Buried in an obscure tax document are clues about how nonprofits are spending money to help—or challenge—your farm business. For top operators willing to do an Internet search, those publicly available data points can help you start a conversation with leadership about finance, governance and accountability.
The IRS requires nonprofits to complete a Form 990. Guidelines vary depending on gross receipts, total assets and tax structure. Associations filing this form are familiar: The National Corn Growers Association, the American Soybean Association and the National Pork Producers Council (NPPC) are just a few of many.
“The regular 990 has a full-blown balance sheet; it has a full-blown income statement,” says Paul Neiffer, principal at CliftonLarsonAllen and Top Producer tax columnist. “There are many, many questions and several schedules that, depending on the type of nonprofit organization, they are required to fill out.”
In addition to groups supportive of agriculture, 990s also are required of advocacy groups that challenge producers such as People for the Ethical Treatment of Animals (PETA) and The Humane Society of the United States.
Regardless of whose 990 you are viewing, Neiffer and others stress that while the forms are a good place to get some basic information about organizational practices, they are only a starting point.
“The financial information is the accurate financial information, but it doesn’t really give you the nuances, and it doesn’t really talk about the program areas and specifically the issues being addressed,” explains
Neil Dierks, CEO of NPPC.
Data Shed Light. Access to 990s can be obtained in several ways. Online search tools are available at sites such as GuideStar.org and FoundationCenter.org, allowing farmers to type in a few pieces of information such as organization name, ZIP code and fiscal year to view files. Many of them can easily be downloaded as a PDF.
In contrast to producers’ business tax filings, the 990 is far more comprehensive and includes a combination of concrete figures as well as open-ended questions.
“With a tax return, you’re dealing with objective items generally. It’s this number or it’s this number,” Neiffer says. “With a 990, part of it is, ‘Do you have a discrimination policy? If yes, is the discrimination policy in writing?’” Also included are sections identifying whether a nonprofit has policies on conflicts of interest and whistleblowers.
Farmers should pay attention to several key components of the document, Neiffer says. The front page is important. It summarizes an organization’s financial position.
“It tells me here’s how much revenue they generated, here’s how they spent it, here’s their beginning net worth and here’s their ending net worth,” he says.
At the same time, the form doesn’t articulate some higher-level financial details, Dierks adds. For example, producers can donate to NPPC’s strategic investment program, and 40% of those contributions are returned to state pork associations for local projects.
The national 990 doesn’t detail those disbursements. “A lot of what producers want to know is NPPC’s position on an issue,” Dierks says. “It’s a starting point.”
Next, producers should spend time reviewing pages 2 and 3 of the filing. This section includes some of the more subjective and text-based responses that reveal an organization’s values and focus areas.
“There’ll be a page that says describe the top five or 10 objectives of your nonprofit and the expenses or the income generated by that,” Neiffer says. Another valuable section is a list of the names of officers and directors making $100,000 or more. The document also identifies total compensation.
“If they’re generating $5 million of income and they’re paying salaries of $1 million or $2 million to these officers, is it really meeting its objectives?” Neiffer says.
He points out that while the IRS requires nonprofits to provide a list of donors who have given $5,000 or more, federal law does not require organizations to make that information public. Instead, the 990 simply lists the sum of all donations made during the fiscal year.
Begin The Conversation. Farmers should use the 990 to develop questions and follow up with nonprofits directly to get a comprehensive answer, Dierks advises.
“We’re more than willing to go through details. I think that’s the responsible thing to do,” he says. “This isn’t Neil Dierks’ association, this is their association.”
How to Read a 990
Among the most important sections of the tax filing required yearly by nonprofits is the summary section, says Paul Neiffer, principal at CliftonLarsonAllen and Top Producer tax columnist. Broadly, it helps farmers understand how agricultural associations are spending their money. Here are a few sections producers should read from the form, as outlined by GuideStar.org, which provides users with free access to many 990s.
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