IRS Updates Draft of 2018 Form 990

The passing of the Tax Cuts and Jobs Act (the Act) has incited the addition of two questions to the IRS’s draft of the 2018 Form 990 for tax-exempt organizations.

New Questions Are Added

Recently, the IRS released an updated draft of Form 990 that addresses new excise tax on compensation greater than $1 million and on educational institution’s net investment income. The first part of this two-question form addition relates to not-for-profit organizations and governmental entities, and the second addresses an educational institution’s net investment income.

Part One: Not-for-Profit, Government and Tax-Exempt

Not-for-profit organizations and governmental entities that pay any covered employee more than $1 million (excluding medical professionals receiving compensation for services) can expect a change in this year’s Form 990. Employers that fall under this umbrella pay a flat 21 percent tax on compensation higher than $1 million to the top five highest earning employees, and the form has been adapted to address this excise tax.

Part Two: Educational Institutions

Furthermore, the IRS’s updated draft includes a question on educational institution’s net investment income, as institutions that meet a number of requirements have to pay a 1.4 percent excise tax on their net investment income. These requirements mandate that:

  • over half of the institution’s students are located in the U.S.,
  • the entity had 500 students at minimum enrolled in the prior year,
  • the educational institution is not a state university or college,
  • and that the cumulative fair market value of their assets (other than those used in carrying out their exempt purpose) from the prior year is $500,000 or more per student.

The two new questions appear in Part V of Form 990’s draft.


While this form is only a draft and tax-exempt organizations must wait for guidance, we recommend that not-for-profit and governmental entities take a close look at the IRS’s updates. Our experts are available to answer any questions or to advise next steps to tax-exempt organizations.

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