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Form 990
and 990-EZ
Form 990 series returns are
required to be filed by most tax-exempt organizations, except
for church and government-affiliated organizations. Form 990 is
the IRS primary tool for gathering information about tax-exempt
organizations, for educating organizations about tax law
requirements and ensuring their compliance. Organizations use
it to inform the public about their programs. In addition, most
states rely on Form 990 to perform charitable and other
regulatory oversight, and to satisfy state income tax filing
requirements for organizations claiming exemption from state
income tax.
What is Form 990?
Form 990, Return of Organization Exempt From Income Tax, is
the annual information return for tax-exempt organizations,
including political organizations.
What is Form 990-EZ?
Form 990-EZ is the short form of the annual information
return for exempt organizations, including political
organizations. A political organization required to file Form
990 that has not exceeded thresholds for the its total gross
receipts during the year and total assets at the end of the year
may file Form 990-EZ instead of the Form 990. See
Filing Phase-In for more information about the thresholds.
Who has to file Form 990?
Tax-exempt political organizations whose annual gross
receipts are $25,000 or more must file Form 990, unless
excepted. Any organization excepted from the
requirements to file a Form 8871 and any political
organization that is a caucus or association or state or local
officials are excepted from the Form 990 filing requirement.
Qualified state or local political organizations are only
required to file Form 990 if they have annual gross receipts of
$100,000 or more.
Note: Organizations whose gross
receipts during the year and total assets at the end of the
do not exceed certain thresholds may file Form 990-EZ
instead of Form 990. See
Political Organizations That May File Form 990-EZ for
more information.
Does a tax-exempt political organization whose annual
gross receipts are normally $25,000 or more have to file a Form
990 for any year in which its annual gross receipts are less
than $25,000?
No. Unlike other exempt organizations, a tax-exempt
political organization does not use the three-year averaging
test to determine whether it meets the $25,000 threshold. The
organization should indicate the amount of its gross receipts in
the header area of the return (Item G), because the IRS may
otherwise correspond with the organization regarding the filing
of Form 990. Note that the $25,000 filing threshold is
increased to $100,000 for qualified
state or local political organizations.
When is Form 990 due?
Form 990 is due on the 15th day of the 5th month following
the end of the organization's taxable year. For organizations on
a calendar year, the Form 990 is due on May 15th of the
following year.
See:
Return Due Dates for Exempt Organizations Annual Returns
May a political organization request an extension
of the due date for filing Form 990?Yes, the
organization may request an automatic three-month
extension, without showing cause, by filing
Form 8868 , Application for Extension of Time
to File an Exempt Organization Return, by the
due date of Form 990. A second three-month
extension, with cause, may also be requested using
Form 8868.
How does a political organization report its
income in Parts I and VIII of Form 990?
That an item of income is treated as a
contribution for purposes of election law reporting
does not necessarily mean it is reported as a
contribution on Form 990. Instead, the political
organization must determine the various types of
income it has and report each type on the
appropriate lines in Parts VIII and I of Form 990.
For example, membership dues and assessments are
reported on line 1h, Part I, of the 2008 return,
whereas political fundraising or entertainment event
income is generally reported as income from
fundraising events on line 1c. Unlike Form
1120-POL, all income of the political organization
is reported on the Form 990 (including contributions
(line 1)) and taxable income (such as interest and
dividends (line 10 of the 2008 form)).
Does a political organization need to identify
contributions as being from federated campaigns,
membership dues, fundraising events, related
organizations, government grants (see line 1 of the
2008 return)?
No, a political organization may report all of
its contributions on the total line (1h of the 2008
Form 990) without breaking out federated campaign
contributions, membership dues, fundraising events,
contributions from related organizations, and
government grants. It does need to identify
contributions as cash or non-cash.
Does a political organization report as a
contribution in Part I of Form 990 the value of the
use of materials, equipment or facilities provided
by a connected organization that is not required to
be reported as a contribution under federal election
law?
No.
How does a political organization report a
loan?
A political organization reports a loan with
repayment obligations in Part X of Form 990 as an
account payable (line 17 on the 2008 form) or as a
loan from an officer, etc. (line 5).
How does a political organization report its
expenses in Part IX of Form 990?
A political organization reports all its expenses
(including its political campaign expenses) in Part
IX, Column A of Form 990. It does not need to
allocate these expenses among columns B (program
services); C (management and general); and D
(fundraising expenses).
How does a political organization that makes
contributions to candidates or other political
organizations report them in Part IX of Form 990?
Contributions to candidates or other political
organizations are reported as grants (line 2, Part
IX of the 2008 form).
Does a political organization need to report
joint costs in Part IX of Form 990?
No, a political organization does not need to
report joint costs in Part IX of Form 990 because it
is not required to allocate expenses between program
services, management and general, and fundraising
costs.
How should a political organization describe
its exempt purpose in Part III of Form 990?
The exempt purpose of a political organization is
to engage in political campaign activity. An
organization may want to be more specific in
describing its purpose. For example, a candidate
committee may describe its purpose as "To elect X to
Congress" while an environmental PAC may describe
its purpose as "To elect candidates who support
environmental issues."
How would a political organization
describe its program service accomplishments in Part
III of Form 990?
Part III of Form 990 provides an opportunity for
a political organization to describe its activities
and how they further its exempt purpose. In some
cases, this will be fairly straightforward. For
example, a candidate committee's program service
accomplishment would be conducting the campaign to
elect X to Congress. In other cases, particularly
for those organizations that engage in indirect as
well as direct political campaign activities, a
political organization may use this section to
describe how various activities are intended to
influence elections.
What does a political organization report in
Part VII of Form 990?
Internal Revenue Code section 527 does not
require political organizations to be organized with
boards of directors, officers and trustees, but if
the political organization is organized in this way,
it must provide the names, addresses, title, average
hours worked and compensation of those officers,
directors and trustees, key employees, highest
compensated employees, and independent contractors.
Does a political organization have to report
the compensation of one of its officers, directors,
trustees or key employees that is paid by a related
organization?
In general, a political organization must report
on
Form 990, Part VII (and on
Schedule J, if Schedule J is required) the
compensation of its officers, directors, trustees,
and key employees that is paid by
related organizations. A political organization
need not report reportable compensation of less than
$10,000 from a related organization on Part VII
(though it must be reported on Schedule J, if
Schedule J is required). A political organization
need not report compensation from certain for-profit
related organizations if the officer, director,
trustee, or key employee serves the political
organization on a volunteer basis.
What is a related organization for
purposes of reporting compensation paid by related
organizations on Form 990?
A related organization is any organization that
meets one of the following tests:
- Fifty percent or more of the political
organization's officers, directors, trustees or
key employees are also officers, directors,
trustees or key employees of the other
organization.
- The political organization appoints fifty
percent or more of the other organization's
officers, directors, trustees or key employees.
- Fifty percent or more of the political
organization's officers, directors, trustees or
key employees are appointed by the other
organization.
Does a political organization
need to complete Part VIII of Form 990?
No, because the political organization
is subject to tax under Code section 527
rather than under the
unrelated business income tax provisions
of section 511-514.
What does a political
organization report on Schedule R of
Form 990?
If the political organization owns
more than fifty percent or more of any
taxable subsidiary or disregarded entity
(partnership or limited liability
company), it must report the name,
address, employer identification number,
activities, and income and assets of the
entity, along with the percentage the
political organization owns of the
entity. It must also report this
information for certain nonprofit
organizations. See the instructions to
Schedule R for more information.
Does a political organization
need to complete Schedule A of Form 990?
No
Does a political organization
complete Schedule B of Form 990?
Yes, if the political organization
received contributions from any one
person aggregating $5,000 or more for
the year. Note, however, that a
political organization
need not report on Schedule B information
about contributors for which information
need not be reported on Form 8872.
If a political organization
that files Form 8872 chooses not to
disclose a contributor on that form, is
it required to disclose the contributor
on Schedule B of Form 990?
A political organization that files
Form 8872 is not required to disclose on
Schedule B of Form 990 the name and
address of any contributor that it did
not disclose on Form 8872. It must
disclose the amount of the contribution
and that it paid the amount specified
under section 527(j)(1) for that
contribution.
What if the political
organization fails to file Form 990?
A political organization that fails
to file a required Form 990 or fails to
include required information on those
returns is subject to a penalty of $20
per day for every day such failure
continues. The maximum penalty imposed
regarding any one return is the lesser
of $10,000 or 5 percent of the gross
receipts of the organization for the
year. In the case of an organization
having gross receipts exceeding
$1,000,000 for any year, the penalty is
increased to $100 per day with a maximum
penalty of $50,000.
Are Forms 990 filed by
tax-exempt political organizations
publicly available?
Yes, Forms 990 filed for taxable
years beginning after June 30, 2000,
including contributor information
reported on Schedule B, will be made
available for public inspection by the
Service. In addition, each political
organization must make a copy of these
returns, including contributor
information reported on Schedule B,
available for public inspection during
regular business hours at its principal
office (and any regional or district
offices having at least three paid
employees)
in the same manner as Internal
Revenue Code section 501(c)
organizations provide copies of their
annual returns.
See:
Penalty for organization's failure to
disclose
What if the tax-exempt political
organization does not make its Forms 990
publicly available?
A penalty of $20 per day may be
imposed on any person with a duty to
comply with the public inspection
requirements for each day a failure to
comply continues. The maximum penalty
that may be incurred for any failure to
disclose any one return is $10,000.
The following are frequently asked questions and tips address various
questions pertaining to Form 990 reporting of arrangements
between a filing organization and its related organizations,
including disregarded entities, exempt organizations,
partnerships, trusts, and corporations.
Schedule R,
Related Organizations and Unrelated Partnerships , is
used to identify, and provide certain information regarding,
related organizations and certain unrelated partnerships. These
FAQs and Tips also address the general reporting requirements
for group returns.
Schedule R requires certain information
reporting regarding related organizations. What are
related organizations for purposes of Schedule R?
Related organizations are organizations
that stand in a parent/subsidiary relationship,
brother/sister relationship, or supporting/supported
organization relationship. Supporting and supported
organizations are defined in section 509(a)(3) and
509(f)(3). Determination of the first two
relationships depends on a definition of control set
forth in the
Form 990 instructions glossary and
Schedule R instructions. The definition of
control depends on whether the organization has
owners or persons with beneficial interests.
How is control defined for
nonprofit organizations and organizations without
owners or persons with beneficial interests?
There is a parent/subsidiary relationship between
such organizations if:
-
one organization (the parent) has the power
to remove and replace, or a continuing power
to appoint or elect, a majority of the
directors or trustees of the other
organization (the subsidiary).
-
there is a management or board overlap
situation where officers, directors,
trustees, employees, or agents of one
organization (the parent) constitute a
majority of the directors or trustees of the
other organization (the subsidiary).
There is a brother/sister relationship between
such organizations if the same persons constitute a
majority of the members of the governing body of
both organizations.
How is control defined
for nonprofit organizations and
organizations with owners or persons
with beneficial interests?
There is control if one organization
(the parent) owns more than 50 percent
of the other organization (the
subsidiary), as follows:
-
more than 50 percent of the
stock (measured by voting power
or value) of a corporation;
-
more than 50 percent of the
profits or capital interest in a
partnership (or limited
liability company (LLC) treated
as a partnership); or
-
more than 50 percent of the
beneficial interests in a trust.
There are also several special rules
for treating a partner or member (the
parent) as controlling a partnership or
LLC (the subsidiary):
-
an organization that is one of
three or fewer managing partners
or managing members is deemed to
control that partnership or LLC;
-
an organization that is one of
three or fewer general partners
in a limited partnership is
deemed to control that limited
partnership; and
-
the sole member of a disregarded
entity controls the disregarded
entity (for example, a
single-member LLC) .
In the first two situations, control in
fact typically exists regardless of the
level of economic ownership in the
entity.
What information about a related
organization is required to be reported on Schedule
R?
Parts I-IV of
Schedule R all ask for the related
organization’s name, address, employer
identification number, primary activity, legal
domicile, and direct controlling entity. They also
ask for certain other types of information depending
on whether the related organization is a tax-exempt
organization, a disregarded entity, a taxable
corporation, or a partnership for federal tax
purposes, as follows:
Schedule R, Part V also requires
reporting of transactions between the filing
organization and its related organizations. Do all
transactions between the filing organization and its
related organizations have to be reported?
No.
Schedule R, Part V, line 1, requires check-box
reporting of whether the organization was engaged in
certain kinds of transactions with any related
organizations. The following transactions must be
reported in greater detail in line 2:
-
all transactions described in line 1a, which
includes all receipts or accruals of
interest, annuities, royalties, or rent from
a controlled entity under section
512(b)(13), regardless of amount.
-
transactions described in lines 1(b) through
1(r) with controlled entities if the amounts
involved during the tax year between the
filing organization and a particular
controlled entity exceed $50,000.
Section 501(c)(3) organizations must report
additional information on line 2. Such
organizations:
-
must report transactions with related
tax-exempt organizations not described in
section 501(c)(3) (including section 527
political organizations).
-
in particular, must report the name of the
related organization, the type of
transaction, and the amount involved during
the filing organization’s tax year (even if
the transaction was entered into by the
parties in a prior year).
-
should aggregate transactions of the same
type with the same related organization.
-
may disregard and not report transactions of
a specified type with a particular
organization if the total amounts related to
those transactions during the tax year do
not exceed $50,000.
What is the difference between a related organization
and a controlled entity for purposes of Schedule R? Why does the
IRS require certain transactions between the filing organization
and a controlled entity to be reported on the schedule, even if
the transaction amount is less than the reporting thresholds
applicable to other transactions with related organizations?
A related organization for Form 990 purposes is defined by
the glossary and instructions (see
Meaning of Related Organization,
Meaning of Control - Organization Without Owners, and
Meaning of Control - Organization With Owners). A controlled
entity is one type of related organization, whether tax-exempt
or taxable, that is defined in Code section 512(b)(13) to
include subsidiaries that are more-than-50 percent controlled by
the organization. Section 6033(h) requires controlling
organizations to report certain controlled entity transactions,
including loans, fund transfers, and receipt of interest,
annuities, royalties, or rents from the controlled entity, on
their Forms 990.
Schedule R
is used to report this information. Because receipts or
accruals of interest, annuities, royalties, or rent from a
controlled entity are subject to special tax treatment under
section 512(b)(13), they must be reported regardless of amount.
Besides Schedule R, what are some other examples of
other parts of the Form 990 and schedules that require the
filing organization to provide information regarding certain of
its related organizations?
-
Part VII, Compensation—compensation from
related organizations
-
Part VI, Governance, line 1b— must take into
account transactions with related organizations in
determining independence of members of governing body
-
Part VIII, Statement of Revenue, line
1d--contributions from related organizations
-
Schedule D, Part V, line 3--endowment funds held by
related organizations
-
Schedule D, Part X--payables to related organizations
-
Schedule H, Part VI (optional for 2008 but required
for 2009)--states in which a related organization files
a community benefit report on behalf of filing
organization
-
Schedule M, Part I, line 32--whether the
organization solicits, processes, or sells noncash
contributions for filing organization
The same definition of related organization used for
Schedule R
(described in
Meaning of Related Organization,
Meaning of Control - Organization Without Owners, and
Meaning of Control - Organization With Owners) is also used
for these other reporting requirements.
Because information regarding related organizations is
required in various parts of the form, the Sequencing List in
the
Instructions (page 5) recommends determining the related
organizations as one of the first steps in preparing the Form
990.
Why does Part VI of Schedule R require information
regarding certain partnerships even though they are not related
organizations?
Some exempt organizations participate in joint ventures and
other arrangements in which the organization does not have a
controlling interest that satisfies the Form 990 definition of
related organization. These arrangements might lead to
activities that result in unrelated business income tax, private
benefit, inurement, and other exempt status issues, especially
when the organization does not control the venture or
arrangement. Accordingly, Part VI of
Schedule R was
designed to collect information regarding participation in
partnerships which are not controlled by the organization but
through which the organization conducts significant activities.
For this purpose, the organization must report information
regarding unrelated partnerships through which it conducts
activities constituting at least 5 percent of its total
activities, measured by gross revenue or total assets, whichever
is greater. Certain passive investment activities are excepted.
When is the filing organization required to treat the
activities of a related organization as its own activities for
Form 990 reporting purposes?
Whether and the extent to which an organization is required
to include in its Form 990 the activities of a related
organization depend upon the type of related organization.
-
Disregarded entities. Except for
reporting of disregarded entities in
Schedule R, Part I, disregarded entities are treated
as part of the organization rather than as separate
entities for Form 990 reporting purposes. Accordingly,
all activities of a disregarded entity of which the
filing organization is the sole member are to be
reported in the filing organization’s Form 990. See
Appendix F,
Form
990 instructions, for more information on how
activities of disregarded entities are to be reported on
certain lines.
-
Partnerships. In general, the
activities of a partnership are treated as the
activities of the filing organization, in accordance
with the filing organization’s proportionate interest in
the partnership. See Appendix F for more information on
how activities of partnerships are to be reported on
certain lines.
-
Corporations. In general, the
activities of a corporation in which the filing
organization has an ownership interest are not treated
as the activities of the filing organization, unless the
corporation (1) is acting as the filing organization’s
agent, or (2) the corporation is a sham (for instance,
lacks a bona fide business purpose and is not conducting
business).
Should a filing organization report on Schedule R
other organizations in which it has an indirect ownership
interest, such as second and third tier subsidiaries?
Yes, if the filing organization directly or indirectly
controls the other organization. For this purpose, the
constructive ownership rules of section 318 of the Code apply to
determine control of a corporation, and similar principles apply
to determine control of a partnership or trust.
For example, if the filing organization X owns 80 percent of
a taxable corporation Y, and Y holds a 70 percent profits
interest as a limited partner of a limited partnership Z, then X
is deemed to own 56 percent of Z (80 percent of Y’s 70 percent
interest in Z). Thus, X controls both Y and Z, which are
therefore both related organizations with respect to X. X would
report Y in
Schedule R, Part IV, and would report Z in Schedule R, Part
III.
These constructive ownership rules also apply to determine
whether the filing organization is controlled by or under common
control with another organization.
What are the related organization reporting
requirements for organizations filing group returns?
Appendix E to the
Form 990
instructions contains special group return rules for
reporting information on behalf of a group in a group return,
including special rules for
Schedule R.
In general, central and subordinate organizations in a group
exemption are not required to be reported as related
organizations in Schedule R, Part II. All other related
organizations of the central and subordinate organizations are
required to be listed in Parts I, II, III, and IV, as
appropriate. Transactions with such organizations must be
reported in Part V whether or not a central or subordinate
organization in a group exemption is required to be listed as a
related organization.
What are the related organization reporting
requirements for organizations filing Form 990-EZ?
There are only two lines in
Form 990-EZ
that pertain to related organizations. Line 45 asks whether the
organization has any controlled entities, because the
organization must file Form 990 and not 990-EZ if there was a
transfer of funds with a controlled entity. Also, line 49 asks
whether the organization (if a 501(c)(3)) made any transfer to a
related tax-exempt organization other than a 501(c)(3)
organization and, if so, whether the related organization was a
section 527 organization.
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Schedule R tips (Adobe).
Additional information
Exempt organizations--If
you are an officer, director, employee or volunteer of an
exempt organization;
Tax professionals--If
you prepare returns for or provide tax advice to exempt
organizations;
General public and contributors--If
you make contributions to charitable organizations or want
to find information about an exempt organization; and
Researchers (including news media)--If
you need statistical information or general background
information about exempt organizations.
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