The American Institute of CPAs suggested more than 30 changes to the Internal Revenue Service for the Form 990, Return of Organization Exempt from Income Tax, and its instructions, some of them marked as urgent.
In a letter Tuesday, the AICPA indicated the importance and urgency of each of its recommendations. Eighteen of the 33 recommendations ranked “high” in terms of both importance and urgency. The suggestions include:
• Delete the terms and associated definitions from the Glossary in the Instructions to the Form 990 and in all parts of the form and related schedules that have changed under the tax law.The terms are “endowment,” “permanent (true) endowment,” “SFAS 116,” “SFAS 117,” “temporarily restricted endowment” and “FIN 48.”
• Update the Glossary to define the terms used in Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, issued by the Financial Accounting Standards Board as defined in the FASB Accounting Standards Codification Master Glossary.
• Update the trigger question for Schedule D to reflect the changed classification of net assets under FASB ASC 958, while still recognizing that the focus of the question is on reporting for donor restricted and board designated or quasi-endowments.
• Align the trigger questions in Form 990, Part IV and Part X so that they agree with the definition of “interested parties” in the Schedule L instructions.
• Update the net assets or fund balances portion of the balance sheet to reflect ASU 2016-14.
• Update the question and instructions related to the Office of Management and Budget/Uniform Guidance rules, and update the instructions to reflect the new single audit threshold of $750,000.
• Update the instructions for Schedule I, Part II, Line 1 so they are consistent with the instructions for the trigger question in Form 990, Part IV, Line 21.
Last week, the AICPA sent a separate letter to the IRS asking the agency to clarify its informal policy to not issue private letter rulings involving certain S corporation matters to ensure that the no-rule policy doesn’t become too broad. The AICPA noted the IRS is no longer issuing private letter rulings involving some S corporation matters, but the informal policy leaves S corps without a way to remedy various issues with the IRS.
“The IRS’s private letter ruling process serves a vital function for many taxpayers, especially S corporations,” wrote AICPA Tax Executive Committee chair Annette Nellen in the letter. “With the new informal no-rule policy, many S corporation taxpayers are left without an avenue to remedy various issues that are specifically unique to S corporations.”
The AICPA asked the IRS to ensure the no-rule policy doesn’t become overly broad; formally define and publish the parameters of the no-rule policy; and issue a revenue ruling or other authoritative pronouncement to offer more clarity for certain S corporation matters on which the IRS will no longer rule. Nellen suggested six parameters that should be included in the revenue ruling.
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