SAN FRANCISCO — State chartered credit unions in California got a reprieve from the annual chore of filing individual IRS Form 990s when the state's Department of Financial Institutions announced that, for at least one more year, it would file a group 990 form with the Internal Revenue Service on behalf of participating state-chartered credit unions.
Nonprofit organizations of all different stripes file 990 forms each year with the IRS. Because state-chartered credit unions do not share the automatic exemption from federal taxes that flows from the federal charter, they too have been required to file. In some states, regulators or sometimes credit union leagues have sought to ease this burden by filing group 990s on behalf of their state chartered institutions but that practice has been declining as state chartered CUs' ongoing concerns about their potential responsibilities under IRS unrelated business income tax policy have gone unresolved, according to Kathy Thompson, a senior vice president of compliance with CUNA.
"The thing many people need to remember is that the 990 form affects a great many more people and organizations than only credit unions," Thompson said, explaining that the IRS had sought to revise the form because it had last been changed in the late 1970s. "I think they had a sense that the old form was no longer capturing the sorts of information that they needed," she added.
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California is one of the states which has filed group 990s for its credit unions and had said it would no longer do so, but the State's DFI reversed its previous decision when the IRS left the old form in place for 2008′s filing for 2007. But it's unclear that the practice will continue in the future, even though the IRS has said it will continue allowing group 990 filing on the revised form, which it released on Dec. 20 of last year.
"The Discussion Draft proposed eliminating group returns," the service said in a background paper to the revised form. "Several organizations, including fraternal organizations with hundreds or thousands of small subsidiaries, recommended that the IRS continue to allow group returns. These organizations commented that eliminating group returns would substantially increase the cost and administrative burden associated with completing separate returns for each member of the group. Some offered to work with the IRS to improve the identification of group members so that the IRS can more easily track which members have been included in a Form 990 filing. Based on these responses, group returns will be allowed, and the IRS will work with the sector to study changes to group return filing processes and requirements."
Thompson and other sources explained that even though the IRS has released the new form and has said it will allow group 990 filings, a lot of uncertainty remains because the Service has not yet released the instructions for filling out the form. Such instructions might include, for example, guidelines for what information to include and how to file a group 990.
Some of those types of issues include whether and how to include executive compensation information on the group 990 form, always a hot topic Thompson explained, as well as whether the filer of the group 990 has any liability for any UBIT information that the CU did or did not file. The revised 990 form includes a line which asks about unrelated business income and refers the filer to another schedule if it had unrelated business income of more than $1000 and did not file a UBIT return (form 990T).
"We have already asked for clarification of some items on the new form," Thompson said, "so like everyone else we are waiting to see what the instructions will say."
In its release of the new form, IRS announced that that would release instructions for the new form early this year.
According to NASCUS, as of the end of January, at least eight state regulators still file group 990s on behalf of their state-chartered credit unions. They are Alabama, Idaho, Ohio, Texas, Connecticut, New York, New Jersey, and California.
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