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2019 Form 990-T and 990-PF Changes and Other Updates

05/04/2020 Bryan Pautsch

Most of the changes to the 2019 Forms 990-T and 990-PF were minor, including clarifications outlined in the instructions.  A few of the more significant changes include:

Form 990-T

  • The Charitable Contributions section has been moved to Part III, Line 34 from Part I line 20. The instructions state the deduction for contributions will be allowed whether or not they are directly connected with the conduct of a trade or business.  The charitable contribution deduction on Part III, Line 34, is used to offset gross UBTI reported on Part III, Line 32.
  • IRC Section 512(a)(7), regarding qualified transportation fringe benefit expenses as UBTI, has been repealed (i.e The Parking Lot Tax).  The instructions for Form 990-T have been revised to state that Part III, Line 33, should be left blank. Since the repeal was retroactive, if an exempt organization previously filed Form 990-T and reported qualified fringe benefit expense as UBTI, it should follow the IRS guidance on amending its previously filed returns.
  • Part III, Line 35 was added to report the total amount of UBTI before deducting pre-2018 net operating losses and the $1,000 specific deduction.

Form 990-PF

  • Instructions to the Form 990-PF were updated to include the explanation for the electronic filing requirement for tax years beginning after July 2, 2019.  This means calendar-year organizations need to electronically file their 990s for the 2020 tax year.  However, if your fiscal year began on Aug. 1, 2019 or later, you will be required to file electronically in 2020, using the 2019 form.

There are a few exceptions that allows an organization to paper file if:

1. Your application for exemption is pending, and the “If exemption application is pending, check here” box is checked in Item C.

2. You are a foreign organization, and you checked the box in either Item D1 or D2.

3. You are a foundation in a 60-month termination under section 507(b)(1)(B), and you  checked the box in Item F.

4. Your organization’s name has changed, the new name is entered on Form 990-PF, and the “Name change” box is checked in Item G.

5. You are filing Form 990-PF for a short period because of an accounting period change. This does not apply if (a) the short period is an initial return, and the “Initial return” box is checked in Item G; or (b) the short period is for a final return, and the “Final return” box is checked in Item G.

6. You are filing Form 990-PF before the end of the tax year. This does not apply if the return is a final return, and the “Final return” box is checked in Item G.

7. You are an exempt foreign foundation and entered withholding tax in Part VI, line 6b.

8. You attempted to file Form 990-PF electronically, but the return was rejected.

  • Part II, Lines 24-25 have been changed for Foundations following ASC 958 to classify net assets as either net assets without donor restrictions (line 24) or net assets with donor restrictions (line 25).  Previously, the categories were unrestricted net assets, temporarily restricted net assets and permanently restricted net assets.

The IRS Tax Exempt and Government Entities division (TE/GE) published its annual
Accomplishments Letter on March 23, 2020, which applies to ALL tax exempt organizations. Read it here: Tax Exempt and Government Entities Fiscal Year 2019 Accomplishments Letter

Highlights of the IRS’s accomplishments during FY 2019, all of which support the IRS’s Strategic Plan for 2018-2022, include:

  • Expanded the use of Pay.gov to make payments easier;
  • Expanded Employee Plans’ (EP’s) self-correction and voluntary correction programs to improve voluntary compliance;
  • Expanded the EP determination letter program to encourage compliance;
  • Expanded educational efforts, soft letters and compliance checks to increase voluntary compliance;
  • Released additional educational videos and articles and participated in many outreach events to empower taxpayers and encourage compliance.

You can also review the TE/GE Fiscal Year 2020 Program Letter, which explains the IRS’s priorities for the current fiscal year.

IRS Issues Proposed Regulations for Exempt Organizations calculate UBTI Separately for each Trade or Business

The IRS issued proposed regulations on April 23, 2020, regarding the new rule that requires tax-exempt organizations subject to tax on unrelated business taxable income (UBTI) to calculate UBTI separately with respect to each business — or to “silo” revenue and expenses for each separate business. These new rules were enacted as part of the Tax Cuts and Jobs Act and are found in Section 512(a)(6) of the Internal Revenue Code.

A more detailed discussion will be provided in our next news update. For any questions related to this article, or nonprofit tax services in general, please contact Bryan Pautsch at bpautsch@vlcpa.com or 800.887.0437.

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