The $5.4 billion Lake Michigan Credit Union in Grand Rapids and the $4.7 billion DFCU Financial Credit Union in Dearborn did not fully comply with IRS reporting requirements for executive compensation, their 990 forms show.

For example, LMCU reported in its 990 forms for 2016 and 2015 that President/CEO Sandy Jelinski and CFO Peter Dann received zero compensation. What's more, LMCU did not report specific compensation information for other top executives in its 990 forms from 2011 to 2016. Michigan's largest credit union by assets and members also did not list the names of board members as required by the IRS even though this information is publicly available on the NCUA's website. Similarly, DFCU Financial, Michigan's second largest credit union by assets and third by members, did not report required executive compensation information, including that of its President/CEO Mark Shobe, in its 990 forms from 2013 to 2016.

According to IRS regulations and financial and tax experts with 990 expertise, any nonprofit that does not fully disclose this information could risk their tax exempt status, face stiff fines or could come under scrutiny by an IRS audit.

CU Times reviewed the 990 forms of the top 55 state-chartered credit unions, by assets, and found all of them except for LMCU and DFCU complied with IRS requirements in reporting executive compensation.

However, CU Times also found that the $3.1 billion MidFlorida Credit Union, the Sunshine State's fourth largest credit union by assets and members, did not fully report executive compensation from 2011 to 2016. But the Lakeland-based credit union acknowledged these were oversights made by an outside accountant. Those oversights were also missed by the credit union, said Zelda Abram, MidFlorida's CFO. Although MidFlorida correctly reported its W-2 executive compensation, it mistakenly did not break out the total compensation numbers in reporting other forms of compensation such as deferred compensation, bonuses, incentives and retirement, Abram said.

"I appreciate the fact that you pointed it out," Abram said. "We had a good conversation with the preparer. It's definitely something that we need to look harder at going forward."

In regards to any nonprofit that does not report executive compensation for several years, the IRS could determine the 990s were incomplete and/or inaccurate. When that occurs, the federal agency could conclude that the organization had never filed their 990s forms altogether, according to Julius Green, a partner at Philadelphia-based Baker Tilly Virchow Krause, LLP, who leads the firm's exempt organizations practice.

"Failure to file an accurate return could be viewed as failure to file," he said. "Failure to file for three consecutive years could result in loss of tax exempt status. That would be the most extreme case/position that the IRS could take."

Agreeing with Green is Lauren A. Haverlock, a senior manager and CPA at accounting, consulting and wealth management firm Moss Adams headquartered in Seattle. Haverlock exclusively works in nonprofit compliance, consulting and accounting services.

She pointed out there are no exceptions in reporting executive compensation in a different way or manner. And if an organization does not include all of the required information, technically, that organization has submitted an incomplete or inaccurate 990.

"An incomplete tax return is deemed to (have) never been filed, and if you don't file a tax return for three years in a row, your exemptions are (automatically) revoked," Haverlock said. "This is the risk. This is the worst that would happen if it was discovered, and the IRS addressed it with you."

But Marc Berger, national director of the nonprofit tax service for BDO USA LLP in Washington, D.C., said there is nothing in federal law that says if an organization filed an inaccurate or incomplete 990, then the IRS considers that unfiled for purposes of the automatic three-year tax exempt revocation.

He pointed out that the IRS gives an organization a chance to correct and refile the 990 if it is determined to be inaccurate or incomplete. If the organization fails to comply, the IRS could impose fines against the organization or against individuals who signed the 990 form.

"I haven't seen, in my experience, a situation when an organization's tax exempt status was removed because of incomplete returns, but I would point you to the first page of the (990) return," Berger explained. "Right above the signature box, it says, 'under penalties of perjury, I declare that I have examined this return and that all accompanying schedules and statements, to the best of my knowledge, are true, correct, and complete.' I wouldn't want to be in a position of an officer that's going to sign a return that doesn't have executive compensation listed."

However, Sarah Avery, a CPA and director at Friedman LLP in East Hanover, N.J., who specializes in audit and tax compliance services for nonprofits and private foundations, said that it is in the IRS statutes that if the 990 return is incomplete, the federal agency considers it as if the 990 document had never been filed.

Michael Schaffer, tax managing director in BPM's Nonprofit Industry Group in San Francisco and a former IRS employee, agreed with Avery. But he also said it's important to keep in mind that whether the IRS takes this action, or not, is completely discretionary on the agency's part.

"It certainly does have the discretion to revoke, and has shown that it will do so, where an organization refuses to follow rules with which it has been made aware," Shaffer said.

He noted the IRS could decide to impose stiff fines of $100 a day, up to a maximum of $50,000, for nonprofits that have posted more than $1 million in gross receipts.

According to an IRS report, it conducted more than 6,000 examinations and it revoked the tax exempt status of 63 organizations in 2017.

An incomplete or inaccurate form also can lead the IRS to conduct an audit of the organization, which Schaffer described as an intrusive process.

Stephen Fishman is a San Francisco-based attorney, tax expert and author of several business books including "Every Nonprofit's Tax Guide," which printed its 5th edition in January.

"By far the least welcome interaction your nonprofit can have with the IRS is an audit," he wrote.

Until recently, the IRS audits of nonprofits were relatively rare, but that is changing.

"In the past few years, the IRS has placed a new emphasis on enforcement in all areas, including tax compliance by nonprofits," Fishman said. "As a result it has increased audit and other contact with all types of nonprofits."

According to an IRS report, it conducted more than 6,000 examinations and it revoked the tax exempt status of 63 organizations in 2017.

In LMCU's 990 forms for 2016 and 2015, the credit union listed zero reportable compensation for LMCU President/CEO Sandy Jelinski and zero reportable compensation for LMCU Chief Financial Officer Peter Dann.

Although Jelinski and Dann did not respond to CU Times requests for comment, LMCU lawyer Chuck Holzman, said that to the "best of their knowledge, information and belief, LMCU is in full compliance with all of its reporting obligations and have never been notified that they have failed to satisfy any reporting requirement."

When asked to provide specific information to show that LMCU was in full compliance, Holzman did not respond to CU Times request.

In the credit union's 990 form for 2016, LMCU reported that an officer of the credit union received more than $4.3 million in W-2 compensation, and more than $235,000 in other compensation, but the officer's name and title was not listed. The IRS requires the name and title of the officer to be listed.

That unidentified LMCU officer received more than  $4.3 million in total compensation, which is about 58 times more than what the average LMCU employee made. In 2016, the approximate average LMCU employee salary and benefits amounted to roughly $74,699, according to its financial performance report filed with the NCUA. This salary and benefits number is arrived at by dividing the credit union's total cost number that it paid in employees' salaries and benefits by the number of the credit union's full-time equivalents.

LMCU also did not report the names, titles and compensation of other highest paid executives, required by the IRS. The credit union did report what appears to an aggregate number of more than $2.6 million and more than $74,000 in other compensation for these highest paid executives.

What's more, LMCU did not list the names of board members. This information is also required  by the IRS regardless of whether the directors receive compensation.

LMCU indicates in its 990 forms that the list of executives, their titles and what they earned, and a list of its board members, are "available upon request."

Avery of Friedman LLP noted that the aggregate numbers in LMCU's 990s and the credit union's statement that the executive compensation and the board member information is "available upon request," is something she has never seen reported before on 990 forms, and it doesn't comply with IRS regulations.

She pointed out that the 990s are not just for the IRS to review whether nonprofits are complying with federal laws that govern tax exempt organizations. The 990s are also important for public disclosure because American taxpayers are essentially subsidizing nonprofits through the exemption.

"The general purpose of the 990 is to provide transparency, so obviously, this kind of a disclosure did not provide any transparency," Avery explained. The lack of transparency causes you to ask more questions because you can't come to any conclusions based on the information presented."

CU Times requested LMCU's "available upon request" executive compensation information in April for a separate article, published May 11, about the 21% excise tax on executive compensation and how many credit union executives may be affected by this new tax. That request was not fulfilled.

In its 990 form for 2015, LMCU again reported zero compensation for Jelinski and Dann. And just like 2016, the Michigan credit union reported that an officer received more than $3.9 million in W-2 compensation and an additional $279,000 without reporting who the officer was or his or her title.

Moreover, LMCU did not report the names, title and compensation of other highest paid executives, but it did list what appears to be an aggregate number of more than $2.5million and more than $114,000 in other compensation for these highest paid executives.

Under Schedule J of LMCU's 990 form for 2015 and 2016 that breaks down the total compensation of each the credit union reported what appears to be two sets of aggregate numbers, but it failed to identify each executives' name, their title and the total compensation they received.

Additionally, for LMCU's 990 forms it filed with the IRS in 2011, 2012, 2013 and 2014, the credit union only listed what appears to be one and/or two sets of aggregate compensation numbers. But the credit union did not list the executive names, titles or specific compensation that they received in Part VII or Schedule J, as required by the IRS. In Schedule J, LMCU did break out the aggregate number to show how much was paid in base compensation, bonus and incentive, other reportable compensation, retirement and deferred compensation and nontaxable benefits but, again, the credit union did not report the name and title of the executives who received this compensation, LMCU's 990 forms show.

In its 990 forms from 2013 to 2016, DFCU Financial also failed to report executive names, titles and compensation and board member names in Part VII. The credit union reported what appears to be an aggregate compensation number in Part VII but it does not name the executive or title. Moreover, the credit union also fails to report each executives' name, title and specific compensation they received in those years.

DFCU reported that the unidentified former key executive received more than $5.6 million in total compensation in 2016, which is about 66 times more than what the average DFCU employee made. In 2016, the DFCU employee salary and benefits roughly totaled $85,006, according to its financial performance report filed with the NCUA. This salary and benefits number is calculated by dividing the credit union's total cost number that the credit union paid in employees' salaries and benefits by the number of the credit union's full-time equivalents.

Moreover, in DFCU Financial's 990 form for 2014, it reported that an officer received more than $9.5 million in total compensation or 108 times what the rough average of $88,008 made by the credit union's employees in 2014.

While DFCU Financial did report the names of board members and executives and their titles in Schedule J, it failed to report any specific compensation for each executive, as required by the IRS.

The credit union did not respond to CU Times email and phone requests for comment.

DFCU Financial also indicated in its 990 forms that the executive list of names, title, and presumably their compensation, would be provided in "detail available upon request." In April, for an article on the 21% excise tax on executive compensation, published May 11, the CU Times requested this executive list from the credit union's 990 form for 2016. That request was not fulfilled.

Because of privacy regulations, an IRS spokesperson declined to address CU Times questions regarding the Michigan credit unions, including whether the federal agency did not detect the incomplete and/or inaccurate 990 forms for several years.

LMCU's lawyer claimed that the credit union was never notified that it failed to satisfy any 990 reporting requirement.