United States, includes a column (a) for reporting the name of each grantee organization and a column (b) for reporting of the employer identification number (EIN) and IRS code section (if applicable) of each grantee. In response to public comment that disclosure of such information could jeopardize the confidentiality of sensitive foreign operations and the safety of such grantees, the IRS retained but shaded out these two columns so they could not be completed for tax years 2008-2010.

The IRS invites comment on whether these two columns should be unshaded or, alternatively, deleted entirely from Part II, and the rationale for taking such action.

8. Indirect foreign expenditures.

When the IRS released the instructions for Schedule F, some commented that it would not be possible for their organizations to report certain foreign expenditures on Schedule F, because they lacked accounting systems that tracked indirect foreign expenditures ( e.g., the expenses of listing a “study abroad” program in a school’s website or paper catalog). For tax years 2008-2010, the IRS has allowed organizations not to report such indirect expenditures on Schedule F if the organizations do not separately track them.

The IRS requests comment on whether this instruction should be revised now that Form 990 filers have had several years to develop procedures and adopt systems to separately track indirect foreign expenditures. Particularly, should the IRS require that all Schedule F filers account for and report indirect foreign expenditures in Part I, line 3, column (f)?

9. Reporting bank deposits as loans or business transactions on Schedule L.

In its list of Frequently Asked Questions on Form 990, Schedule L, Trans- actions with Interested Persons, the IRS states that, for tax years 2008-2010, deposits into and withdrawals from a bank account do not constitute “payments” or “business transactions” that need to be reported in Schedule L, Part IV, nor do such deposits constitute “loans” that need to be reported in Schedule L, Part II. See http://www.irs.gov/charities/ article/0,,id=215126,00.html . The IRS requests comment on the pros and cons of

2011–26 I.R.B. 935 June 27, 2011

Internal Revenue Service Courier’s Desk 1111 Constitution Ave., N.W. Washington, DC 20224 Attn: Stephen Clarke

(Announcement 2011–36) SE:T:EO (3C1)

Submissions may also be sent electronically to the following e-mail address:

Form990Revision@IRS.gov

Please include “Announcement 2011–36” in the subject line. All comments will be available for public inspection and copying.

DRAFTING INFORMATION

The principal author of this announcement is Stephen Clarke of the Exempt Organizations, Tax Exempt and Government Entities Division. For further information regarding this announcement, contact Mr. Clarke at (202) 283–9474 (not a toll-free call).

11. Scope of related organization reporting on Schedule R.

The Form 990 requires reporting of related organizations on Schedule R. This reporting provides the IRS and the public with a more complete picture of the organization’s structure and controlling relationships. For purposes of Form 990, “related organization” means an organization that controls or is controlled by the filing organization, is controlled by the same person or persons who control the filing organization, is a 509(a)(3) supporting or supported organization of the filing organization, or is a sponsoring organization of or contributing employer to a filing organization that is exempt under section 501(c)(9) as a voluntary employees’ beneficiary association (VEBA). Schedule R contains exceptions for reporting of certain related organizations ( e.g., certain bank trustees, subordinate organizations of a group exemption included in the central organization’s group return).

Some have expressed concern that Schedule R requires reporting that, in some cases, is overly burdensome ( e.g., reporting of religious organizations and churches in a religious denomination or association, affiliates in a hospital system,

chapters of a national organization) and/or compromises the confidentiality of the related organizations and/or their employees ( e.g., reporting of foreign affiliates, charitable remainder trusts, contributing employers of VEBAs), and have asked that such organizations be excepted from reporting in Schedule R. The IRS requests comment on the pros and cons of adopting these or similar Schedule R exceptions.

REQUEST FOR COMMENTS

The IRS requests comments on the issues described above. Comments should be submitted in writing on or before August 1, 2011. Please include “Announcement 2011–36” on the cover page. Comments should be sent to the following address:

Internal Revenue Service Attn: Stephen Clarke

(Announcement 2011–36) SE:T:EO (3C1) 1111 Constitution Avenue, N.W. Washington, DC 20224

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

June 27, 2011 936 2011–26 I.R.B.