IRS

IRS to release machine readable Form 990 data next year

Yesterday the IRS announced that it will publish data from Form 990 in a machine readable format beginning in early 2016. Currently, the Form 990 data is available as a low resolution image, which makes it difficult to research many organizations at once. The new format will be XML-based, enabling computers to quickly analyze the data.

This new resource will make peer comparison surveys much easier for healthcare organizations, credit unions, and their consultants. Only state-chartered credit unions submit Form 990, but both federal and state-chartered credit unions can use the data.

For example, the current data looks like this:

Screen Shot 2015-07-01 at 4.00.09 PM.png

That same data in the new format will look like this:

<IRS990ScheduleJ documentId="RetDoc1042400001">
    <FirstClassOrCharterTravel>X</FirstClassOrCharterTravel>
    <TravelForCompanions>X</TravelForCompanions>
    <WrittenPolicyReTAndEExpenses>1</WrittenPolicyReTAndEExpenses>
    <SubstantiationRequired>1</SubstantiationRequired>
    <CompensationCommittee>X</CompensationCommittee>
    <WrittenEmploymentContract>X</WrittenEmploymentContract>
    <CompensationSurvey>X</CompensationSurvey>
    <BoardOrCommitteeApproval>X</BoardOrCommitteeApproval>
    <SeverancePayment>0</SeverancePayment>
    <SupplementalNonqualRetirePlan>1</SupplementalNonqualRetirePlan>
    <EquityBasedCompArrangement>0</EquityBasedCompArrangement>
    <Form990ScheduleJPartII>
        <NamePerson>VINCENT SANDUSKY</NamePerson>
        <BaseCompensationFilingOrg>382438</BaseCompensationFilingOrg>
        <CompBasedOnRelatedOrgs>0</CompBasedOnRelatedOrgs>
        <BonusFilingOrg>0</BonusFilingOrg>
        <BonusRelatedOrgs>0</BonusRelatedOrgs>
        <OtherCompensationFilingOrg>0</OtherCompensationFilingOrg>
        <OtherCompensationRelatedOrgs>0</OtherCompensationRelatedOrgs>
        <DeferredCompFilingOrg>37600</DeferredCompFilingOrg>
        <DeferredCompRelatedOrgs>0</DeferredCompRelatedOrgs>
        <NontaxableBenefitsFilingOrg>24342</NontaxableBenefitsFilingOrg>
        <NontaxableBenefitsRelatedOrgs>0</NontaxableBenefitsRelatedOrgs>
        <TotalCompensationFilingOrg>444380</TotalCompensationFilingOrg>
        <TotalCompensationRelatedOrgs>0</TotalCompensationRelatedOrgs>
        <CompReportPrior990FilingOrg>0</CompReportPrior990FilingOrg>
        <CompReportPrior990RelatedOrgs>0</CompReportPrior990RelatedOrgs>
    </Form990ScheduleJPartII>
    <Form990ScheduleJPartII>
        <NamePerson>JERROLD MARANS</NamePerson>
        <BaseCompensationFilingOrg>149353</BaseCompensationFilingOrg>
        <CompBasedOnRelatedOrgs>0</CompBasedOnRelatedOrgs>
        <BonusFilingOrg>0</BonusFilingOrg>
        <BonusRelatedOrgs>0</BonusRelatedOrgs>
        <OtherCompensationFilingOrg>0</OtherCompensationFilingOrg>
        <OtherCompensationRelatedOrgs>0</OtherCompensationRelatedOrgs>
        <DeferredCompFilingOrg>15848</DeferredCompFilingOrg>
        <DeferredCompRelatedOrgs>0</DeferredCompRelatedOrgs>
        <NontaxableBenefitsFilingOrg>17952</NontaxableBenefitsFilingOrg>
        <NontaxableBenefitsRelatedOrgs>0</NontaxableBenefitsRelatedOrgs>
        <TotalCompensationFilingOrg>183153</TotalCompensationFilingOrg>
        <TotalCompensationRelatedOrgs>0</TotalCompensationRelatedOrgs>
        <CompReportPrior990FilingOrg>0</CompReportPrior990FilingOrg>
        <CompReportPrior990RelatedOrgs>0</CompReportPrior990RelatedOrgs>
    </Form990ScheduleJPartII>
    <Form990ScheduleJPartII>
        <NamePerson>TOM SOLES</NamePerson>
        <BaseCompensationFilingOrg>165945</BaseCompensationFilingOrg>
        <CompBasedOnRelatedOrgs>0</CompBasedOnRelatedOrgs>
        <BonusFilingOrg>0</BonusFilingOrg>
        <BonusRelatedOrgs>0</BonusRelatedOrgs>
        <OtherCompensationFilingOrg>0</OtherCompensationFilingOrg>
        <OtherCompensationRelatedOrgs>0</OtherCompensationRelatedOrgs>
        <DeferredCompFilingOrg>17329</DeferredCompFilingOrg>
        <DeferredCompRelatedOrgs>0</DeferredCompRelatedOrgs>
        <NontaxableBenefitsFilingOrg>24342</NontaxableBenefitsFilingOrg>
        <NontaxableBenefitsRelatedOrgs>0</NontaxableBenefitsRelatedOrgs>
        <TotalCompensationFilingOrg>207616</TotalCompensationFilingOrg>
        <TotalCompensationRelatedOrgs>0</TotalCompensationRelatedOrgs>
        <CompReportPrior990FilingOrg>0</CompReportPrior990FilingOrg>
        <CompReportPrior990RelatedOrgs>0</CompReportPrior990RelatedOrgs>
    </Form990ScheduleJPartII>
    <Form990ScheduleJPartII>
        <NamePerson>DEBORAH WYANDT</NamePerson>
        <BaseCompensationFilingOrg>187821</BaseCompensationFilingOrg>
        <CompBasedOnRelatedOrgs>0</CompBasedOnRelatedOrgs>
        <BonusFilingOrg>0</BonusFilingOrg>
        <BonusRelatedOrgs>0</BonusRelatedOrgs>
        <OtherCompensationFilingOrg>0</OtherCompensationFilingOrg>
        <OtherCompensationRelatedOrgs>0</OtherCompensationRelatedOrgs>
        <DeferredCompFilingOrg>19019</DeferredCompFilingOrg>
        <DeferredCompRelatedOrgs>0</DeferredCompRelatedOrgs>
        <NontaxableBenefitsFilingOrg>10249</NontaxableBenefitsFilingOrg>
        <NontaxableBenefitsRelatedOrgs>0</NontaxableBenefitsRelatedOrgs>
        <TotalCompensationFilingOrg>217089</TotalCompensationFilingOrg>
        <TotalCompensationRelatedOrgs>0</TotalCompensationRelatedOrgs>
        <CompReportPrior990FilingOrg>0</CompReportPrior990FilingOrg>
        <CompReportPrior990RelatedOrgs>0</CompReportPrior990RelatedOrgs>
    </Form990ScheduleJPartII>
    <Form990ScheduleJPartII>
        <NamePerson>ELI HOWARD</NamePerson>
        <BaseCompensationFilingOrg>154565</BaseCompensationFilingOrg>
        <CompBasedOnRelatedOrgs>0</CompBasedOnRelatedOrgs>
        <BonusFilingOrg>0</BonusFilingOrg>
        <BonusRelatedOrgs>0</BonusRelatedOrgs>
        <OtherCompensationFilingOrg>0</OtherCompensationFilingOrg>
        <OtherCompensationRelatedOrgs>0</OtherCompensationRelatedOrgs>
        <DeferredCompFilingOrg>15819</DeferredCompFilingOrg>
        <DeferredCompRelatedOrgs>0</DeferredCompRelatedOrgs>
        <NontaxableBenefitsFilingOrg>16641</NontaxableBenefitsFilingOrg>
        <NontaxableBenefitsRelatedOrgs>0</NontaxableBenefitsRelatedOrgs>
        <TotalCompensationFilingOrg>187025</TotalCompensationFilingOrg>
        <TotalCompensationRelatedOrgs>0</TotalCompensationRelatedOrgs>
        <CompReportPrior990FilingOrg>0</CompReportPrior990FilingOrg>
        <CompReportPrior990RelatedOrgs>0</CompReportPrior990RelatedOrgs>
    </Form990ScheduleJPartII>
    <Form990ScheduleJPartII>
        <NamePerson>STAN KOLBE</NamePerson>
        <BaseCompensationFilingOrg>144829</BaseCompensationFilingOrg>
        <CompBasedOnRelatedOrgs>0</CompBasedOnRelatedOrgs>
        <BonusFilingOrg>0</BonusFilingOrg>
        <BonusRelatedOrgs>0</BonusRelatedOrgs>
        <OtherCompensationFilingOrg>0</OtherCompensationFilingOrg>
        <OtherCompensationRelatedOrgs>0</OtherCompensationRelatedOrgs>
        <DeferredCompFilingOrg>15177</DeferredCompFilingOrg>
        <DeferredCompRelatedOrgs>0</DeferredCompRelatedOrgs>
        <NontaxableBenefitsFilingOrg>24324</NontaxableBenefitsFilingOrg>
        <NontaxableBenefitsRelatedOrgs>0</NontaxableBenefitsRelatedOrgs>
        <TotalCompensationFilingOrg>184330</TotalCompensationFilingOrg>
        <TotalCompensationRelatedOrgs>0</TotalCompensationRelatedOrgs>
        <CompReportPrior990FilingOrg>0</CompReportPrior990FilingOrg>
        <CompReportPrior990RelatedOrgs>0</CompReportPrior990RelatedOrgs>
    </Form990ScheduleJPartII>
    <Form990ScheduleJPartIII>
        <ReturnReference>PART I, LINE 1A</ReturnReference>
        <Explanation>SMACNA PAYS FOR ITS EXECUTIVE COMMITTEE MEMBERS AND THEIR SPOUSES TO FLY TO BOARD MEETING LOCATIONS.
</Explanation>
    </Form990ScheduleJPartIII>
</IRS990ScheduleJ>

It's not as human friendly, but computers can quickly analyze mountains of data formatted like this. If the IRS makes the bulk data reasonably accessible, lots of interesting analysis will be possible next year.

The IRS is adding this option largely because of constant pushing from public.resource.org.

AFRs for July 2015

The IRS published the applicable federal rates for July 2015. Now that both the January and July rates are known, we can calculate the blended AFR for 2015 (it's 0.44%).

The July rates are:

  • Short Term: 0.48%

  • Mid Term: 1.77%

  • Long Term: 2.74%

Our chart of the historical rates can be found here.

NAFCU Services | Compensation and Severance Plan Rule Changes May Impact Your Credit Union

Upcoming IRS regulations may require changes to your nonqualified deferral plans and severance plans. Kirk and Jim explain more on the NAFCU Services blog.

Implications under 409A for Operational and Documentation Failures

Congress imposed a rigid tax regime on nonqualified deferred compensation plans by adopting Section 409A of the Internal Revenue Code at the end of 2004.  409A imposes various requirements, such as rules relating to time and form of payment and timing of deferral elections.  409A also imposes three penalties on participants in non-compliant plans:

  • Immediate taxation
  • 20% penalty
  • Interest from the year of deferral (at the underpayment rate plus one percent).

That’s old news, right?  Not exactly.  Although plans should be in compliance at this point, we are finding that some employers never updated their plans for 409A, are not administering their plans correctly, or both.  Fortunately, the IRS has provided limited relief on both counts.

For certain operational failures that are both inadvertent and unintentional, the IRS relief varies based on how soon after the failure the correction occurs and on the status of the participant who needs the relief.  For correcting certain unintentional document failures, reporting of the correction and limited penalties may apply.

Example

The correction procedures are too complicated to effectively summarize in a blog post, but consider the following operational failure we recently encountered to get a sense of what can be involved.

A plan had been updated for 409A, but the plan has not been administered correctly.  The plan provides for vesting at age 65, with an annual benefit of $100,000 payable for five years.  The participant is the employer’s chief executive officer.  However, the parties decide when the participant attains age 65 to defer payment to age 68.  409A does not allow for this type of flexibility.  (Payment dates can be extended under 409A, but the extension must be for at least five years and must be made in writing at least one year before the date of entitlement.)  This year, when the CEO attained age 67, the employer tried to resolve the 409A violation.

The correction procedure for an insider (i.e., the CEO) who fails to receive scheduled payments under the plan, and who corrects the mistake by the end of the second year after the error, is as follows:

  • the employer in 2012 pays the CEO $100,000 for 2010 and $100,000 for 2011;
  • gains in the plan are removed, and the employer cannot pay any interest or other payment to the CEO;
  • the employer and the CEO would need to amend their prior tax returns to include the payments and required taxes;
  • the CEO would pay a penalty amount of $20,000 [i.e., 20% of $100,000] for 2010 and $20,000 for 2011; and
  • the employer and CEO would need to file an information statement with their original, timely returns (contains list of affected employees, name of plan, description of failure and circumstances, describes steps taken to avoid recurrence, and a statement of eligibility).

The employer would then pay the remaining three annual installments in a timely manner under the terms of the plan.

So where does this leave us?  Employers with plans that have never been updated for 409A or that are not being administered correctly should take advantage of the correction procedures and start complying with 409A.  Various types of corrections can be made without penalty, but early correction is the key.

Comparing 2011 Form 990 to 2010

The IRS 2011 Annual Report & 2012 Work Plan reports:

FY2011 marked the end of the three-year phase-in of the redesigned Form 990. [T]his means the lead-up time is over, and the redesign has begun to pay off by providing us with more information about exempt organizations. This allows us to use data analytics and build risk models that will guide our work and greatly improve our ability to support high standards of transparency and stewardship among exempt organizations.

Consistent with this statement, Form 990 for reporting 2011 activities has few changes in its compensation reporting requirements compared to 2010. Here is a comparison of the 2010 and 2011 forms.

Defined Benefit Retirement Plan

2010 Form 2011 Form
Report increases in actuarial value Report net of increases and decreases in actuarial value

W–2 Compensation

2010 Form 2011 Form
Use box 5 (Medicare wages) unless zero, in which case use box 1 (gross wages) Use the greater of box 1 or box 5

Short Deferrals

2010 Form 2011 Form
Report as deferred compensation any amount earned in a year that is not paid by the end of the year Do not report as deferred compensation any amount paid within 2½ months after end of the year

Benefit Reporting Table

2010 Form 2011 Form
Gives instructions for reporting 70 different benefits Adds instructions for reporting gift cards (as taxable compensation) and “disregarded benefits” (e.g., working condition fringe benefits) (not reported)

Governance:

Has the organization provided a copy of this Form 990 to all members of its governing body before filing the form?

2010 Form 2011 Form
Answer “yes” if the organization emailed the board a link to a password protected web site to review the form Adds:  Answer “no” if all the organization did was tell the board that the form is available upon request.

§ 457(f) regs to "clean-up" § 409A

A key IRS attorney said last week that the § 457(f) regulations will be used as a vehicle to do some § 409A "clean-up." He also referred to the initial guidance being proposed rules. These comments seem to indicate that the regulations are moving forward, are broader than originally thought, and have a better chance of receiving earlier rather than later attention. The indication that they will come out in proposed form is positive news as it will not only give a chance for comment, but a longer period for easing into the new rules. From: bna.com

Advanced notice of proposed rules gives glimpse of IRS position on federal credit unions' §§ 457(b) and (f) plans

This week the IRS published draft proposed rules defining governments and government related entities for qualified plan purposes.  76 FR 69172. Resolving a six-year controversy, the draft rules also state that for purposes of non-qualified deferred compensation plans, federal credit unions are tax-exempt non-government entities, not federal instrumentalities. The result is that federal credit unions can sponsor 457(b) plans and 457(f) plans as any other tax-exempt organization. If the final regulations look like the proposed rules, few, if any, changes to current plans will be required. 457(b) plans designed to meet the 409A requirements could remove the 409A restrictions (such as annual deferral elections and five-year postponements for changing the time and form of benefit payments). Even now, new plans can be installed with greater confidence in the 457(b)/457(f) approach.