Editor’s note: The following article has been corrected from the version that was posted on July 28. The previous version misstated the types of compensation the Internal Revenue Service is scrutinizing.
The Internal Revenue Service is now gathering and reviewing information about the compensation of professional fund-raising companies that charities hire to solicit for them, a tax agency official told a gathering of nonprofit development and marketing executives on Tuesday.
The official, Judith Kindell, noted that the newly redesigned informational tax return seeks out information about professional fund-raising companies and their ties to the top executives and board members who run a charity. Charities are now starting to file the new form, she said, and the tax agency’s research unit is in the middle of culling trends from the filings, the results of which may or may not be announced publicly.
Ms. Kindell, senior technical adviser for exempt organizations, said compensation issues are a key topic for the tax agency this year, noting that the IRS is looking carefully at the pay of chief executives of nonprofit groups.
She also said that the new form makes it easier to spot a chief executive’s total compensation, since it asks charities to report pay at all their units. In the past, nonprofit groups could make it tough for the IRS and the public to figure out total compensation when an executive oversaw many entities that each filed separate forms.
She also discussed how nonprofit groups are responding to the newly redesigned tax forms. She said that while the changes in the Form 990 may have created headaches, the new approach is also popular with many groups.
For fund raisers, she said, the new format of the informational returns offers a special opportunity to tell an organization’s story.
“The Form 990 is no longer simply just reporting your financials to the IRS,” she says. “This is the story of what you’re doing. It is not simply you handing it over to your accountant. It is your annual chance to tell your story.”
But telling that story hasn’t come without some hiccups. The Form 990′s Schedule O was designed to give every organization that files a space for a narrative explanation. But early on, the IRS was finding a high rate—some 30 percent—that weren’t filling out the required form. It publicized the need to fill out that part of the form, and the rate has now gone up to 90 percent. “It should be 100 percent, but we’re getting there,” Ms. Kindell said.
Ms. Kindell spoke at the 2010 Bridge to Integrated Marketing and Fundraising Conference, held just outside Washington.
