Understanding the Form 990 for New Mexico Nonprofits

What Is the Form 990?

The IRS Form 990 is the annual information return that most tax-exempt organizations must file with the Internal Revenue Service. Despite being a tax form, it is not primarily about paying taxes. Rather, it is a public accountability document that discloses your organization's finances, programs, governance practices, and key personnel to the IRS, to state regulators, and to the general public.

The Form 990 is public information. Any member of the public, donor, funder, journalist, or watchdog can access your 990 through the IRS website or through services like ProPublica's Nonprofit Explorer or Candid's GuideStar database. Your 990 is, in effect, your organization's most widely read document. How you present your programs, finances, and governance in the 990 directly affects how donors and funders perceive your organization.

Who Must File, and Which Form?

The form you file depends on your organization's size and type:

• Form 990-N (e-Postcard): For organizations with annual gross receipts normally under $50,000. This is a simple online filing with basic information about the organization.
• Form 990-EZ: For organizations with gross receipts under $200,000 and total assets under $500,000. A shorter version of the full 990.
• Form 990: For organizations with gross receipts of $200,000 or more, or total assets of $500,000 or more. The full form includes detailed schedules on compensation, fundraising, governance, and other topics.
• Form 990-PF: For private foundations, regardless of size.

The filing deadline is the 15th day of the fifth month after the end of your fiscal year. For organizations with a December 31 fiscal year end, that is May 15. Extensions of six months are available by filing Form 8868.

What the 990 Discloses

The full Form 990 requires detailed disclosure of:

• Revenue: All sources of income, including grants, contributions, program service revenue, investment income, and special event proceeds
• Expenses: Broken down by program, management and general, and fundraising, and by type (salaries, occupancy, printing, etc.)
• Program accomplishments: A description of your three largest programs, including the number of people served and key accomplishments
• Key employees and compensation: The names and compensation of your five highest-paid employees, your board officers, and any employee earning more than $100,000
• Board governance: Whether you have a conflict of interest policy, whistleblower policy, and document retention policy; whether the board reviewed the 990 before filing
• Independent contractor compensation: Service providers paid more than $100,000

Why the 990 Matters for Fundraising

Many foundations require a copy of your most recent 990 as part of grant applications, and sophisticated individual donors increasingly use 990 data to evaluate organizations before giving. Charity watchdogs like Charity Navigator and GiveWell use 990 data to rate nonprofits' financial health and efficiency.

Common things funders look for in a 990:

• Reasonable ratio of program expenses to total expenses (most watchdogs suggest 75% or more going to programs)
• Whether the organization is growing or declining and whether it has adequate reserves
• Executive compensation that is reasonable relative to the organization's size and the market for similar roles
• Good governance practices: conflict of interest policy, independent board, appropriate financial controls

New Mexico Filing Requirements

In addition to the federal 990, New Mexico nonprofits that solicit charitable contributions must file annual reports with the New Mexico Attorney General's Charitable Organizations program. These reports typically include financial information and are due within six months of your fiscal year end. The Attorney General's office uses these reports to monitor compliance with state charitable solicitation laws.

New Mexico also requires nonprofit corporations to file annual reports with the Secretary of State, currently a $10 filing, to maintain good standing as a corporation. Failure to file can result in administrative dissolution, which can have serious consequences for the organization's legal status and its ability to enter contracts or receive grants.

Preparing a Good 990

The 990 should be prepared by or in close consultation with a CPA experienced in nonprofit accounting. The board should review the completed 990 before it is filed, not just sign off on it without reading it. The 990 is a legal document signed under penalty of perjury by an authorized officer, so it is important that it accurately represents the organization's activities and finances.

The program description section of the 990 is an opportunity to communicate the value of your work to the public. Write clear, compelling descriptions of your programs that explain what you do, how many people you serve, and what impact you achieve. These descriptions are often the first thing a potential donor or funder reads about your organization.