IRS Form 990 FAQs
Below are general questions and answers to assist our community in understanding the Internal Revenue Service (IRS) Form 990.
What is the purpose of Form 990?
Completing Form 990 is a United States Internal Revenue Service (IRS) requirement for federally tax-exempt organizations. The form consists of schedules designed by the IRS to address its information requirements. It also enhances transparency to the public through various financial statements and schedules and narrative disclosures. In addition to posting Form 990 on the ICANN organization's website like any nonprofit organization in the U.S., it is also posted on Guidestar.org, the publication portal designated by the IRS for public viewing.
Why is some of the financial information represented in Form 990 over one year old?
ICANN organization has a fiscal year ending 30 June and IRS forms are traditionally based on calendar years ending 31 December. Therefore, the organization's Form 990 contains information related to its fiscal year ending 30 June and also contains information related to the prior calendar year ending 31 December. Because the IRS filing deadline for Form 990 is based on an organization's fiscal year end, certain information contained in Form 990 that is related to the prior calendar year (such as compensation amounts) may be more than a year old when Form 990 is filed.
Why are some of the figures reported in Form 990 different from the audited financial statements?
Some financial information reported in Form 990 varies from the audited financial statements due to differences between tax reporting requirements for Form 990 and Generally Accepted Accounting Principles (GAAP) reporting requirements for the audited financial statements. For example, investment management fees might be reported as administration expenses in Form 990 and as other income/expense in the audited financial statements. Both are correct. Tax reporting requires various adjustments for treatment of unrealized gains/losses, management investment fees, and timing.
One of the primary differences between amounts reported in Form 990 and the audited financial statements is due to the different reporting timeframes. ICANN organization's fiscal year ends 30 June and, therefore, the audited financial statements report from 1 July through 30 June. However, Form 990 is filed for calendar years and typically includes amounts from the preceding calendar year, 1 January through 31 December. As a result, the various schedules like Part VII, Compensation in Form 990 include amounts that relate to the prior calendar year rather than the organization's fiscal year.
Additionally, the audited financial statements are presented on a consolidated basis for ICANN, such that they include financial information from both ICANN and its affiliate, PTI. However, ICANN and its affiliate are each required to file a Form 990 separately. This can create differences between the ICANN audited financial statements and the ICANN Form 990.
What are the Functional Expenses reported in Part IX of ICANN's Form 990?
In Form 990, functional expenses are reported as: (a) Program service expenses; (b) Management and General expenses; and (c) Fundraising expenses. ICANN organization provides detail by certain types of expenses, as required by the IRS, and classifies Program expenses as those that directly relate to the mission of supporting the stability and interoperability of the domain name system. Program expenses are broken down by: (i) funding provided to perform the IANA functions; (ii) the cost of hosting global meetings; (iii) grants given to other nonprofit organizations and individuals; and (iv) and legal and lobbying expenses to support the activities related to the mission. Payroll expenses and overhead expenses are allocated between Program, and Management and General expenses. The remainder of operating and managerial expenses are classified as Management and General expenses. The organization does not have Fundraising expenses.
Why is compensation reported for certain individuals?
ICANN organization is required to disclose compensation for key individuals including: directors, trustees, officers, key employees, and highly compensated employees. This information is reported in Part VII of Form 990. The same individuals' compensation that meet thresholds for reporting are also reported in Schedule J, which total compensation including base pay, at-risk compensation, deferred compensation (401(k) match), and other benefits (such as medical, dental, life insurance, etc.).
Why are there zeros listed for some of the compensation amounts in Part VII of Form 990?
Board members often establish separate legal entities or what is called "Doing Business As" (DBAs). When separate DBAs or legal entities are established by Board members and provided to ICANN organization for payment processing, compensation and other forms of reimbursement are made payable to the business entity name rather than to the individual. Per IRS requirements, Part VII of Form 990 only lists compensation paid directly to the named individuals, not business entities. The organization has chosen to disclose compensation paid to business entities in the supplemental notes to Form 990 found in Schedule O for transparency.
What is reported in the supplemental information section of Form 990?
Schedule O of Form 990 is a narrative that provides the IRS with information required for responses to specific questions. It also reports additional information that the organization deems beneficial to disclose to the community and the general public.