CUNA Regulatory Comment Call

July 10, 2007

EXECUTIVE SUMMARY

• The IRS released for public comment a redesigned draft of Form 990, the IRS form filed annually by state chartered credit unions.
• The new draft has a core form, that must be completed by each filer, and 15 schedules completed by those organizations that conduct certain activities.
• Organizations would be required to report summary information about the compensation of officers, directors, trustees, and certain other employees in the core form.
• Detailed compensation information would be reported on Schedule J and would be completed only by those organizations with highly compensated individuals and particularly those individuals with complicated compensation arrangements.
• Information on the composition of an organization’s board, governance and financial statement practices would be required on the core form.
• The IRS is also seeking comments on whether to preclude group 990 returns.
• Please submit your comments to CUNA by August 27, 2007. Comments are due to the IRS by September 14, 2007.

Please feel free to fax your responses to CUNA at 202-638-7052; Assistant General Counsel Lilly Thomas at lthomas@cuna.com; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004. Click here for more information on the draft Form 990. For specific information on the proposal, click here.

BACKGROUND

IRS Form 990 “Return of Organization Exempt from Income Tax” is an annual return required to be filed by tax-exempt organizations to report information about their operations. It is a public document and is relied on for information about the organizations that file (filing organizations).

All state chartered credit unions are required to file Form 990 with the IRS annually. Federal credit unions are not required to file Form 990, since they are not subject to unrelated business income taxes.

The IRS believes that the current form, which was redesigned in 1979, neither adequately describes the filing organization nor provides a basis for comparing an organization with its peers.

The current redesign is based on three guiding principles:

• Enhancing transparency to provide the IRS and the public with a realistic picture of the organization, along with the basis for comparison to other organizations;
• Promoting tax compliance by accurately reflecting the organization’s operations so the IRS may efficiently assess the risk of noncompliance; and
• Minimizing the burden on filing organizations.

DISCUSSION OF PROPOSAL

The IRS released for public comment a redesigned draft of Form 990, the IRS form filed annually by state chartered credit unions.

The new draft has a ten page core form that must be completed by each 990 filer. There are also fifteen schedules designed to require reporting of information only from organizations that conduct certain activities.

The core form includes a summary page (Part I), nine additional Parts and a signature block (Part X). The summary page includes the organization’s identifying information and a snapshot of the organization’s key financial, compensation, governance, and operational information. The summary page will include a breakdown of the organization’s revenues, expenses, assets, liabilities, and net assets, which will highlight the size and key financial measures of the organization.

Part II Compensation of Officers, Directors, Trustees, Key Employees and Other Highest Compensated Employees or Independent Contractors requires information about the compensation of officers, directors, trustees, and certain other employees. Organizations currently must list each officer, director, trustee, or key employee. Unlike the current form, which requires detailed information about compensation, organizations would be required to report summary information about compensation, based on Form W-2 reporting for employees, and Form 1099 reporting for directors and other independent contractors. Like the current form, compensation paid by related organizations must be reported separately.

Some filers will be required to complete Schedule J, Supplemental Compensation Information, which breaks down the reporting of an individual’s executive compensation, deferred compensation, fringe benefits and expense allowances or reimbursements. You may access Schedule J at The IRS intends that it be completed only by those organizations with highly compensated individuals and particularly those individuals with complicated compensation arrangements. Generally, Schedule J must be completed for individuals listed in Form 990, Part II, who:

• are former officers, key or highest compensated employees who received more than $100,000, or directors and trustees who received more than $10,000, of reportable compensation from the organization and any related organizations;
• have reportable compensation in excess of $150,000 from the organization and any related organizations for the calendar year;
• received or accrued more than $250,000 of reportable or other compensation, including deferred compensation, nontaxable fringe benefits and expense reimbursements from the organization and related organizations; or
• who received or accrued compensation from any source, other than the organization, for services rendered to the organization.

Part III of the core form, Governance, Management and Financial Reporting, asks for certain information regarding the composition of an organization’s board or governing body, governance and financial statement practices and the means by which the organization is accountable to the public by making information publicly available. This section requires filers to list the number of members of the governing body, whether there were significant changes to organizing or governing documents, and how information is made available to the public. Filers are also required to list whether the organization has written policies on conflicts of interest, document retention and destruction, whistleblowing and branch activity.

Parts IV, V, and VI, Statements of Revenues and Expenses, Balance Sheet, are similar to the existing form’s layout for reporting revenues, expenses, and balance sheet items. The new draft form places all the required supplemental financial information from Parts I, VII, and VIII of the 2006 Form into Schedule D and eliminates exclusion codes.

Part VII and VIII, Statements Regarding General Activities and Statements Regarding Other IRS Filings, respectfully, include questions that serve as a "trigger" for the different schedules and ask about the general activities of the organization and its compliance with various IRS filing requirements. Part VIII requests information about the organization’s filing obligations including unrelated business income tax (UBIT).

Part IX, Statement of Program Service Accomplishments, requires information on the program service and exempt function activities of the organization, and asks the organization to describe its most significant accomplishment of the year.

1. Does the new redesign (a ten-page core form with 15 schedules) provide for a more efficient method of reporting?
   
   a. Yes _____
   b. No _____
   
   Please explain.
   
   

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2. Part II of the core form requires the organization to report information about the compensation of officers, directors, trustees, and certain other employees. Do you agree with the requirement to report compensation based on Form W-2 reporting for employees and Form 1099 reporting for directors and other independent contractors?
   
   a. Yes _____
   b. No _____
   
   

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3. Do you agree with the triggers used in the core form for filing Schedule J, Supplemental Compensation Information?
   
   a. Yes _____
   b. No _____
   
   

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4. Part III of the core form includes questions regarding governance, management and financial reporting including the number of members of the governing body; whether there are specific written policies; and the method by which certain documents are made available to the public. Do you believe these additional items are a good indication that safeguards are in place to provide that an organization’s assets will be used consistently with its exempt purposes?
   
   a. Yes _____
   b. No _____
   
   Please explain.
   
   

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5. Do you believe the new draft form takes into consideration any privacy concerns?
   
   a. Yes _____
   b. No _____
   
   Please explain.
   
   

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6. The IRS is seeking comment on whether it should preclude group returns. Do you agree?
   
   a. Yes _____
   b. No _____
   
   Please provide information on the benefits of group returns.
   
   

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7. The IRS anticipates a new form for the 2008 filing year, which would apply to returns filed in 2009. Is this sufficient time for compliance?
   
   a. Yes _____
   b. No _____
   
   Please explain.
   
   

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8. Please provide any additional comments.
   
   

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