At Issue

The Form 990 instructions may be difficult to navigate. With the IRS running “data queries” that they have developed to ferret out areas of “non-compliance”, it makes sense to insure that your filings are complete, accurate, and timely.

Situation

Troas Bible College (TBC) is 501(c)(3) private Christian college that is required to file Form 990 each year. As we are reviewing their prior year Form 990 with them, Gwen, their Chief Financial Officer, asked about the “Yes/No” question at Form 990, Part IV, Line 14b that asks, “Did the organization have aggregate revenues or expenses of more than $10,000 from grantmaking, fundraising, business, investment, and program service activities outside the United States, or aggregate foreign investments valued at $100,000 or more? If “Yes,” complete Schedule F, Parts I and IV”

Gwen wonders if conducting a missions trip to Ghana with TBC students who operate a Bible school for two weeks – which cost about $42,000 in travel, lodging, meals, supplies, etc. – would cause TBC to need to file Schedule F.

We tell her that it would because this activity would generally qualify as “program services. The Schedule F, Part I instructions state, “Types of activities are any of the following: grantmaking, fundraising activities, unrelated trade or business, program services, investments, program-related investments, conducting board meetings, or sending agents of the organization to attend and speak at seminars and conferences. If multiple activities are conducted per region, list each type of activity on a separate line and repeat regions in column (a) as necessary.” (Underline ours.)

Rules

From the IRS Schedule F (Form 990) Instructions:

Purpose of Schedule
Schedule F (Form 990) is used by an organization that files Form 990 to provide information on its activities conducted outside the United States by the organization at any time during the tax year. Activities conducted outside the United States include grants and other assistance, program-related investments, fundraising activities, unrelated trade or business, program services, investments, or maintaining offices, employees, or agents for the purpose of conducting any such activities in regions outside the United States.

United States is defined as the 50 states and the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands. A “foreign country” is any sovereignty that is not the United States.

Information is to be reported based on the geographic regions described below. Report activities conducted by the organization directly or indirectly through a disregarded entity, or through a joint venture treated as a partnership.

For purposes of Schedule F (Form 990), grants and other assistance includes awards, prizes, contributions, noncash assistance, cash allocations, stipends, scholarships, fellowships, research grants, and similar payments and distributions made by the organization during the tax year to foreign organizations, foreign governments, and foreign individuals. It also includes grants and other assistance to domestic individuals or domestic organizations for the purpose of providing grants to designated foreign beneficiaries. It does not include salaries or other compensation to employees or payments to independent contractors; the payment of any benefit by a section 501(c)(9) voluntary employees’ beneficiary association (VEBA) to employees of a sponsoring organization or contributing employer, if such payment is made under the terms of the VEBA trust and in compliance with section 505; or payments or other assistance to affiliates or branch offices that are not organized as legal entities separate from the filing organization.

“Program services” are activities conducted by the organization outside the United States that form the basis of the organization’s exemption from federal income tax. Examples of program services include, but are not limited to, operating an orphanage, school, hospital, church, temple, mosque, or synagogue; disaster relief efforts; and providing indigent relief.

Bottom Line

It makes sense for someone on your accounting team to be a “Form 990 guru”. And, if you have student financial aid over certain thresholds, the “Yellow Book” rules may require your independent audit firm to certify that you have someone who knows more than a little about Form 990. As always, communicate with your qualified tax advisor on these items. He or she will be able to help you navigate the “murky” rules that can lurk around Form 990.

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.