Part II: Compensation and Other Financial Arrangements
From NCCS Wiki
It is of great value to researchers and donors to have information on the number of employees.
However, it is unclear the value of disclosing the number of employees that earn $100K or more By federal government standards, this is not a recognized threshold that distinguishes highly compensated employees. The highest tax bracket (35%) does not apply until adjusted gross income for a single individual is 349,700 and the next highest tax bracket (33%) starts at 160,850.
The $100K threshold might encourage nonprofits to break apart the compensation of a highly paid employee into several amounts paid by separately incorporated nonprofits that file separate Form 990s. I salute the IRS for trying to prevent this behavior by requiring a nonprofit to report the compensation received by an employee from related organizations.
Unfortunately, the $100K threshold will likely have the undesirable effect of encouraging nonprofits to pay more people as subcontractors rather than employees. It would be helpful to require nonprofits to provide the number of people paid on Form 1099s with some caveats designed to be sure the number includes people operating as LLCs, etc.
In my view, excessive compensation is not [? PB] the pervasive problem in the sector, rather compensation benefits that are insufficient, making it difficult to attract and retain employees. I would personally prefer to have the front page and Part II highlight the number of employees without health insurance and pension plan coverage than the number of folks paid $100K as it would highlight the real employee-related problems in the sector.
Elizabeth Keating CPA, 23 June 2007
Jack Siegel makes the good suggestion in his recent post on the new Form 990 (in http://www.charitygovernance.com/charity_governance/files/july_29_2007_jack_siegel_comments_re_june_14_2007_irs_form_990_proposed_revisions_instructions.pdf on page 9) that the compensation of the five highest-paid employees should be reported without regard to whether they are paid more than a certain threshold. His rationale is that the data are useful for comparative purposes (and that many small organizations would benefit). It seems to me also that placing a floor under the reportable compensation levels encourages the creation of misleading statistics, since medians and means of a distribution that is truncated by removing the lowest entries will necessarily be higher than the corresponding statistics calculated for the full distribution. Putnam Barber 18:53, 7 August 2007 (MDT)
