Tip Sheets

How to understand a 990

By J. Duncan Moore Jr. and Kristen Hallam

Nothing sets a not-for profit organization's teeth on edge quite like a phone call from a reporter asking to see its IRS Form 990. "Why?" "What do you need that for?" "What are you going to say about us?" are typical responses from the P.R. department as they fumble for reasons not to let you see it. "We don't know who has it," "We're not required to file one," and "The dog ate it," are less frequently heard but not out of the question.

Most frequently heard, unfortunately, is: "No, we won't send you a photocopy. You'll have to come here and look at it," when "here" may be anywhere from 10 to 1,000 miles away. And that, until very recently, has been a perfectly legitimate response under the law.

But thanks to new regulations that went into effect in 2000, reporters shouldn't hear that excuse any longer. Now you should be able to get your hands on a 990 promptly and with a minimum of fuss, and at a nearby location. The 990 is a tax return for a tax-exempt organization. The same way you file a Form 1040 as an individual, your local tax-exempt hospital, health plan or foundation files a Form 990.

Since the Tax Reform Act of 1986, the 990 is required to be publicly available to anyone who asks, with certain restrictions. The organization did not have to provide a photocopy or mail it to the requester. All it was obligated to do was make it available for viewing at its main office.

Certain corporate good citizens, such as SSM Health Care in St. Louis, have been known to photocopy the whole thing, bundle it into a FedEx package, and ship it the same day, on request. Other organizations, such as the American Medical Association, insisted that you come look at the document at its headquarters in Chicago and declined to provide a photocopy.

This is what the new regulations changed. As part of The Taxpayer Bill of Rights of 1996, Congress intended to make charities and other not-for-profits more accountable for their privileged tax status. The legislation ordered the Internal Revenue Service to write new regulations making their tax returns more accessible to the public.

That's good news for health care reporters, since about 80 percent of hospitals are not-for-profit institutions. It may not be such good news for some of those institutions, if past practice is any guide. One of the reasons Congress tightened these requirements is because citizens complained that these organizations were stonewalling on making the 990s available.

Usually the big thing they are worried about is the executive compensation. The 990 reveals salary and benefits for the five most highly-paid employees. It also tells compensation for officers and directors. Many reporters have garnered eye-catching headlines by revealing the salaries and perks of the top dogs at local not-for-profit establishments. (Even so, the 990 provides less information on executive compensation than a proxy statement of a for-profit company.)

For that and other reasons, working with a 990 can put you into an adversarial relationship with the organization you are researching. They may regard your inquiries as unfriendly. One citizens group we know that went around requesting hospitals' IRS 990s found itself being checked out by a private investigator in turn.

Aside from any sensation mongering, the 990 can give you a wealth of information about the organization. Among other things it tells you the organization's revenues and expenses, and its assets and liabilities. You can see whether or not it is making a profit, and how its fund balance, or net assets, has changed over the past year.

You can also see how the organization is spending its money: how much for legal fees, for travel, for conferences, accounting services, and so forth. Bear in mind that the tax return submitted to the IRS follows a strict format and might not show the same numbers as an audited financial statement. Still, in general, the numbers in the boxes should represent the same thing from organization to organization. Here are some tips:

• Ask for and read 990s from the parent company and all related organizations. Sometimes executive compensation can be spread around among several subsidiary organizations. If you only see the parent's 990, you might miss the odd $20,000 here and $200,000 there.
• Read the list of directors. There you may get an idea of how well the organization is connected to community and political leaders.
• Compare the 990s year by year. You are allowed to see the three most recent years' returns. Observe how the numbers and names change from year to year.
• Understand how long it takes. It takes organizations typically from six months to nine months after the end of their tax year to file these documents. Don't get impatient if they can't provide you the return for the tax year ending Sept. 30 any sooner than the following spring.
• Look at the list of five highest paid independent contractors. Also look over the list of scholarship and grant recipients.
• Look for the unreimbursed care. One section of the form lists all the activities the organization performs to justify its tax-exempt status. A hospital typically will state the value it attaches to the unreimbursed care it provides.

If you request the 990 in person from the organization's home or regional office, you can expect a copy within one business day. That's a new feature of the law. Previously, only the main headquarters was required to make a copy available for viewing. Now, reporters can take a photocopy back to their desks and dig through it without public relations directors leering over their shoulders.

Regional or district offices, which may include clinics or other satellite facilities of a hospital, must now keep a copy on hand for public inspection. In the case of a large multi-hospital system, each hospital within that system may need to keep a copy of the umbrella system's 990 as well as its own, if it files separately.

However, it may be more expedient for you to go directly to the main office, if possible. Regional offices in some cases are allowed as long as two weeks to comply with such requests.

Any site where 990s are on file is required by law to keep copies of their last three years' returns on hand.

The law also applies to all supporting documents to the 990, and to the organization's initial application for tax exemption. Make sure to request all the supporting documentation. Some organizations will place the executive compensation in an appendix that you won't receive unless you ask for it. The organization may charge you a "reasonable" copying fee.

That means not-for-profit organizations must set up a protocol for processing and complying with such requests. For those reasons, the new regulations give health care providers an incentive to post their 990s on the Internet to avoid the costs and disruption associated with copying the forms on site.

Even if the organization chooses not to post its 990 on the Internet, nothing prevents other individuals or groups from doing so. The IRS also plans to put recent 990s on CD-ROM. It is unclear what the agency will charge for such a collection.

Finally, if an organization tries to thwart efforts to obtain a copy or view a copy of its form 990 or application for exemption, reporters can complain to the IRS. The agency says it will take all complaints seriously.

If you feel you have been unlawfully denied access to such public documents, write or fax a letter to the district director for the area where the organization is located. You may contact the IRS' national press office at 202-622-4000 to determine who the proper district director is.

Based on a quick perusal of the Web, most healthcare organizations haven't put these documents on their web sites. The American Red Cross is a notable - and laudable - exception. Go to the "Governance" section of their Web site .

Moore co-founded the Association of Health Care Journalists when he was a reporter for Modern HealthCare magazine. He is now a Writer/Editor for McKinsey & Co. Hallam is a reporter for Bloomberg News in London and a member of the AHCJ Board of Directors. They wrote this piece in 2000 for HealthBeat, AHCJ's newsletter.