General Instructions

Purpose of Form

Use Form 990-T to:

  • Report unrelated business income,

  • Figure and report unrelated business income tax liability,

  • Report proxy tax liability,

  • Claim a refund of income tax paid by a regulated investment company (RIC) or a real estate investment trust (REIT), on undistributed long-term capital gain,

  • Request a credit for certain federal excise taxes paid or for small employer health insurance premiums paid, and

  • Report unrelated business income tax on reinsurance entities.

Who Must File

The following entities must file Form 990-T.

  • Any domestic or foreign organization exempt under section 501(a) or section 529(a) if it has gross income of $1,000 or more from a regularly conducted unrelated trade or business (see Regulations section 1.6012-2(e)). Gross income is gross receipts minus the cost of goods sold (see Regulations section 1.61-3).

    A disregarded entity, as described in Regulations sections 301.7701-1 through 301.7701-3, is treated as a branch or division of its parent organization for federal tax purposes. Therefore, financial information applicable to a disregarded entity must be reported as the parent organization's financial information.

  • Organizations liable for the proxy tax on lobbying and political expenditures. See Line 37. Proxy Tax later for a discussion of the proxy tax. If your organization is only required to file because of the proxy tax, see Proxy Tax Only under Which Parts To Complete, later.

  • Colleges and universities of states and other governmental units, and subsidiary corporations wholly owned by such colleges and universities. However, a section 501(c)(1) corporation that is an instrumentality of the United States and both organized and exempted from tax by an Act of Congress does not have to file.

  • Applicable reinsurance entities under Affordable Care Act of 2010 (ACA), section 1341(c)(1), must write “Applicable Reinsurance Entity” across the top of Form 990-T.

  • Organizations that are liable for other taxes (such as the section 1291 tax (Form 990-T, line 35c or 36) or recapture taxes (Form 990-T, line 42)). See a discussion of these items later. If your organization is only required to file Form 990-T because of these taxes, see Other Taxes under Which Parts To Complete, later.

  • Fiduciaries for the following trusts that have $1,000 or more of unrelated trade or business gross income:

    1. Individual retirement accounts (IRAs) described under section 408(a),

    2. Simplified employee pensions (SEPs) described under section 408(k),

    3. Simple incentive match plans (SIMPLEs) described under section 408(p),

    4. Roth IRAs described under section 408A(b),

    5. Coverdell education savings accounts (ESAs) described under section 530(b),

    6. Archer medical savings accounts (Archer MSAs) described under section 220(d), and

    7. Qualified tuition programs described under section 529.

IRAs and other tax-exempt shareholders in a RIC or REIT filing Form 990-T only to obtain a refund of income tax paid on undistributed long-term capital gains should complete Form 990-T as explained in IRAs and other tax-exempt shareholders in a RIC or REIT, later.

Definitions

Section 501(c)(3) organization.   Section 501(c)(3) describes certain organizations which are exempt from taxation under section 501(a). A 501(c)(3) organization is an organization organized and operated exclusively for charitable purposes. See Regulations section 1.501(c)(3)-1(a).

Annual return.    An annual return is an exact copy of the Form 990-T that was filed with the IRS including all schedules and attachments. It also includes any amendments to the original return (amended return).

  By annual return, we mean any annual return (defined above) that is not more than 3 years old from the later of:
  • The date the return is required to be filed (including extensions), or

  • The date that the return is actually filed.

Applicable Reinsurance Entity.   An applicable reinsurance entity is a not-for-profit organization:
  • The purpose of which is to help stabilize premiums for coverage in the individual and small group markets in a state during the first 3 years of operation of the state's American Health Benefit Exchange for such markets within the state when the risk of adverse selection related to new rating rules and market changes is greatest; and

  • The duties of which shall be to conduct the reinsurance program under ACA section 1341 by coordinating the funding and operation of the risk-spreading mechanisms designed to implement the reinsurance program of the Act.

Directly connected expenses.   To be deductible in computing unrelated business taxable income, expenses, depreciation, and similar items, must qualify as deductions allowed by section 162, 167, or others, and must be directly connected with the conduct of an unrelated trade or business activity.

  To be directly connected with the conduct of an unrelated trade or business activity, expenses, depreciation, and similar items must bear a proximate and primary relationship to the conduct of the activity. For example, where facilities and/or personnel are used both to conduct exempt activities and to conduct unrelated trade or business activities, expenses and similar items attributable to such facilities and/or personnel must be allocated between the two uses on a reasonable basis. The portion of any such item allocated to the unrelated trade or business activity must bear a proximate and primary relationship to that business activity.

Not substantially related to.   Not substantially related to means the activity that produces the income does not contribute importantly to the exempt purposes of the organization, other than the need for funds, etc. Whether an activity contributes importantly depends in each case on the facts involved.

  For details, see Pub. 598, Tax on Unrelated Business Income of Exempt Organizations.

Trade or business.   A trade or business is any activity conducted for the production of income from selling goods or performing services. An activity does not lose its identity as a trade or business merely because it is conducted within a larger group of similar activities that may or may not be related to the exempt purpose of the organization. If, however, an activity conducted for profit is an unrelated trade or business, no part of it can be excluded from this classification merely because it does not result in profit.

Unrelated trade or business income.   Unrelated trade or business income is the gross income derived from any trade or business (defined above) regularly conducted and not substantially related to (defined above) the organization's exempt purpose or function (aside from the organization's need for income or funds or the use it makes of the profits).

  Generally, for section 501(c)(7), (9), or (17) organizations, unrelated trade or business income is derived from nonmembers with certain modifications (see section 512(a)(3)(A)).

  For a section 511(a)(2)(B) state college or university, unrelated trade or business income is derived from activities not substantially related to exercising or performing any purpose or function described in section 501(c)(3).

  An unrelated trade or business does not include a trade or business:
  1. In which substantially all the work is performed for the organization without compensation; or

  2. That is conducted by a section 501(c)(3) or 511(a)(2)(B) organization mainly for the convenience of its members, students, patients, officers, or employees; or

  3. That sells items of work-related equipment and clothes, and items normally sold through vending machines, food dispensing facilities or by snack bars, by a local association of employees described in section 501(c)(4), organized before May 27, 1969, if the sales are for the convenience of its members at their usual place of employment; or

  4. That sells merchandise substantially all of which was received by the organization as gifts or contributions; or

  5. That consists of qualified public entertainment activities regularly conducted by a section 501(c)(3), (4), or (5) organization as one of its substantial exempt purposes (see section 513(d)(2) for the meaning of qualified public entertainment activities); or

  6. That consists of qualified convention or trade show activities regularly conducted by a section 501(c)(3), (4), (5), or (6) organization as one of its substantial exempt purposes (see section 513(d)(3) for the meaning of qualified convention and trade show activities); or

  7. That furnishes one or more services described in section 501(e)(1)(A) by a hospital to one or more hospitals subject to conditions in section 513(e); or

  8. That consists of qualified pole rentals, as defined in section 501(c)(12)(D), by a mutual or cooperative telephone or electric company; or

  9. That includes activities relating to the distribution of low-cost articles, each costing $10.20 or less, by an organization described in section 501 and contributions to which are deductible under section 170(c)(2) or (3) if the distribution is incidental to the solicitation of charitable contributions; or

  10. That includes the exchange or rental of donor or membership lists between organizations described in section 501 and contributions to which are deductible under section 170(c)(2) or (3); or

  11. That consists of bingo games as defined in section 513(f). Generally, a bingo game is not included in any unrelated trade or business if:

    1. Wagers are placed, winners are determined, and prizes are distributed in the presence of all persons wagering in that game, and

    2. The game does not compete with bingo games conducted by for-profit businesses in the same jurisdiction, and

    3. The game does not violate state or local law; or

  12. That consists of conducting any game of chance by a nonprofit organization in the state of North Dakota and the conducting of the game does not violate any state or local law; or

  13. That consists of soliciting and receiving qualified sponsorship payments that are solicited or received after December 31, 1997. Generally, qualified sponsorship payment means any payment to a tax-exempt organization by a person engaged in a trade or business in which there is no arrangement or expectation of any substantial return benefit by that person other than the use or acknowledgment of that person's name, logo, or product lines in connection with the activities of the tax-exempt organization. See section 513(i).

When To File

An employees' trust defined in section 401(a), an IRA (including SEPs and SIMPLEs), a Roth IRA, a Coverdell ESA, or an Archer MSA must file Form 990-T by the 15th day of the 4th month after the end of its tax year. All other organizations must file Form 990-T by the 15th day of the 5th month after the end of their tax year. If the regular due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. If the return is filed late, see Interest and Penalties on this page.

Extension.   Corporations may request an automatic 6-month extension of time to file Form 990-T by using Form 8868, Application for Extension of Time To File an Exempt Organization Return.

  Trusts may request an automatic 3-month extension of time to file by using Form 8868. Also, if more than the initial automatic 3 months is needed, trusts may file a second Form 8868 to request that an additional, but not automatic, 3-month extension be granted by the IRS.

Amended return.   To correct errors or change a previously filed return, write “Amended Return” at the top of the return. Also, include a statement that indicates the line number(s) on the original return that was changed and give the reason for each change. Generally, the amended return must be filed within 3 years after the date the original return was due or 3 years after the date the organization filed it, whichever is later.

Where To File

To file Form 990-T, mail or deliver it to:

Department of the Treasury  
Internal Revenue Service Center 
Ogden, UT 84201-0027

Private delivery services (PDSs).   In addition to the United States mail, exempt organizations can use certain PDSs designated by the IRS to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. These private delivery services include only the following:
  • DHL Express (DHL): DHL Same Day Service.

  • Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First.

  • United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

  For filing using a private delivery service, mail to:

Internal Revenue Service 
1973 Rulon White Blvd. 
Ogden, UT 84404

  For private delivery service mailing address, go to IRS.gov and enter “street address private delivery service” in the search box.

  The private delivery service can tell you how to get written proof of the mailing date.

  
Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.

Estimated Tax Payments

Generally, an organization filing Form 990-T must make installment payments of estimated tax if its estimated tax (tax minus allowable credits) is expected to be $500 or more. Both corporate and trust organizations use Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, to figure their estimated tax liability. Do not include the proxy tax when computing your estimated tax liability for 2013.

To figure estimated tax, trusts and corporations must take the alternative minimum tax (if applicable) into account. See Form 990-W for more information.

Depository Method of Tax Payment

The organization must pay any tax due in full by the due date of the return without extensions.

Electronic Deposit Requirement

Beginning January 1, 2011, the organization must deposit all depository taxes (such as employment tax, excise tax, and corporate income tax) electronically. Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). For more information about EFTPS or to enroll in EFTPS, visit the EFTPS website at www.eftps.gov, or call 1-800-555-4477. You can also get Pub. 966, The Secure Way to Pay Your Federal Taxes.

Depositing on time.    For EFTPS deposits to be made timely, the organization must initiate the deposit by 8 p.m. Eastern time the day before the deposit is due.

Same-day wire payment option.

If you fail to initiate a deposit transaction on EFTPS by 8 p.m. Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA), a same-day federal tax payment system that works in conjunction with EFTPS. Make arrangements with your financial institution ahead of time, noting the institution's availability, deadlines, and costs, if you believe you would ever need the same-day wire payment option. To learn more, visit http://fms.treas.gov/ftcs/index.html and also download the Same-Day Payment Worksheet.

Timeliness of deposits.

Beginning January 1, 2011, the IRS will use business days to determine the timeliness of deposits. Business days are any day that is not a Saturday, Sunday or legal holiday in the District of Columbia. To provide transitional relief for 2012, the IRS will not assert penalties for federal tax deposits that are untimely solely because the depositor used a statewide legal holiday instead of a District of Columbia legal holiday. See Notice 2010-87, 2010-52 I.R.B. 908, available at www.irs.gov/irb/2010-52_IRB/ar12.html.

  See Pub. 583, Starting a Business and Keeping Records.

If the organization owes tax when it files Form 990-T, do not include the payment with the tax return. Instead, use EFTPS.

Interest and Penalties

Your organization may be subject to interest and penalty charges if it files a late return or fails to pay tax when due. Generally, the organization is not required to include interest and penalty charges on Form 990-T because the IRS can figure the amount and bill the organization for it.

Interest.   Interest is charged on taxes not paid by the due date even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements, and substantial understatements of tax from the due date (including extensions) to the date of payment. The interest charge is figured at the underpayment rate determined under section 6621.

Late filing of return.   An organization that fails to file its return when due (including extensions of time for filing) is subject to a penalty of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is more than 60 days late is the smaller of the tax due or $135. If you receive a notice about a penalty after you file this return, reply to the notice with an explanation and we will determine if you meet reasonable-cause criteria. Do not include an explanation when you file your return.

Late payment of tax.   The penalty for late payment of taxes is usually ½ of 1% of the unpaid tax for each month or part of a month the tax is unpaid. The penalty cannot exceed 25% of the unpaid tax. If you receive a notice about a penalty after you file this return, reply to the notice with an explanation and we will determine if you meet reasonable-cause criteria. Do not include an explanation when you file your return.

Estimated tax penalty.   An organization that does not make estimated tax payments when due may be subject to an underpayment penalty for the period of underpayment. Generally, an organization is subject to this penalty if its tax liability for the tax year is $500 or more and it did not make estimated tax payments of at least the smaller of its tax liability for the tax year or 100% of the prior year's tax. See section 6655 for details and exceptions.

  Form 2220, Underpayment of Estimated Tax by Corporations, is used by corporations and trusts filing Form 990-T to see if the organization owes a penalty and its amount. Generally, the organization is not required to file this form because the IRS can figure the amount of any penalty and notify the organization. However, even if the organization does not owe the penalty, you must complete and attach Form 2220 if either of the following applies.
  • The annualized income or adjusted seasonal installment method is used.

  • The organization is a “large organization” computing its first required installment based on the prior year's tax.

  If you attach Form 2220, check the box on Form 990-T, line 46, and enter the amount of any penalty on this line.

Trust fund recovery penalty.   This penalty may apply if certain excise, income, social security, and Medicare taxes that must be collected or withheld are not paid to the United States Treasury. These taxes are generally reported on:
  • Form 720, Quarterly Federal Excise Tax Return;

  • Form 941, Employer's QUARTERLY Federal Tax Return;

  • Form 943, Employer's Annual Federal Tax Return for Agricultural Employees; or

  • Form 945, Annual Return of Withheld Federal Income Tax.

  The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the unpaid trust fund tax. See the Instructions for Form 720; Pub. 15 (Circular E), Employer's Tax Guide; or Pub. 51 (Circular A), Agricultural Employer's Tax Guide, for details, including the definition of responsible persons.

Other penalties.   There are also penalties that can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. See sections 6662, 6662A, and 6663.

Which Parts To Complete

If you are filing Form 990-T only because of the proxy tax, other taxes, or only to claim a refund, go directly to Proxy Tax Only, Other Taxes, or Claim for Refund, later. If you are filing Form 990-T only to claim the credit for small employer health insurance premiums, see the instructions for line 44f later.

Is Gross Income More Than $10,000?

If the amount in Part I, line 13, column (A), is more than $10,000, complete all lines and schedules that apply.

Is Gross Income $10,000 or Less?

If Part I, line 13, column (A) is $10,000 or less, complete the following.

  • The heading (above Part I);

  • Part I, lines 1–13, column (A);

  • Part I, line 13, for columns (B) and (C);

  • Part II, lines 29–34;

  • Parts III–V, and

  • Signature area.

Filers with $10,000 or less on line 13, column (A) do not have to complete Schedules A through K (however, refer to applicable schedules when completing column (A) and in determining the deductible expenses to include on line 13 of column (B)).

Proxy Tax Only

Organizations that are required to file Form 990-T only because they are liable for the proxy tax on lobbying and political expenditures must complete the following:

  • The heading (above Part I) except items E, H, and I;

  • Lines 37 and 39;

  • Part IV;

  • Signature area; and

  • Attach a statement showing the proxy tax computation.

Other Taxes

Organizations that are required to file Form 990-T only because they are liable for recapture taxes, the section 1291 tax, or other items listed in the instructions for line 42 must complete the following:

  • The heading above Part I except items E, H, and I;

  • The appropriate lines of Parts III and IV;

  • Signature area, and

  • Attach all appropriate forms and/or schedules showing the computation of the applicable tax or taxes.

Claim For Refund

If your only reason for filing a Form 990-T is to claim a refund, complete the following:

  • The heading above 
    Part I except items E, H, and I;

  • Enter -0- on line 13, column (A), line 34, and line 43;

  • Enter the credit or payment on the appropriate line (44a–44g);

  • Lines 45, 48, and 49;

  • Signature area, and

  • For claims described below, follow the additional instructions for that claim.

IRAs and other tax-exempt shareholders in a RIC or REIT.

If you are an IRA or other tax-exempt shareholder that is invested in a RIC or a REIT and file Form 990-T only to obtain a refund of income tax paid on undistributed long-term capital gains, follow steps above under Claim For Refund; write “Claim for Refund Shown on Form 2439” at the top of Form 990-T; and attach Copy B of Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains.

Composite Form 990-T.

If you are a trustee of more than one IRA invested in a RIC, you may be able to file a composite Form 990-T to claim a refund of tax under section 852(b) instead of filing a separate Form 990-T for each IRA. See Notice 90-18, 1990-1 C.B. 327, for information on who can file a composite return. Complete steps above under Claim For Refund and follow the additional requirements in the notice.

Backup withholding.

If your only reason for filing Form 990-T is to claim a refund of backup withholding, complete steps above under Claim For Refund and attach a copy of the Form 1099 showing the withholding.

Consolidated Returns

The consolidated return provisions of section 1501 do not apply to exempt organizations, except for organizations having title holding companies. If a title holding corporation described in section 501(c)(2) pays any amount of its net income for a tax year to an organization exempt from tax under section 501(a) (or would, except that the expenses of collecting its income exceeded that income), and the corporation and organization file a consolidated return as described below, then treat the title holding corporation as being organized and operated for the same purposes as the other exempt organization (in addition to the purposes described in section 501(c)(2)).

Two organizations exempt from tax under section 501(a), one a title holding company and the other earning income from the first, will be includible corporations for purposes of section 1504(a). If the organizations meet the definition of an affiliated group and the other relevant provisions of Chapter 6 of the IRC, then these organizations may file a consolidated return. The parent organization must attach Form 851, Affiliations Schedule, to the consolidated return. For the first year a consolidated return is filed, the title holding company must attach Form 1122, Authorization and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax Return. See Regulations section 1.1502-100.

Other Forms That May Be Required

Forms W-2 and W-3.   File Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, to report wages, tips, other compensation, withheld income taxes, and withheld social security/Medicare taxes for employees.

Form 720.   File Form 720, Quarterly Federal Excise Tax Return, to report environmental excise taxes, communications and air transportation taxes, fuel taxes, manufacturer's taxes, ship passenger tax, and certain other excise taxes.

  
See Trust fund recovery penalty earlier.

Form 926.   File Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, if the organization is required to report certain transfers to foreign corporations under section 6038B.

Form 940.   File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, if the organization is liable for FUTA tax.

Form 941 and Form 943.   File Form 941, Employer's QUARTERLY Federal Tax Return, or Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, to report income tax withheld, and employer and employee social security and Medicare taxes. Also, see Trust fund recovery penalty earlier.

Form 945.   File Form 945, Annual Return of Withheld Federal Income Tax, to report income tax withheld from nonpayroll distributions or payments, including pensions, annuities, IRAs, gambling winnings, and backup withholding.

Form 1098.   File Form 1098, Mortgage Interest Statement, to report the receipt from any individual of $600 or more of mortgage interest (including points) in the course of the organization's trade or business and reimbursements of overpaid interest.

Forms 1099-A, B, DIV, INT, LTC, MISC, OID, R, S, and SA.   Organizations engaged in an unrelated trade or business may be required to:
  • File an information return on Forms 1099-A, B, DIV, INT, LTC, MISC, OID, R, S, and SA;

  • Report acquisitions or abandonments of secured property through foreclosure;

  • Report proceeds from broker and barter exchange transactions;

  • Report certain dividends and distributions;

  • Report interest income;

  • Report certain payments made on a per diem basis under a long-term care insurance contract, and certain accelerated death benefits;

  • Report miscellaneous income (such as payments to providers of health and medical services, miscellaneous income payments, and nonemployee compensation);

  • Report original issue discount;

  • Report distributions from retirement or profit-sharing plans, IRAs, SEPs, SIMPLEs, insurance contracts;

  • Report proceeds from real estate transactions; and

  • Report distributions from an HSA, Archer MSA, or Medicare Advantage MSA.

  
When filing the above noted information returns, the organization must also file Form 1096, Annual Summary and Transmittal of U.S. Information Returns.

Form 4466.   File Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund if the organization overpaid its estimated tax for the year by at least 10% of its expected income tax liability and at least $500.

Form 5498.   File Form 5498, IRA Contribution Information, to report contributions (including rollover contributions) to any IRA, including a SEP, SIMPLE, Roth IRA, and to report Roth IRA conversions, IRA recharacterizations, and the fair market value of the account.

Form 5498-ESA.   File Form 5498-ESA, Coverdell ESA Contribution Information, to report contributions (including rollover contributions) to a Coverdell education savings account (ESA).

Form 5498-SA.   File Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, to report contributions to an HSA or Archer MSA and the fair market value of an HSA, Archer MSA, or Medicare Advantage MSA. See the Instructions for Forms 1099-SA and 5498-SA.

Form 5713.   File Form 5713, International Boycott Report, if the organization had operations in, or related to, certain “boycotting” countries.

Form 6198.   File Form 6198, At-Risk Limitations, if the organization has a loss from an at-risk activity conducted as a trade or business or for the production of income.

Form 8275 and 8275-R.   Taxpayers and income tax return preparers file Form 8275, Disclosure Statement, and Form 8275-R, Regulation Disclosure Statement, to disclose items or positions taken on a tax return or that are contrary to Treasury regulations (to avoid parts of the accuracy-related penalty or certain preparer penalties).

Form 8300.   File Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if the organization received more than $10,000 in cash or foreign currency in one transaction or in a series of related transactions. See Form 8300 and Regulations section 1.6050I-1(c).

Form 8582.   File Form 8582, Passive Activity Loss Limitations, for trusts that have losses (including prior year unallowed losses) from passive activities.

Form 8697.   File Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, to figure the interest due or to be refunded under the look-back method of section 460(b)(2). The look-back method applies to certain long-term contracts that are accounted for under either the percentage method or the completion-capitalized cost method.

Form 8810.   File Form 8810, Corporate Passive Activity Loss and Credit Limitations, for closely held corporations that have losses or credits (including prior year unallowed losses and credits) from passive activities.

Form 8865.   File Form 8865, Return of U.S. Persons With Respect To Certain Foreign Partnerships, if the organization:
  1. Controlled a foreign partnership (that is, owned more than a 50% direct or indirect interest in the partnership).

  2. Owned at least a 10% direct or indirect interest in a foreign partnership while U.S. persons controlled that partnership.

  3. Had an acquisition, disposition, or change in proportional interest in a foreign partnership that:

    1. Increased its direct interest to at least 10% or reduced its direct interest of at least 10% to less than 10%.

    2. Changed its direct interest by at least a 10% interest.

  4. Contributed property to a foreign partnership in exchange for a partnership interest if:

    1. Immediately after the contribution, the organization directly or indirectly owned at least a 10% interest in the foreign partnership; or

    2. The FMV of the property the organization contributed to the foreign partnership in exchange for a partnership interest, when added to other contributions of property made to the foreign partnership by the organization or a related person during the preceding 12-month period, exceeds $100,000.

  Also, the organization may have to file Form 8865 to report certain dispositions by a foreign partnership of property it previously contributed to that foreign partnership if it was a partner at the time of the disposition. See Form 8865 and its separate instructions.

Form 8886.   File Form 8886, Reportable Transaction Disclosure Statement, to disclose information for each reportable transaction in which the organization participated. Form 8886 must be filed for each tax year that the federal income tax liability of the organization is affected by its participation in the transaction. The organization may have to pay a penalty if it is required to file Form 8886 but does not do so. The following are reportable transactions.
  • Any listed transaction that is the same as, or substantially similar to tax avoidance transactions identified by the IRS.

  • Any transaction offered under conditions of confidentiality for which the organization paid an advisor a fee of at least $250,000.

  • Certain transactions for which the organization has contractual protection against disallowance of the tax benefits.

  • Any transaction resulting in a loss of at least $10 million in any single year or $20 million in any combination of years.

  • Certain transactions identified by the IRS in published guidance as a “transaction of interest” (a transaction that the IRS believes has a potential for tax avoidance or evasion, but has not yet been identified as a listed transaction).

Form 8886-T.   File Form 8886-T, Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction, to disclose information with respect to each prohibited tax shelter transaction to which the organization is a party.

Penalties.

The organization may have to pay a penalty if it is required to disclose a reportable transaction under section 6011 and fails to properly complete and file Form 8886. The penalty is $50,000 ($200,000 if the reportable transaction is a listed transaction) for each failure to file Form 8886 with its return or for failure to provide a copy of Form 8886 to the Office of Tax Shelter Analysis (OTSA). Other penalties, such as an accuracy-related penalty under section 6662A, may also apply. See the Instructions for Form 8886 for details.

Form 8899.   File Form 8899, Notice of Income from Donated Intellectual Property, to report income from qualified intellectual property.

Form 8903.   File Form 8903, Domestic Production Activities Deduction, to deduct a portion of income from certain qualified domestic production activities.

Form 8925.   File Form 8925, Report of Employer-Owned Life Insurance Contracts, which must be filed by every applicable policyholder owning one or more employer-owned life insurance contracts issued after August 17, 2006.

Accounting Methods

An accounting method is a set of rules used to determine when and how income and expenses are reported. Figure taxable income using the method of accounting regularly used in keeping the organization's books and records.

Generally, permissible methods include:

  • Cash,

  • Accrual, or

  • Any other method authorized by the IRC.

In all cases, the method used must clearly show taxable income.

See Pub. 538, Accounting Periods and Methods.

Change in accounting method.   To change the method of accounting used to report taxable income (for income as a whole or for the treatment of any material item), the organization must file with the IRS either an (a) advanced consent request for a ruling or (b) automatic change request for certain specific changes in accounting method.

  In either case, the organization must file Form 3115, Application for Change in Accounting Method. See Pub. 538.

Section 481(a) adjustment.

The organization may have to make an adjustment under section 481(a) to prevent amounts of income or expense from being duplicated or omitted. The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. However, an organization may elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. The organization must complete the appropriate lines of Form 3115 to make the election.

Include any net positive section 481(a) adjustment on Form 990-T, line 12. If the net section 481(a) adjustment is negative, report it on Form 990-T, line 28.

Accounting Period

The return must be filed using the organization's established annual accounting period. If the organization has no established accounting period, file the return on the calendar-year basis.

To change an accounting period, some organizations may make a notation on a timely filed Form 990, 990-EZ, 990-PF, or 990-T. Others may be required to file Form 1128, Application To Adopt, Change, or Retain a Tax Year. For details on which procedure applies to your organization, see Rev. Proc. 85-58, 1985-2 C.B. 740, and the Instructions for Form 1128.

If the organization changes its accounting period, file Form 990-T for the short period that begins with the first day after the end of the old tax year and ends on the day before the first day of the new tax year. For the short period return, figure the tax by placing the organization's taxable income on an annual basis. For details, see section 443.

Reporting Form 990-T Information on Other Returns

Your organization may be required to file an annual information return on:

  • Form 990, Return of Organization Exempt From Income Tax;

  • Form 990-EZ, Short Form Return of Organization Exempt From Income Tax;

  • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation; or

  • Form 5500, Annual Return/Report of Employee Benefit Plan.

If so, include on that information return the unrelated business gross income and expenses (but not including the specific deduction claimed on line 33, or any expense carryovers from prior years) reported on Form 990-T for the same tax year.

Rounding Off to Whole Dollars

The organization may round off cents to whole dollars on Form 990-T and its schedules. If the organization does round to whole dollars, it must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.

If two or more amounts must be added to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.

Attachments

If you need more space on the form or schedules, attach separate sheets (statements). On the attachment, write the corresponding form or schedule number or letter and follow the same format. Show totals on the IRS-printed form. Also, include the organization's name and EIN. The separate sheets should be the same size as the IRS-printed form and should be attached after the IRS-printed form.

Public Inspection Requirements of Section 501(c)(3) Organizations

Under section 6104(d), a section 501(c)(3) organization that files Form 990-T must make its entire annual exempt organization business income tax return (including amended returns) available for public inspection.

The Form 990-T and related schedules must be made available for public inspection for a period of 3 years from the date the Form 990-T is required to be filed, including extensions.

What Schedules and Attachments to Form 990-T Must Be Made Available for Public Inspection?

Only schedules, attachments (statements), and supporting documents that relate to the imposition of tax on unrelated business income must be made available for public inspection when attached to a section 501(c)(3) organization's Form 990-T filed after August 17, 2006.

The following documents, when attached to a section 501(c)(3) organization's Form 990-T filed after August 17, 2006, are not required to be made available for public inspections:

  • Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation;

  • Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations;

  • Form 8271, Investor Reporting of Tax Shelter Registration Number;

  • Form 8594, Asset Acquisition Statement under Section 1060;

  • Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund;

  • Form 8832, Entity Classification Election;

  • Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities;

  • Form 8865, Return of U.S. Person with Respect to Certain Foreign Partnerships;

  • Form 8886, Reportable Transaction Disclosure Statement;

  • Form 8913, Credit for Federal Telephone Excise Tax Paid;

  • Form 8925, Report of Employer-Owned Life Insurance Contracts; and

  • Form 8941, Credit for Small Employer Health Insurance Premiums.

How Does a 501(c)(3) Organization Make Its Annual Returns Available for Public Inspection?

A 501(c)(3) organization must make its annual returns available in two ways:

  • By office visitation, and

  • By providing copies or making them widely available.

Public Inspection by Office Visitation

A 501(c)(3) organization must make its annual returns available for public inspection without charge at its principal, regional, and district offices during regular business hours.

Conditions that may be set for public inspection at the office.    A 501(c)(3) organization:
  • May have an employee present,

  • Must allow the individual conducting the inspection to take notes freely during the inspection, and

  • Must allow an individual to make photocopies of documents at no charge but only if the individual brings photocopying equipment to the place of inspection.

Determining if a site is a regional or district office.   A regional or district office is any office of a 501(c)(3) organization, other than its principal office, that has paid employees whose total number of paid hours a week are normally 120 hours or more. Include the hours worked by part-time (as well as full-time) employees in making that determination.

What sites are not considered a regional or district office.

A site is not considered a regional or district office if:

  1. The only services provided at the site further the organization's exempt purposes (for example, day care, health care, or scientific or medical research), and

  2. The site does not serve as an office for management staff, other than managers who are involved only in managing the exempt function activities at the site.

What if the 501(c)(3) organization does not maintain a permanent office?

If the 501(c)(3) organization does not maintain a permanent office, it will comply with the public inspection by office visitation requirement by making the annual returns available at a reasonable location of its choice. It must permit public inspection:

  • Within a reasonable amount of time after receiving a request for inspection (normally, not more than 2 weeks), and

  • At a reasonable time of day.

Optional method of complying.

If a 501(c)(3) organization that does not have a permanent office wishes not to allow an inspection by office visitation, it may mail a copy of the requested documents instead of allowing an inspection. However, it must mail the documents within 2 weeks of receiving the request and may charge for copying and postage only if the requester consents to the charge.

501(c)(3) organizations with a permanent office but limited or no hours.

Even if a 501(c)(3) organization has a permanent office but no office hours or very limited hours during certain times of the year, it must still meet the office visitation requirement. To meet this requirement during those periods when office hours are limited or not available, follow the rules above under What if the 501(c)(3) organization does not maintain a permanent office?

Public Inspection—Providing Copies

A 501(c)(3) organization must provide copies of its annual returns to any individual who makes a request for a copy in person or in writing unless it makes these documents widely available.

In-person requests for document copies.   A 501(c)(3) organization must provide copies to any individual who makes a request in person at the 501(c)(3) organization's principal, regional, or district offices during regular business hours on the same day that the individual makes the request.

Accepted delay in fulfilling an in-person request.

If unusual circumstances exist and fulfilling a request on the same day places an unreasonable burden on the 501(c)(3) organization, it must provide copies by the earlier of:

  • The next business day following the day that the unusual circumstances end, or

  • The fifth business day after the date of the request.

Examples of unusual circumstances include:

  • Receipt of a volume of requests (for document copies) that exceeds the 501(c)(3) organization's daily capacity to make copies,

  • Requests received shortly before the end of regular business hours that require an extensive amount of copying, or

  • Requests received on a day when the 501(c)(3) organization's managerial staff capable of fulfilling the request is conducting official duties (for example, student registration or attending an off-site meeting or convention) instead of its regular administrative duties.

Use of local agents for providing copies.

A 501(c)(3) organization may use a local agent to handle in-person requests for document copies. If a 501(c)(3) organization uses a local agent, it must immediately provide the local agent's name, address, and telephone number to the requester.

The local agent must:

  • Be located within reasonable proximity to the principal, regional, or district office where the individual makes the request, and

  • Provide document copies within the same time frames as the 501(c)(3) organization.

Written requests for document copies.    If a 501(c)(3) organization receives a written request for a copy of its annual returns (or parts of these documents), it must give a copy to the requester. However, this rule only applies if the request:
  • Is addressed to a 501(c)(3) organization's principal, regional, or district office,

  • Is delivered to that address by mail, electronic mail (email), facsimile (fax), or a private delivery service approved by the IRS (see Private delivery services (PDSs) on page 3 for a list), and

  • Gives the address to which the document copies should be sent.

How and when a written request is fulfilled.

  • Requested document copies must be mailed within 30 days from the date the 501(c)(3) organization receives the request.

  • Unless other evidence exists, a request or payment that is mailed is considered to be received by the 501(c)(3) organization 7 days after the postmark date.

  • If an advance payment is required, copies must be provided within 30 days from the date payment is received.

  • If the 501(c)(3) organization requires payment in advance and it receives a request without payment or with insufficient payment, it must notify the requester of the prepayment policy and the amount due within 7 days from the date it receives the request.

  • A request that is transmitted to the 501(c)(3) organization by email or fax is considered received the day the request is transmitted successfully.

  • Requested documents can be emailed instead of the traditional method of mailing if the requester consents to this method.

A document copy is considered as provided on the:

  • Postmark date,

  • Private delivery date,

  • Registration date for certified or registered mail,

  • Postmark date on the sender's receipt for certified or registered mail, or

  • Day the email is successfully transmitted (if the requester agreed to this method).

Requests for parts of a document copy.

A person can request all or any specific part or schedule of the annual returns and the 501(c)(3) organization must fulfill their request for a copy.

Can an agent be used to provide copies?

A 501(c)(3) organization can use an agent to provide document copies for the written requests it receives. However, the agent must provide the document copies under the same conditions that are imposed on the 501(c)(3) organization itself. Also, if an agent fails to provide the documents as required, the 501(c)(3) organization will continue to be subject to penalties.

Example.

The ABC Organization retained an agent to provide copies for all written requests for documents. However, ABC Organization received a request for document copies before the agent did.

The deadline for providing a response is referenced by the date that the ABC Organization received the request and not when the agent received it. If the agent received the request first, then a response would be referenced to the date that the agent received it.

Can a fee be charged for providing copies?   A 501(c)(3) organization may charge a reasonable fee for providing copies. Also, it can require the fee to be paid before providing a copy of the requested document.

What is a reasonable fee?

A fee is reasonable only if it is no more than the per-page copying fee charged by the IRS for providing copies, plus no more than the actual postage costs incurred to provide the copies.

What forms of payment must the 501(c)(3) organization accept?

The form of payment depends on whether the request for copies is made in person or in writing.

Cash and money order must be accepted for in-person requests for document copies. The 501(c)(3) organization, if it wishes, may accept additional forms of payment.

Certified check, money order, and either personal check or credit card must be accepted for written requests for document copies. The 501(c)(3) organization, if it wishes, may accept additional forms of payment.

Other fee information.

If a 501(c)(3) organization provides a requester with notice of a fee and the requester does not pay the fee within 30 days, it may ignore the request.

If a requester's check does not clear on deposit, it may ignore the request.

If a 501(c)(3) organization does not require prepayment and the requester does not prepay, the 501(c)(3) organization must receive consent from the requester if the copying and postage charge exceeds $20.

501(c)(3) organizations subject to a harassment campaign.   If the IRS determines that a 501(c)(3) organization is being harassed, it is not required to comply with any request for copies that it reasonably believes is part of the harassment campaign.

  A group of requests for a 501(c)(3) organization's annual return is indicative of a harassment campaign if the requests are part of a single coordinated effort to disrupt the operations of the 501(c)(3) organization rather than to collect information about it.

Requests that may be disregarded without IRS approval.   A 501(c)(3) organization may disregard any request for copies of all or part of any document beyond the first two received within any 30-day period or the first four received within any 1-year period from the same individual or the same address.

Making the Annual Returns Widely Available

A 501(c)(3) organization does not have to provide copies of its annual returns if it makes these documents widely available. However, it must still allow public inspection by office visitation.

How does a 501(c)(3) organization make its annual returns widely available?   A 501(c)(3) organization's annual returns are widely available if it meets all four of the following requirements:
  1. The Internet posting requirement is met if:

    • The document is posted on an Internet page that the 501(c)(3) organization establishes and maintains, or

    • The document is posted as part of a database of like documents of other tax-exempt organizations on an Internet page established and maintained by another entity.

  2. Additional posting information requirement is met if:

    • The Internet page through which the document is available clearly informs readers that the document is available and provides instructions for downloading the document;

    • After it is downloaded and viewed, the web document exactly reproduces the image of the annual return as it was originally filed with the IRS, except for any information permitted by statute to be withheld from public disclosure; and

    • Any individual with access to the Internet can access, download, view, and print the document without special computer hardware or software required for that format (except software that is readily available to members of the public without payment of any fee) and without payment of a fee to the 501(c)(3) organization or to another entity maintaining the web page.

  3. The reliability and accuracy requirements are met if the entity maintaining the Internet page:

    • Has procedures for ensuring the reliability and accuracy of the document that it posts on the page;

    • Takes reasonable precautions to prevent alteration, destruction, or accidental loss of the document when posted on its page; and

    • Corrects or replaces the document if a posted document is altered, destroyed, or lost.

  4. The notice requirement is met if a 501(c)(3) organization notifies any individual requesting a copy of its annual return where the documents are available (including the Internet address). If the request is made in person, the 501(c)(3) organization must notify the individual immediately. If the request is in writing, it must notify the individual within 7 days of receiving the request.

Penalties

A penalty may be imposed on any person who does not make the annual returns (including all required attachments) available for public inspection according to the section 6104(d) rules discussed above. If more than one person fails to comply, each person is jointly and severally liable for the full amount of the penalty. The penalty amount is $20 for each day during which a failure occurs. The maximum penalty that may be imposed on all persons for any one annual return is $10,000.

Any person who willfully fails to comply with the section 6104(d) public inspection requirements is subject to an additional penalty of $5,000.


More Online Instructions