At Issue
More and more, the IRS is scrutinizing overseas activities and the reporting requirements continually increase. Have you considered whether your college might have operations in or related to a “boycotting country”, or with the government, a company, or a national of a boycotting country.
Situation
Saltwater Christian College (SCC) had an opportunity to send some students and professors on a mission trip to Qatar in the summer of 2015. The country will be the host of the 2022 FIFA World Cup. SCC is excited about the group’s opportunity and includes trip reports and photos on their website. The cost of the trip was $32,485.
SCC’s CFO calls to ask what reporting might be required of the college with regard to this trip.
We reply that they will need to report the “activity” on a regional basis (labelled “Middle East and North Africa”) on Schedule F (Form 990), Part I, Line 2. Also, we related that, unfortunately, they will need to check the box “Yes” at Schedule F (Form 990), Part IV, Line 6 and file a Form 5713, International Boycott Report. Form 5713 is due four and a half months after the end of the tax year in which the trip occurred (the same due date as their Form 990).
Rules
Form 5713 Instructions, page 2…
Operations
The term “operations” means all forms of business or commercial activities and transactions (or parts of transactions), whether or not productive of income, including, but not limited to: selling; purchasing; leasing; licensing; banking, financing, and similar activities; extracting; processing; manufacturing; producing; constructing; transporting; performing activities related to the activities above (for example, contract negotiating, advertising, site selecting, etc.); and performing services, whether or not related to the activities above.
Operations in a boycotting country.
You are considered to have operations “in a boycotting country” if you have an operation that is carried out, in whole or in part, in a boycotting country, either for or with the government, a company, or a national of a boycotting country.
Penalties
Willful failure to file Form 5713 may result in:
• A $25,000 fine,
• Imprisonment for no more than 1 year, or
• Both.
Treasury Release, 7/7/15:
List of Countries Requiring Cooperation With an International Boycott (Dated: July 1, 2015)
In accordance with section 999(a)(3) of the Internal Revenue Code of 1986, the Department of the Treasury is publishing a current list of countries which require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).
On the basis of the best information currently available to the Department of the Treasury, the following countries require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).
- Iraq
- Kuwait
- Lebanon
- Libya
- Qatar
- Saudi Arabia
- Syria
- United Arab Emirates
- Yemen
Bottom Line
This particular – admittedly somewhat extreme – example may not pertain to your college. However, it is wise these days to pay attention to the myriad “international” tax rules that pertain to exempt organizations. Do you have an “FBAR” filing requirement? What about Schedule F (Form 990)? Are you sending people, goods, or dollars overseas? It makes sense to touch base with your tax advisor. He or she will be able to help you navigate these potentially treacherous waters.
Specific questions? Email Dave Moja
The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.