The American Institute of CPAs has sent the Internal Revenue Service a spreadsheet-full of comments on the draft instructions for the revised Form 990 that will be used by tax-exempt organizations to file their returns next year.

The AICPA objected to the expansion of the definition of a "key employee" to include anyone who manages a segment or activity representing 5 percent or more of a charity's activities, assets, income, expenses, capital expenditures, operating budget or employee compensation. The institute contended that the 5 percent threshold was unrealistic and would result in an "exponential increase" in the number of key employees, especially for larger organizations.

Another objection was to listing the five highest compensated employees if they fell out of the top five for the current year but were listed in the top five for any of the prior five years. The AICPA argued this is a "cumbersome requirement" as the listings can change from year to year. The institute recommended that the instructions require reporting of the former five highest paid only if their pay and duties change due to serving in a lesser capacity, if they move to a related organization and serve in a different capacity, or if they were not an employee at all during the year, but were compensated, either by the reporting organization or a related organization, as a consultant or independent contractor.

The AICPA also recommended that the instructions request some specific examples of accomplishments for particular subsectors, such as nursing homes, hospitals, colleges, social clubs and trade associations. For example, in the nursing home sector, the instructions might request the number of beds, number of allied health professionals and medical personnel, specialized facilities and treatments for the elderly.

The institute also suggested that the instructions provide specific guidance on the inclusion of gross proceeds from securities and asset sales in the gross receipts total.

The AICPA also noted that in 2007 the instructions listed eight types of political organizations that were not required to file Form 990. The new draft instructions only list four types. The AICPA wants the IRS to clarify why the four other types that were left out now have to file Form 990. If the four types were omitted in error, the AICPA said they should be restored to the list of organizations required to file the form.

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