This article originally appeared in the March/April 2011 issue of Museum magazine, a benefit of AAM membership.
The revised Form 990 is much more than a tax document—it’s your museum’s annual autobiography. Because the Form 990 is readily available to the public upon request—and online on such sites as GuideStar—donors and other potential funders can easily access its detailed information about how you govern yourself, how you allocate your resources and what you do with your collections.
Why does the IRS care how we govern ourselves?
The IRS has stated that an organization that is well governed is more likely to be tax compliant. The Form 990 now includes an entire section of questions related to a tax-exempt organization’s governance and management practices. It also examines whether the organization has in place critical organizational policies and procedures for making compensation decisions for officers and key employees, keeping contemporaneous records of board of trustees’ meetings, managing employee and board conflicts of interest, handling whistleblowers, retaining and destroying documents, and accepting non-standard gifts. Museums that don’t have such policies and procedures in place should seriously consider adopting them.
What kind of compensation information does the Form 990 require us to report?
Schedule J of the Form 990 requires the reporting of both taxable compensation and non-taxable benefits for the organization’s trustees, officers, key employees and the five most highly compensated employees who are not in the previous categories— and for current employees who formerly were reported in these categories. The organization must also explain how it establishes the compensation of its chief executive. In addition, Schedule J requires the organization to provide detailed information if it provided to any of its officers and key employees such “hot button” benefits as first-class or charter travel, travel for companions, discretionary spending accounts, housing allowances, and health and social club dues.
Are there any questions in the Form 990 that relate to collections?
Schedule M of the Form 990 requires organizations to report by category the number of non-cash contributions they receive annually; some of the IRS categories include objects often found in museum collections—e.g., “works of art,” “scientific specimens,” “taxidermy,” “historical artifacts,” “archeological artifacts.” Museums should carefully read the definitions of the categories to learn in which category the IRS wants objects reported. For museums whose collections fall into multiple categories, those responsible for completing the Form 990 should work closely with their registrars to develop a system for tracking by Form 990 category the objects that the museum receives.
Do museums now have to report the value of their collections?
No. The IRS recognizes that under generally accepted accounting practices, museums may elect not to report as revenue the value of objects received that are held for public exhibition, education or research in furtherance of their tax-exempt purpose (so long as they appropriately footnote their financial statements). The Form 990 explicitly exempts museums that take this accounting position from reporting the values of collection objects on the form.
Marsha Shaines is deputy general counsel, Smithsonian Institution.
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