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DOCUMENT RESUME HE 029 832 ED 402 889 Guidelines for Filing IRS Forms 990 and 990-T. TITLE National Association of Coll. and Univ. Business INSTITUTION Officers, Washington, D.C. PUB DATE 96 118p.; Material updated by KPMG Peat Marwick LLP. NOTE National Association of College and University AVAILABLE FROM Business Officers, One Dupont Circle, Suite 500, Washington, DC 20036 ($34.95 members; $49.95 non-members). PUB TYPE Non-Classroom Use (055) Guides MF01/PC05 Plus Postage. EDRS PRICE Accounting; *Financial Audits; Higher Education; DESCRIPTORS *Money Management; *Nonprofit Organizations; *Records (Forms); Tax Deductions; *Taxes Income Tax Deductions; *Income Taxes; Internal IDENTIFIERS Revenue Code; *Internal Revenue Service ABSTRACT This manual provides instructions and sample documents for all tax-exempt organizations required to file Form 990 "Return of Organization Exempt from Income Tax" or Form 990-1 "Exempt Organization Business Income Tax Return." The short introductory section covers who must file and summarizes the changes in the 1996 forms. The section "Who Must File" defines the parameters for using Forms 990, 990EZ, Schedule A (Form 990) "Organization Exempt Under 501 (3)", 990-T "Exempt Organization Business Income Tax Return", and estimated tax payments (Forms 8109 and 990-W). The next section covers due dates. Section 3 covers the steps for preparing Forms 990 and 990-T, and includes some additional filing tips, cost allocations, and supporting schedules. Section 4 provides guidance for completing each part and line of Form 990 and Schedule A; Section 5 provides detailed instructions for Form 990-T, the unrelated business income tax. Section 6 covers filing for extensions (Form 2758); Section 7 summarizes various Internal Revenue Service Rulings and Determinations; and Section 8 covers public inspection requirements. Three appendixes show a sample university financial statement; a worksheet; and a completed return. Appendix D reprints filing instructions for Form 990EZ, "Short Form Return of Organization Exempt from Income Tax." (CH) *********************************************************************** Reproductions supplied by EDRS are the best that can be made from the original document. *********************************************************************** Guidelines for NACUBO National Association of College and University Filing Business Officers IRS Forms 990 and 990-T BEST COPY AVAILABLE U.S. DEPARTMENT OF EDUCATION Once of Educational Research and improvement EDUCATIONAL RESOURCES INFORMATION -PERMISSION TO REPRODUCE THIS CENTER (ERIC) Xis MATERIAL HAS BEEN GRANTED BY document has been reOrcidUCMI received from the person or organaahon onanahng It. NACU BO O Minor changes have been made to onotovo reproduction ouallty. Pants Of wins or °amens stated in this does. mad do not necessaniv represent ORICtal OEM position or pohcy, TO THE EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC)." Guidelines for Filing IRS Forms 990 and 990-T Updated by KPMG Peat Marwick LLP 11111111 ISSN 1059-602X ©1996 by the National Association of College and University Business Officers One Dupont Circle Washington, DC 20036 All Rights Reserved Printed in the United States of America 4 TABLE OF CONTENTS Introduction 1. Who Must File Form 990, "Return of Organization Exempt from Income Tax" 1 Form 990EZ, "Short Form Return of Organization Exempt from Income Tax" 1 Schedule A (Form 990), "Organization Exempt Under 501(c)(3)" 2 Form 990-T, "Exempt Organization Business Income Tax Return" 2 Estimated Tax Payments: Forms 8109 and 990-W 2 2. Due Dates Filing Dates 3 3 Extensions Penalties for Late Filing or Willfully Not Filing 3 3. Preparing Forms 990 and 990-T Steps to Preparing Form 990 5 Other Filing Tips 6 6 Cost Allocations 8 Supporting Schedules 4. Filing InstructionsForm 990 and Schedule A (Form 990) Form 990, "Return of Organization Exempt from Income Tax"Instructions 11 26 Schedule A (Form 990), "Organization Exempt Under 501(c) (3)"Instructions 5. Unrelated Business Income Tax and Filing InstructionsForm 990-T The Unrelated Business Income Tax 31 Form 990-T, "Exempt Organization Income Tax Return"Instructions 33 44 Tax Situations for 990-T: An Illustrative Example Guidelines for Filing IRS Forms 990 and 990-T iv 6. Filing for Extension Form 2758, "Application for Extension of Time to File Fiduciary and Certain Other Returns" 47 Form 7004, "Application for Automatic Extension of Time to File Corporation Income Tax Return" 48 7. IRS Rulings and Determinations Types of Rulings 51 Requesting Rulings from the IRS 52 Closing Agreements 53 Summaries of Selected Revenue Rulings 53 Summaries of Recent Letter Rulings 54 Current Litigation Summaries 58 8. Public Inspection Requirements 61 Appendix A. Utopia University: Financial Statements 63 Appendix B. Worksheets 67 Appendix C. Completed Returns 79 Appendix D. Filing InstructionsForm 990EZ 109 INTRODUCTION Guidelines for Filing IRS Forms 990 and 990-T Tax Return," if it has gross income of $1,000 or more from unrelated trade or business activities. Public is an update of Guidelines for Filing 1992 IRS Forms 990 and 990-T. Included in this update are the re- and independent colleges and universities, as well as their wholly owned tax-exempt subsidiary corpo- vised 1995 Internal Revenue Service (IRS) Form 990, Schedule A (Form 990), and Form 990-T. The IRS rations, must file Form 990-T if they meet this test, made several changes to Form 990 for 1995, adding even if they are not required to file Form 990. Tax- a reconciliation to the audited financial statements able subsidiaries must file the same income tax re- and, for publicly supported section 501(c)(3) orga- turns (e.g., Form 1120) that apply to similar taxable nizations, a schedule to prove they meet the public entities. support test. These changes are detailed below. In IRS Form 990 is frequently used by state and addition to providing an update that reflects the 1995 local governments to satisfy tax-exempt organization IRS forms, this book also includes enhanced ex- reporting requirements, particularly for section amples such as sample financial statements, 501(c)(3) organizations. State and local governments worksheets, and sample completed tax forms from a may accept Form 990 and Schedule A (Form 990) in university that has implemented SFAS Nos. 116 and place of all or part of their own financial reporting 117. Supporting schedules to Form 990 are included. requirements. If Form 990 will be used to meet state With limited exceptions (e.g., churches), all tax- reporting requirements, the appropriate state office exempt organizations and nonexempt charitable should be contacted to determine specific state re- trusts, including independent colleges and universi- quirements. ties exempt under section 501(c)(3) of the Internal Revenue Code (IRC), are required to file IRS Form Guidelines for Filing IRS Forms 990 and 990 990, "Return of Organization Exempt From Income T is intended principally to be used as a tool by the administrators of colleges and universities in the Tax." Public colleges and universities whose tax exemption derives from section 115(a) rather than sec- preparation of Form 990, Schedule A (Form 990), tion 501(c) are not required to file IRS Form 990. and Form 990-1; however, administrators of other Organizations exempt under section 115(a) do not nonprofit organizations also may find it useful. This receive an IRS letter of exemption. (If for some rea- publication provides general information on complet- son a public institution requests a letter of exemp"-: ing Forms 990, 990-T, and 990EZ, and illustrates tion from the IRS, it will receive a letter of exemp- how to use an organization's standard accounting tion under code section 501(c)(3) with a confirma- records to provide the required financial data. Sample worksheets and copies of 1995 IRS forms are in- tion of its status as a section 115(a) organization. Such an institution would not be required to file a Form cludedAnformation is also provided on the IRS re- 990.) A tax-exempt organization also must file IRS quirements to permit public inspection of annual tax Form 990-T, "Exempt Organization Business Income returns and applications for tax-exempt status. Guidelines for Filing IRS Forms 990 and 990-T vi I Guidelines for Filing IRS Forms 990 and 990-T Changes to the 1995 Forms contains direct quotes and paraphrased excerpts from various IRS publications and instructions. It is in- A number of important changes have been made tended as a supplement to, not a replacement of, the to the 1995 Form 990 and Schedule A (Form 990), IRS instructions provided with the forms, which should resulting in an expansion of each form to six pages: be reviewed carefully before preparing the information forms and tax returns. Because each institution Form 990, Part I, line 20, and Part IV, lines 67 may have unique circumstances or individual report- through 69: The IRS requires the organization to ing differences, questions and areas of concern should report all beginning-of-year balances in confor- be pursued with the appropriate tax advisee; legal coun- mity with the amounts and descriptions on the sel, or independent audit firm. 1994 Form 990. Any changes in net assets as a result of implementing SFAS No. 117 should be Guidelines for Filing IRS Forms 990 and 990-T reported on Part I, line 20, Other changes in net is a revision of an earlier NACUBO publication, origi- assets or fund balances. As in previous years, a nally published in 1988 and most recently updated supporting statement detailing the changes for 1992. Larry Calloway, controller at Texas Chris- should be attached to the return. For beginning- tian University, wrote much of the original work. Rob- of-year fund balances, all unrestricted amounts ert Gardiner, of the Exempt Organizations Operations at the end of the previous year should be com- Branch of the IRS. reviewed the earlier versions of the bined on Part IV, line 67, column A. book and provided valuable advice. Form 990, Part IV, line 62: The IRS changed the The 1996 revision is printed in a loose-leaf for- description to "deferred revenue" and no longer mat to allow readers to insert other relevant documents, requires a supporting schedule detailing support such as the IRS instructions, and to make future revi- and revenue designated for future periods. sions easier and more cost effective. NACUBO is grate- ful to KPMG Peat Marwick LLP for their assistance in Form 990, parts IV-A and IV-B: A new section this revision and for permitting the use of updated fi- has been added to reconcile the revenue and ex- nancial statements reprinted from their publication, pense amounts on the audited financial statements Ratio Analysis in Higher Education: Measuring Past with the amounts reported on Form 990. This por- Performance to Chart Future Direction (KPMG Peat tion of the form slightly resembles the reconcilia- Marwick LLP and Prager, McCarthy & Sealy, 1995). tions provided on Form 1120, Schedule M. Victoria Z. Greve, manager, Exempt Organization Tax, Schedule A (Form 990), Part IV-A: A new sec- KPMG, updated the text and prepared the new tion has been added to Schedule A (Form 990) to worksheets and sample tax forms. NACUBO staff provide for the computation of the public sup- members Anne C. Gross, senior program manager, port test for certain organizations described in Public Policy and Management Programs (PPMP), section 509(a)(1) and 509(a)(2) that are publicly Mary M. Bachinger, program manager, PPMP, and supported. Colleges and universities are not re- Anne Kendrick, project manager/editor, Communica- quired to complete this section of the form. tions, were also instrumental in preparing this revision. Form 990-T: This form remains unchanged from 1994, except for a few line numbers on page 2. NACUBO strongly urges all college and univer- There were no changes to the reporting require- sity business officers to be familiar with the IRS rules ments or format. and regulations for reporting both general and finan- Introduction vii The NACUBO Guide to IRS Audits: A Manual cial information, to take responsibility for ensuring that for Colleges and Universities (1994) offers additional the appropriate tax forms are correctly prepared and guidance on IRS rules and regulations. For more in- filed in a timely manner, and to make provisions for formation, or to order this publication, call NACUBO's public inspection. Failure to file complete and correct Membership and Publications Department at 202 -861- information forms and tax returns can result in penal- 2560. ties being assessed by the IRS. 1 WHO MUST FILE Form 990, "Return of and check box "K" in the area above Part Ito indicate that gross receipts are less than $25,000. Parts I. Organization Exempt from through IX do not have to be completed, but the form Income Tax" must be signed. If organizations comply with this re- quest, the IRS will not have to contact them later to find out why a form was not filed, and Form 990 will All colleges and universities exempt from fed- not have to be filed again until the organization's gross eral income tax under Internal Revenue Code (IRC) receipts exceed the $25,000 minimum. section 501(c) (3) must file an annual return on Form 990except for those institutions defined as exempt Even if the organization is not required to file Form below. If an application for tax exemption is pending, 990, it may wish to follow the abbreviated filing proce- check the "application pending" box at the top of page dures to ensure that the organization continues to he 1 of Form 990 and complete the return in the normal listed in IRS Publication 78, Cumulative List of Orga- manner. nizations Described in Section 170(c). Code section 170(c) describes organizations (including 501(c)(3) or- Exemptions ganizations) that are eligible to receive tax-deductible charitable contributions; therefore, a listing in Publica- An organization may be exempt from filing Form 990 i f tion 78 can he helpful in assuring potential donors that their contributions are deductible. it is a state or municipal institution whose income is excluded from gross income under IRC Form 990EZ, "Short Form Return section 115(a); or of Organization Exempt from its gross receipts are not normally more than $25,000 (based on a three-year average that in- Income Tax" cludes the latest year completed). Cross receipts are the total of lines 12, 6b, 8b, 9b, and 10b of Part If, for any year, (1) the gross receipts of the orga- I, Form 990. nization are less than $100,000 and (2) its total assets are less than $250,000 at year end, the organiza- Even if an organization meets the above "receipts tion may file a Form 990EZ. This short-form return test," the IRS requests, but does not require, that the will satisfy the requirement to file as tong as the dual organization file a return to help update IRS records if test requirements are met. Even if the requirements it receives a Form 990 package with a preaddressed mailing label. The organization should affix the are met, the organization may continue to file the Form 990 if it chooses. preaddressed label in the proper space on Form 990 10