Effective for reporting years beginning on or after January 1, 2022, exempt organizations that use management companies will need to provide additional information regarding the arrangement on their Form 990. The IRS issued Announcement 2021-18 in November of 2021, revoking Announcement 2001-33, which established reasonable cause for organizations to avoid the penalty imposed by Section 6652(c)(1)(A)(ii) if the organizations reported amounts paid to management companies in accordance with Announcement 2001-33 rather than the IRS instructions.
Beginning with the 2022 filing, exempt organizations will need to disclose, in addition to the total paid to the management company if it exceeds $100,000, the following information:
- A description of the services provided by the management company to the exempt organization.
- The names of any current or former officers, directors, trustees, key employees, or highly compensated employees that were compensated under the arrangement. Note that the definition of an officer includes the top management official and the top financial official of the organization.
- The amount of reportable (W-2/1099) and other compensation received by the listed individuals for services provided to the filing organization and any related organization(s) during the year.
The additional information will be included on Schedule O for the reporting organization in addition to disclosing the total paid on Part VII, Section B, as has been required in the past.
If employees of the management company would qualify as common law employees of the organization under state law or the management company is related to the exempt organization, those employees and their compensation would be reported on Part VII of Form 990 as if they were direct employees of the exempt organization.
For more information, please contact:
Eleanor Livingston, CPA, MST
Not-For-Profit Tax Director
+1 847 773 0760