Form 990: Employee Compensation Disclosure

by Casey R. Good, CPA, Audit Manager

Posted on August 14, 2019

The annual Form 990 informational return for nonprofit organizations requires disclose of compensation information for specific employees, but who qualifies for disclosure?  Part VII of the 990 requires the reporting of officers, directors, trustees and key employees of the organization whose reportable compensation exceeds specific thresholds.  Here is a summary of the requirements for each potential category:

Officers, Directors, and Trustees

An officer is an employee elected or appointed to manage the organization’s daily operations.  A director or trustee is a member of the nonprofit’s governing body, but only if the member has voting rights.  Directors and trustees may or may not be compensated for their duties.

Key Employees

Key employees of the organization are those that meet all three of the following tests, applied in order;

  1. An employee receives reportable compensation from the organization and all related organizations in excess of $150,000 for the calendar year ending with or within the organization’s tax year.
  1. An employee who at any time during the calendar year ending with or within the organization’s tax year:
    1. Has responsibilities, powers, or influence over the organization as a whole that is similar to those of officers, directors, or trustees;
    2. Manages a discrete segment or activity of the organization that represents 10% or more of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole; or
    3. Has or shares authority to control or determine 10% or more of the organization’s capital expenditures, operating budget, or compensation for employees.
  1. If the employee is one of the 20 employees other than officers, directors, and trustees who satisfy the $150,000 test and responsibility test with the highest reportable compensation from the organization and related organization for the calendar year ending with or within the organization’s tax year.

Five Highest Compensated Employees

The nonprofit’s highest compensated employees are those other than the officers, directors, trustees or key employees listed above that received more than $100,000 of reportable compensation.

Current vs. Former

The Form 990 requires the organization to identify whether the individuals listed in Part VII are current or former employees/governing members.  But the distinction is somewhat tricky; to be considered current, an employee or governing member must have received compensation during the organizations tax year

As a reminder, all compensation should be reported for the calendar year ending with or within the organization’s tax year.  For example, if you have a June 30, 2019 fiscal year end, you would report the compensation for the calendar year ending December 31, 2018.