Accounting method change.

Once a taxpayer, including a tax-exempt entity, adopts an accounting method for federal income tax purposes, the taxpayer must generally request the IRS’s consent before it can change its accounting method (even if the year in which the taxpayer seeks to make the change is a year in which it generates only tax-exempt income or is otherwise not taxed on its taxable income). In most cases, a taxpayer requests consent to change an accounting method by filing a Form 3115, Application for Change in Accounting Method. See Rev. Proc. 2015-13, as modified by Rev. Proc. 2021-34 and any successor, for general procedures for obtaining consent to change an accounting method.

Depending on the specific accounting method change being requested, the taxpayer may be able to request “automatic” consent. This means that as long as the taxpayer follows the applicable procedures, the taxpayer does not have to wait for formal approval by the IRS before applying the new accounting method. See Rev. Proc. 2023-24, 2023-8 I.R.B. 1207, or its successor, for a list of accounting method changes that generally qualify for automatic consent.

For example, a tax-exempt entity that has adopted an accounting method for an item of income from an unrelated trade or business must generally request consent before it can change its method of accounting for that item in any subsequent year. This is true regardless of whether gross income from the unrelated trade or business is greater than or equal to $1,000 in such subsequent year.

Alternatively, if a taxpayer, including a tax-exempt entity, has not yet adopted an accounting method for an item of income or deduction, a change in how the entity reports the item is not a change in accounting method. In this case, the procedures applicable to requests for accounting method changes (for example, the requirement to file a Form 3115) are not applicable.

Thus, a tax-exempt entity that has never taken into account an item of income or deduction in determining taxable income does not have to request consent to change its method of reporting that item on Form 990. Additionally, a tax-exempt entity that has never been subject to federal income tax on an item of income or deduction but that is required to file a Form 990-T solely due to owing a section 6033(e)(2) proxy tax does not have to request consent to change its method for reporting the item.

Adjustments required when changing an accounting method.

A taxpayer, including a tax-exempt entity, that changes its accounting method must generally calculate and report an adjustment to ensure that no portion of the item being changed is permanently omitted or duplicated (see section 481(a)). However, depending on the specific method change, the IRS may provide that an adjustment is not required or permitted. An organization must report any adjustment required by section 481(a) in Parts VIII through XI and on Schedule D (Form 990), Parts XI and XII, as applicable, and provide an explanation for the change on Schedule O (Form 990).

Generally, a taxpayer, including a tax-exempt entity, will recognize a positive section 481(a) adjustment (such as an increase to income) ratably over 4 tax years and will recognize a negative section 481(a) adjustment in full in the year of change. See Rev. Proc. 2015-13, as modified by Rev. Proc. 2021-34 and any successor, for general procedures for obtaining consent to change an accounting method.

However, as discussed above, if a tax-exempt entity has not yet adopted an accounting method for an item, a change in how the entity reports the item for purposes of the Form 990 is not a change in accounting method. In this case, an adjustment under section 481(a) is not required or permitted.

State reporting.

Many states that accept Form 990 in place of their own forms require that all amounts be reported based on the accrual method of accounting. If the organization prepares Form 990 for state reporting purposes, it can file an identical return with the IRS even though the return doesn't agree with the books of account, unless the way one or more items are reported on the state return conflicts with the instructions for preparing Form 990 for filing with the IRS.

Line 1a.

The governing body is the group of one or more persons authorized under state law to make governance decisions on behalf of the organization and its shareholders or members, if applicable. The governing body is, generally speaking, the board of directors (sometimes referred to as “board of trustees”) of a corporation or association, or the trustee or trustees of a trust (sometimes referred to as the “board of trustees”).

Enter the number, as of the end of the organization's tax year, of members of the governing body of the organization with power to vote on all matters that come before the governing body (other than when a conflict of interest disqualifies the member from voting). If members of the governing body don't all have the same voting rights, explain material differences on Schedule O (Form 990).

If the organization's governing body or governing documents delegated authority to act on its behalf to an executive committee or similar committee with broad authority to act on behalf of the governing body, and the committee held such authority at any time during the organization's tax year, describe on Schedule O (Form 990) the composition of the committee, whether any of the committee's members aren't on the governing body, and the scope of the committee's authority. The organization need not describe on Schedule O (Form 990) delegations of authority that are limited in scope to particular areas or matters, such as delegations to an audit committee, investment committee, or compensation committee of the governing body.

Line 1b.

Enter the number of independent voting members of the governing body as of the end of the organization's tax year. A member of the governing body is considered “independent” only if all four of the following circumstances applied at all times during the organization's tax year.

A member of the governing body isn't considered to lack independence merely because of the following circumstances.

Line 2.

Answer “Yes” if any of the organization's current officers, directors, trustees, or key employees, as reported in Part VII, Section A, had a family relationship or business relationship with another of the organization's current officers, directors, trustees, or key employees, as reported in Part VII, Section A, at any time during the organization's tax year. For each family and business relationship, identify the persons and describe their relationship on Schedule O (Form 990). It is sufficient to enter “family relationship” or “business relationship” without greater detail.

Line 3.

Answer “Yes” if, at any time during the organization's tax year, the organization used a management company or other person (other than persons acting in their capacities as officers, directors, trustees, or key employees) to perform any management duties customarily performed by or under the direct supervision of officers, directors, trustees, or key employees. Such management duties include, but aren't limited to, hiring, firing, and supervising personnel; planning or executing budgets or financial operations; or supervising exempt operations or unrelated trades or businesses of the organization. Management duties don't include administrative services (such as payroll processing) that don't involve significant managerial decision making. Management duties also don't include investment management unless the filing organization conducts investment management services for others.

If “Yes,” on Schedule O (Form 990), list the name(s) of the management company or companies or other person(s) performing management duties; describe the services they provided to the organization; list any of the organization’s current or former officers, directors, trustees, key employees, and highest compensated employees listed in Part VII, Section A, who were compensated by the management company or companies or other person(s) during the calendar year ending with or within the organization's tax year; and list the amounts of reportable and other compensation they received from the management company or companies or other person(s) for services provided to the filing organization and related organizations during that year.

Line 4.

The organization must report significant changes to its organizing or enabling document by which it was created (articles of incorporation, association, or organization; trust instrument; constitution; or similar document), and to its rules governing its affairs commonly known as bylaws (or regulations, operating agreement, or similar document). Report significant changes that weren't reported on any prior Form 990, and that were made before the end of the tax year. Don't report changes to policies described or established outside of the organizing or enabling document and bylaws (or similar documents), such as adoption of, or change to, a policy adopted by resolution of the governing body that doesn't entail a change to the organizing document or bylaws.

Examples of significant changes to the organizing or enabling document or bylaws include changes to:

Examples of insignificant changes made to organizing or enabling documents or bylaws that aren't required to be reported here include changes to the organization's registered agent with the state and to the required or permitted number or frequency of governing body or member meetings.

Describe significant changes on Schedule O (Form 990), but don't attach a copy of the amendments or amended document to Form 990 (or recite the entire amended document verbatim), unless such amended documents reflect a change in the organization's name. See Specific Instructions, Item B, earlier, regarding attachments required in the event of a change in the organization's name.

An organization must report significant changes to its organizational documents on Form 990, Part VI, rather than in a letter to EO Determinations. EO Determinations no longer issues letters confirming the tax-exempt status of organizations that report significant changes to their organizational documents, though it will, on request, issue an affirmation letter confirming an organization's name change. The IRS will no longer require a new exemption application from a domestic section 501(c) organization that undergoes certain changes of form or place of organization described in Rev. Proc. 2018-15, 2018-9 I.R.B. 379.

Line 5.

Answer “Yes” if the organization became aware during the organization's tax year of a significant diversion of its assets, whether or not the diversion occurred during the year. If “Yes,” explain the nature of the diversion, dollar amounts and/or other property involved, corrective actions taken to address the matter, and pertinent circumstances on Schedule O (Form 990), although the person or persons who diverted the assets shouldn't be identified by name.

A diversion of assets includes any unauthorized conversion or use of the organization's assets other than for the organization's authorized purposes, including but not limited to embezzlement or theft. Report diversions by the organization's officers, directors, trustees, employees, volunteers, independent contractors, grantees (diverting grant funds), or any other person, even if not associated with the organization other than by the diversion. A diversion of assets doesn't include an authorized transfer of assets for FMV consideration, such as to a joint venture or for-profit subsidiary in exchange for an interest in the joint venture or subsidiary. For this purpose, a diversion is considered significant if the gross value of all diversions (not taking into account restitution, insurance, or similar recoveries) discovered during the organization's tax year exceeds the lesser of (1) 5% of the organization's gross receipts for its tax year, (2) 5% of the organization's total assets as of the end of its tax year, or (3) $250,000.

Line 6.

Answer “Yes” if the organization is organized as a stock corporation, a joint-stock company, a partnership, a joint venture, or an LLC. Also answer “Yes” if the organization is organized as a non-stock, nonprofit, or not-for-profit corporation or association with members. For purposes of Form 990, Part VI,member means (without regard to what a person, including a corporation or other legal entity, is called in the governing documents) any person who, pursuant to a provision of the organization's governing documents or applicable state law, has the right to participate in the organization's governance or to receive distributions of income or assets from the organization. Members don't include governing body members. For purposes of Part VI, a membership organization includes members with the following kinds of rights.

Line 7a.

Answer “Yes” on line 7a if at any time during the organization's tax year there were one or more persons (other than the organization's governing body itself, acting in such capacity) that had the right to elect or appoint one or more members of the organization's governing body, whether periodically, or as vacancies arise, or otherwise. If “Yes,” describe on Schedule O (Form 990) the class or classes of such persons and the nature of their rights.

Line 7b.

Answer “Yes” on line 7b if at any time during the organization's tax year any governance decisions of the organization were reserved to (or subject to approval by) members, stockholders, or persons other than the governing body, whether or not any such governance decisions were made during the tax year, such as approval of the governing body's election or removal of members of the governing body, or approval of the governing body's decision to dissolve the organization. If “Yes,” describe on Schedule O (Form 990) the class or classes of such persons, the decisions that require their approval, and the nature of their voting rights.

Line 8.

Answer “Yes” on lines 8a and 8b if the organization contemporaneously documented by any means permitted by state law every meeting held and written action taken during the organization's tax year by its governing body and committees with authority to act on behalf of the governing body (which ordinarily don't include advisory boards). Documentation permitted by state law can include approved minutes, email, or similar writings that explain the action taken, when it was taken, and who made the decision. For this purpose, contemporaneous means by the later of (1) the next meeting of the governing body or committee (such as approving the minutes of the prior meeting), or (2) 60 days after the date of the meeting or written action. If the answer to either line 8a or 8b is “No,” explain on Schedule O (Form 990) the organization's practices or policies, if any, regarding documentation of meetings and written actions of its governing body and committees with authority to act on its behalf. If the organization had no committees, answer “No” to line 8b.

Line 9.

The IRS needs a current mailing address to contact the organization's officers, directors, trustees, or key employees. The organization can use its official mailing address stated on the first page of Form 990 as the mailing address for such persons. Otherwise, enter on Schedule O (Form 990) the mailing addresses for such persons who are to be contacted at a different address. Such information will be available to the public.

Line 15.

Answer “Yes” on line 15a if, during the tax year, the organization (not a related organization or other third party) used a process for determining compensation (reported on Part II or Schedule J (Form 990), Compensation Information) of the CEO, executive director, or other person who is the top management official, that included all of the following elements.

Answer “Yes” on line 15b if the process for determining compensation of one or more officers or key employees other than the top management official included all of the elements listed above.

If the answer was “Yes” on line 15a or 15b, describe the process on Schedule O (Form 990), identify the offices or positions for which the process was used to establish compensation of the persons who served in those offices or positions, and enter the year in which this process was last undertaken for each such person.

If the organization didn't compensate its CEO, executive director, or top management official during the tax year, answer “No” to line 15a. If the organization didn't compensate any of its other officers or key employees during the tax year, even if such employees were compensated by a related organization, answer “No” to line 15b.

Line 16.

Answer “Yes” on line 16a if, at any time during its tax year, the organization invested in, contributed assets to, or otherwise participated in a joint venture or similar arrangement with one or more taxable persons. For purposes of line 16, a joint venture or similar arrangement (or a “venture or arrangement”) means any joint ownership or contractual arrangement through which there is an agreement to jointly undertake a specific business enterprise, investment, or exempt-purpose activity without regard to (1) whether the organization controls the venture or arrangement, (2) the legal structure of the venture or arrangement, or (3) whether the venture or arrangement is treated as a partnership for federal income tax purposes, or as an association, or corporation for federal income tax purposes. Disregard ventures or arrangements that meet both of the following conditions.

Answer “Yes” on line 16b if, as of the end of the organization's tax year, the organization had both:

Some examples of safeguards include the following.

Line 17.

List the states with which a copy of this Form 990 is required to be filed, even if the organization hasn't yet filed Form 990 with that state. Use Schedule O (Form 990) if additional space is necessary.

Line 18.

Check the box for “Own website” only if the organization posted an exact reproduction (other than for information permitted by law to be withheld from public disclosure, such as the names and addresses of contributors listed on Schedule B (Form 990)) of its Form 990, Form 990-T (for section 501(c)(3) organizations), or application for recognition of exemption (Form 1023, 1023-EZ, 1024, or 1024-A) on its website during its tax year. Check the box for “Another's website” only if the organization provided to another individual or organization and that other individual or organization posted on its website, an exact reproduction (other than for information permitted by law to be withheld from public disclosure, such as the names and addresses of contributors listed on Schedule B (Form 990)) of any such forms during the tax year.

If “Other” is checked, explain on Schedule O (Form 990). Also explain on Schedule O (Form 990) if the organization didn't make publicly available upon request any of Forms 1023, 1023-EZ, 1024, 1024-A, 990, or 990-T that are subject to public inspection requirements. Exempt organizations must make available for public inspection their Form 1023, 1023-EZ, 1024, or 1024-A application for recognition of exemption. Applications filed before July 15, 1987, need not be made publicly available unless the organization had a copy on July 15, 1987.

Organizations that file Form 990 must make it publicly available for a period of 3 years from the date it is required to be filed (including extensions) or, if later, is actually filed. Organizations aren't required to make publicly available the names and addresses of contributors (as set forth on Schedule B (Form 990), and on Form 1023, 1023-EZ, 1024, or 1024-A). Section 501(c)(3) organizations that file Form 990-T are also required to make their Forms 990-T publicly available for the corresponding 3-year period for forms filed after August 17, 2006 (unless the form was filed solely to request a refund of telephone excise taxes). See Appendix D for more information on public inspection requirements.

Line 19.

Explain on Schedule O (Form 990) whether the organization made its governing documents (for example, articles of incorporation, constitution, bylaws, trust instrument), conflict of interest policy, and financial statements (whether or not audited) available to the general public during the tax year, and, if so, how it made them available to the public (for example, posting on the organization's website, posting on another website, providing copies on request, inspection at an office of the organization, etc.). If the organization didn't make any of these documents available to the public, enter “No documents available to the public.”

Federal tax law doesn't require that such documents be made publicly available unless they were included on a form that is publicly available (such as Form 1023, 1023-EZ, 1024, or 1024-A).

Line 20.

Provide the name of the person who possesses the organization's books and records, and the business address and telephone number of such person (or of the organization if the books and records are kept by such person at a personal residence). If the books and records are kept at more than one location, provide the name, business address, and telephone number of the person responsible for coordinating the maintenance of the books and records. The organization isn't required to provide the address or telephone number of a personal residence of an individual. If provided, however, such information will be available to the public.

Overview.

Organizations are required to enter in Part VII, Section A, the following officers, directors, trustees, and employees of the organization whose reportable compensation from the organization and related organizations (as explained in the Glossary and the Instructions for Schedule R (Form 990)) exceeded the following thresholds for the tax year.

Special rules apply to disregarded entities of which the organization is the sole member. See Disregarded Entities, later.

To determine which persons are current or former officers, directors, trustees, key employees, or highest compensated employees, see the instructions for Part VII, Section A, column (C), later.

Order of reporting.

List the persons required to be included in Part VII, Section A, in order from highest to lowest compensation based on the sum of columns (D), (E), and (F) for each person. When the amount of total compensation is the same, list the persons in the following order: individual trustees or directors, institutional trustees, officers, key employees, highest compensated employees, and former such persons.

Fiscal year filers.

To determine which persons are listed in Part VII, Section A, the organization must use the calendar year ending with or within the organization's fiscal year for some (those whose compensation must exceed minimum thresholds in order to be reported) and the fiscal year for others. Report officers, directors, and trustees that served at any time during the fiscal year as “current” officers, directors, and trustees. Report the following persons based on reportable compensation and status for the calendar year ending within the fiscal year.

Report compensation on Form 990, Part VII, for the calendar year ending within the organization's fiscal year, including that of current officers, directors, and trustees, even if the fiscal year is used to determine which such persons must be listed in Part VII.

Director or trustee.

A director or trustee is a member of the organization's governing body, but only if the member has voting rights. A director or trustee that served at any time during the organization's tax year is deemed a current director or trustee. Members of advisory boards that don't exercise any governance authority over the organization aren't considered directors or trustees.

An “institutional trustee” is a trustee that isn't an individual or natural person but an organization. For instance, a bank or trust company serving as the trustee of a trust is an institutional trustee.

Officer.

An officer is a person elected or appointed to manage the organization's daily operations. An officer that served at any time during the organization's tax year is deemed a current officer. The officers of an organization are determined by reference to its organizing document, bylaws, or resolutions of its governing body, or as otherwise designated consistent with state law, but, at a minimum, include those officers required by applicable state law. Officers can include a president, vice president, secretary, treasurer, and, in some cases, a Board Chair. In addition, for purposes of Form 990, including Part VII, Section A, and Schedule J (Form 990), treat as an officer the following persons, regardless of their titles.

Key employee.

For purposes of Form 990, a current key employee is an employee of the organization (other than an officer, director, or trustee) who meets all three of the following tests, applied in the following order.

An individual that isn't an employee of the organization (or of a disregarded entity of the organization) is nonetheless treated as a key employee if she or he serves as an officer or director of a disregarded entity of the organization and otherwise meets the standards of a key employee set forth above. See Disregarded Entities, later, for treatment of certain employees of a disregarded entity as key employees of the organization.

If an employee is a key employee of the organization for only a portion of the year, that person's entire compensation for the calendar year ending with or within the organization's tax year, from both the filing organization and related organizations, should be reported in Part VII, Section A.

Management companies and similar entities that are independent contractors shouldn't be reported as key employees. The organization's top management official and top financial official are deemed officers rather than key employees.

In the examples set forth below, assume the individual involved is an employee that satisfies the $150,000 Test and Top 20 Test and isn't an officer, director, or trustee.

Five highest compensated employees.

The organization is required to enter its current five highest compensated employees whose reportable compensation combined from the organization and related organizations is greater than $100,000 for the calendar year ending with or within the organization's tax year and who aren't also current officers, directors, trustees, or key employees of the organization. Such individuals are the “current” five highest compensated employees. These can include persons who meet some but not all of the tests for key employee status. The organization isn't required to enter more than the top five such persons, ranked by amount of reportable compensation. Use the calendar year ending with or within the organization's tax year for determining the organization's current five highest compensated employees.

$10,000 exceptions for reporting compensation.

Report compensation paid or accrued by the filing organization and related organizations. Special rules apply for reporting reportable compensation and other compensation.

All reportable compensation paid by the filing organization must be reported. Reportable compensation paid by a related organization isn't required to be reported unless (1) it is $10,000 or more for the calendar year ending with or within the organization's tax year (the “$10,000-per-related-organization exception”), or (2) it is paid for past services to the filing organization in the person's capacity as a former director or trustee.

A particular item of other compensation (such as listed in the compensation table, later) paid or accrued by the filing organization isn't required to be reported unless (1) it is $10,000 or more for the calendar year ending with or within the organization's tax year (the “$10,000-per-item exception”), or (2) it is one of the five types of compensation (generally constituting deferred compensation (including retirement plan benefits) and health benefits) that must be reported regardless of amount (see the instructions for column (F)). The same principles apply to items of other compensation paid or accrued by a related organization (applied separately to each related organization).

The $10,000 exceptions don't apply to reporting compensation on Schedule J (Form 990), Part II.

Reportable compensation.

Reportable compensation consists of:

If the organization didn't file a Form 1099-NEC or 1099-MISC because the amounts paid were below the threshold reporting requirement, then include and report the amount actually paid. For a full definition of reportable compensation, see the Glossary.

Corporate officers are considered employees for purposes of Form W-2 reporting, unless they perform no services as officers, or perform only minor services and neither receive nor are entitled to receive, directly or indirectly, any compensation. Corporate directors are considered independent contractors, not employees, and director compensation, if any, is generally required to be reported on Form 1099-NEC. See Regulations section 31.3401(c)-1(f).

For certain kinds of employees and for retirees, the amount in box 5 of Form W-2 can be zero or less than the amount in box 1 of Form W-2. For instance, recipients of disability pay, certain members of the clergy, and religious workers who aren't subject to social security and Medicare taxes as employees can receive compensation that isn't reported in box 5. In that case, the amount required to be reported in box 1 of Form W-2 must be reported as reportable compensation.

If an officer, director, trustee, key employee, or highest compensated employee of the organization is a foreign person who received U.S. source income during the calendar year ending with or within the organization's tax year from the filing organization or a related organization, and if such income was reported in box 2 of Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, then treat this income as reportable compensation and report it in Part VII, Section A, column (D) or (E). For foreign persons for whom compensation reporting on Form W-2, Form 1099-NEC, Form 1099-MISC, or Form 1042-S isn't required, treat as reportable compensation in column (D) or (E) the total value of the compensation paid in the form of cash or property during the calendar year ending with or within the organization's tax year. Report other compensation from foreign organizations as “other compensation” in column (F).

To determine whether an individual received more than $100,000 (or $150,000) in reportable compensation in the aggregate from the filing organization (and, as discussed later, certain third parties such as common paymasters, payroll/reporting agents, and certain unrelated organizations, compensation from which is considered compensation from the filing organization) and related organizations, add the following amounts.

To determine whether an individual received solely in his or her capacity as a former trustee or director of the organization more than $10,000 in reportable compensation for the calendar year ending with or within the organization's tax year, in the aggregate, from the organization and all related organizations (and thus must be reported on Form 990, Part VII, and Schedule J (Form 990), Part II), add the amounts reported in box 1 of all Forms 1099-NEC, box 6 of all Forms 1099-MISC, and, if relevant, box 1 or 5 of all Forms W-2 (whichever amount is greater) issued to the individual by the organization and all related organizations for the calendar year ending with or within the organization's tax year. Report such amounts only to the extent that such amounts relate to the individual's past services as a trustee or director of the organization, and don't disregard any payments from a related organization if below $10,000, for such purpose.

Other compensation.

Other compensation includes compensation other than reportable compensation, including deferred compensation not currently reportable in box 1 or 5 of Form W-2, box 1 of Form 1099-NEC, or box 6 of Form 1099-MISC, and certain nontaxable benefits, as discussed in detail in the instructions for Schedule J (Form 990), Part II. See the instructions for other compensation reported in column (F), later, which includes a table to show where and how to report certain types of compensation in Part VII, Section A, and Schedule J (Form 990).

Disregarded entities.

Disregarded entities (such as an LLC that is wholly owned by the organization and not treated as a separate entity for federal tax purposes) are generally treated as part of the organization rather than as related organizations for purposes of Form 990, including Part VII and Schedule J (Form 990). A person isn't considered an officer or director of the organization by virtue of being an officer or director of a disregarded entity, but he or she can qualify as a key employee or highest compensated employee of the organization. An officer, director, or employee of a disregarded entity is a key employee of the organization if she or he meets the $150,000 Test and Top 20 Test for the filing organization as a whole, and if, for the Responsibility Test, the person has responsibilities, powers, or influence over a discrete segment or activity of the disregarded entity that represents at least 10% of the activities, assets, income, or expenses of the filing organization as a whole, or has or shares authority to control or determine the disregarded entity's capital expenditures, operating budget, or compensation for employees that is at least 10% of the filing organization's respective items as a whole. If an officer or director of a disregarded entity also serves as an officer, director, trustee, or key employee of the organization, report this individual as an officer, director, trustee, or key employee, as applicable, of the organization, and add the compensation, if any, paid by the disregarded entity to this individual to the compensation, if any, paid directly by the organization to this individual. Report the total aggregate amount in column (D).

A disregarded entity must generally use the EIN of its sole member. An exception applies to employment taxes: for wages paid to employees of a disregarded entity, the disregarded entity must file separate employment tax returns and use its own EIN on such returns. See Regulations sections 301.6109-1(h) and 301.7701-2(c)(2)(iv).

Management companies.

Management companies, as independent contractors, are reported on Form 990, Part VII, (if at all) only in Section B. Independent Contractors, and aren't reported on Schedule J (Form 990), Part II. If a current or former officer, director, trustee, or key employee has a relationship with a management company that provides services to the organization, then the relationship may be reportable on Schedule L (Form 990), Part IV. A key employee of a management company must be reported as a current officer of the filing organization if he or she is the filing organization's top management official or top financial official or is designated as an officer of the filing organization. However, that person doesn't qualify as a key employee of the filing organization solely on the basis of being a key employee of the management company. If a current or former officer, director, trustee, key employee, or highest compensated employee received compensation from a management company that provided services to the organization and was a related organization during the tax year, then the individual's compensation from the management company must be reported on Form 990, Part VII, Section A, columns (E) and (F). If the management company wasn't a related organization during the tax year, the individual’s compensation from the management company isn't reportable in Part VII, Section A. Questions pertaining to management companies also appear on Form 990, Part VI, line 3; and Schedule H (Form 990), Hospitals, Part IV.

Employee leasing companies and professional employer organizations.

In some cases, instead of hiring a management company, an exempt organization “leases” one or more employees from another company, which may be in the business of leasing employees. Alternatively, the organization may enter into an agreement with a professional employer organization to perform some or all of the federal employment tax withholding, reporting, and payment functions related to workers performing services for the organization. The organization should treat employees of an employee leasing company, a professional employer organization (whether or not certified under the new Certified Professional Employer Organization), or a management company as the organization's own employees if such persons have the status of employees of the filing organization under the usual common law rules applicable in determining the employer-employee relationship or who are treated as employees of the filing organization for federal employment tax purposes under section 3121(d). See Pub. 1779, Independent Contractor or Employee, for more information. Otherwise, the compensation paid to leasing companies and professional employer organizations should be treated like compensation to a management company for purposes of Form 990 compensation reporting.

Compensation from common paymasters, payroll/reporting agents, and unrelated organizations or individuals (except for compensation from management companies or leasing companies, and compensation described in Taxable organization employee exception, later) must be treated as reportable compensation in determining whether the dollar thresholds are met for reporting (1) current or former employees as current or former key employees or highest compensated employees; or (2) former officers, directors, or trustees, on Form 990, Part VII, Section A. If the Form 990, Part VII, thresholds for reporting are met, then the compensation from the common paymaster, payroll/reporting agent, or unrelated organization or individual must be reported as compensation from the filing organization in Part VII. The compensation may also need to be reported on Schedule J (Form 990), Part II (see the instructions for Form 990, Part VII, Section A, line 5).

The use of a leasing company, common paymaster, payroll/reporting agent, or other payroll service provider doesn't relieve an employer of its obligation for employment tax liabilities. The IRS strongly suggests that the organization doesn't change its address to that of its payroll service provider or other third-party payer. Doing so could limit the organization’s ability to stay informed of tax matters, because the IRS sends correspondence regarding problems with an employer's account to the employer's address of record. Alternatively, an employer may grant permission for a third-party payer to receive copies of IRS correspondence by using Form 8822-B; Form 2848, Power of Attorney and Declaration of Representative; or Form 8655, Reporting Agent Authorization, as appropriate.

Compensation from unrelated organizations or individuals.

If a current or former officer, director, trustee, key employee, or highest compensated employee received or accrued compensation or payments from an unrelated organization (other than from management companies or leasing companies, as discussed above) or an individual for services rendered to the filing organization in that person's capacity as an officer, director, trustee, or employee of the filing organization, then the filing organization must report (subject to the Taxable organization employee exception next) such amounts as compensation from the filing organization if it has knowledge of the arrangement, whether or not the unrelated organization or the individual treats the amounts as compensation, grants, contributions, or otherwise. Report such compensation from unrelated organizations in Section A, columns (D) and (F), as appropriate. If the organization can't distinguish between reportable compensation and other compensation from the unrelated organization, report all such compensation in column (D).

Column (A).

For each person required to be listed, enter the name on the top of each row and the person's title or position with the organization on the bottom of the row. If more than one title or position, list all. List persons in the order described under Order of reporting, earlier. List each person on only one line.

Column (B).

For each person listed in column (A), estimate the average hours per week devoted to the organization during the year. Entry of a specific number is required for a complete answer. Enter “-0-” if applicable. Don't include statements such as “as needed,” “as required,” or “40+.” If the average is less than 1 hour per week, then the organization can enter a decimal rounded to the nearest tenth (for example, 0.2 hours per week).

For each person listed in column (A), list below the dotted line an estimate of the average hours per week (if any) devoted to related organizations.

Column (C).

For each person listed in column (A), check the box that reflects the person's position with the organization during the tax year. Don't check more than one box, unless the person was both an officer and a director/trustee of the organization during the tax year. For a former officer, director, trustee, key employee, or highest compensated employee, check only the “Former” box and indicate the former status in the person's title.

Columns (D) and (E).

Enter the amounts required to be reported (whether or not actually reported) in box 1 or 5 of Form W-2 (whichever is greater), box 1 of Form 1099-NEC, and/or box 6 of Form 1099-MISC, issued to the person for the calendar year ending with or within the organization's tax year. Enter an amount for each person in each of columns (D) and (E). Enter “-0-” if the person received no reportable compensation. For institutional trustees that don't receive a Form 1099-NEC or 1099-MISC, enter the amount that the organization would have reported in box 1 of Form 1099-NEC or box 6 of Form 1099-MISC if the form(s) had been required.

Reportable compensation paid to the person by a related organization at any time during the entire calendar year ending with or within the filing organization's tax year should be reported in column (E). If the related organization was related to the filing organization for only a portion of the tax year, then the filing organization may choose to report only compensation paid or accrued by the related organization during the time it was actually related. If the filing organization reports compensation on this basis, it must explain on Schedule O (Form 990) and state the period during which the related organization was related.

Column (F).

Other compensation generally includes compensation not currently reportable in box 1 or 5 of Form W-2, in box 1 of Form 1099-NEC, or in box 6 of Form 1099-MISC, including nontaxable benefits other than disregarded benefits, as discussed under Disregarded benefits, later, and in the instructions for Schedule J (Form 990), Part II. Treat amounts paid or accrued under a deferred compensation plan, or held by a deferred compensation trust, that is established, sponsored, or maintained by the organization (or a related organization) as paid, accrued, or held directly by the organization (or the related organization). Deferred compensation to be reported in column (F) includes compensation that is earned or accrued in one year and deferred to a future year, whether or not funded, vested, qualified or nonqualified, or subject to a substantial risk of forfeiture. But don't report in column (F) a deferral of compensation that causes an amount to be deferred from the calendar year ending with or within the tax year to a date that isn't more than 2½ months after the end of the calendar year ending with or within the tax year if such compensation is currently reported as reportable compensation.

Enter an amount in column (F) for each person listed in Part VII, Section A. (Enter “-0-” if applicable.) Report a reasonable estimate if actual numbers aren't readily available.

Other compensation paid to the person by a related organization at any time during the calendar year ending with or within the filing organization's tax year should be reported in column (F). If the related organization was related to the filing organization for only a portion of the tax year, then the filing organization may choose to report only other compensation paid or accrued by the related organization during the time it was actually related. If the filing organization reports compensation on this basis, it must explain on Schedule O (Form 990) and state the period during which the related organization was related.

The following items of compensation provided by the filing organization and related organizations must be reported as “other compensation” in column (F) in all cases regardless of the amount, to the extent they aren't included in column (D).

$10,000-per-item exception.

Except for the five items listed above, neither the organization nor a related organization is required to report on Form 990, Part VII, Section A, any item of “other compensation” (as set forth in the compensation table beginning later) if its total value is less than $10,000 for the calendar year ending with or within the organization's tax year.

Amounts excluded under the two separate $10,000 exceptions (the $10,000-per-related-organization and $10,000-per-item exceptions) are to be excluded from compensation in determining whether an individual's total reportable compensation and other compensation exceeds the thresholds set forth on Form 990, Part VII, Section A, line 4. If the individual's total compensation exceeds the relevant threshold, then the amounts excluded under the $10,000 exceptions are included in the individual's compensation reported on Schedule J (Form 990). Thus, the total amount of compensation reported on Schedule J (Form 990) can be higher than the amount reported on Form 990, Part VII, Section A.

The $10,000-per-item exception applies separately for each item of other compensation from the organization and from each related organization.

Disregarded benefits.

Disregarded benefits under Regulations section 53.4958-4(a)(4) need not be reported in column (F). Disregarded benefits generally include fringe benefits excluded from gross income under section 132. These benefits include:

For descriptions of each of these disregarded benefits, see the Instructions for Schedule J (Form 990).

Short year and final returns.

For a short year return in which there is no calendar year that ends with or within the short year, leave column (F) blank, unless the return is a final return. If the return is a final return, report the other compensation for the short year from both the filing organization and related organizations.

Compensation table for reporting on Part VII, Section A; or Schedule J (Form 990), Part II.

The following table may be useful in determining how and where to report items of compensation on Form 990, Part VII, Section A, and on Schedule J (Form 990), Part II. The list isn't comprehensive but covers most items for most organizations. Many items of compensation may or may not be taxable or currently taxable, depending on the plan or arrangement adopted by the organization and other circumstances. The list attempts to take into account these varying facts and circumstances. The list is merely a guideline to report amounts for those persons required to be listed. In all cases, items included in box 1 or 5 of Form W-2 (whichever is greater), in box 1 of Form 1099-NEC, and/or in box 6 of Form 1099-MISC are required to be reported on Part VII, Section A, and, for applicable persons, Schedule J (Form 990), Part II, column (B). Items listed as “taxable” or “taxable in current year” are currently includible in reportable compensation, but aren't necessarily subject to federal income tax in the current year.

Any item listed in the following compensation table that isn't followed by a star (x) or asterisk (*) in any column shouldn't be reported on Part VII, Section A; or in Schedule J (Form 990), Part II.

Line 1b.

Report the subtotals of compensation from the Section A, line 1a, table in line 1b, columns (D), (E), and (F).

Line 1c.

Report the subtotals of compensation from duplicate Section A tables for filers that report more than 25 persons in the Section A, line 1a, table in line 1c, columns (D), (E), and (F).

Line 1d.

Add the totals of lines 1b and 1c in line 1d for columns (D), (E), and (F).

Line 2.

Report the total number of individuals, both those listed in the Part VII, Section A, table, and those not listed, to whom the filing organization (not related organizations) paid over $100,000 in reportable compensation during the tax year.

Line 3.

Complete Schedule J (Form 990) for each of the following persons.

Line 4.

Complete Schedule J (Form 990) for each individual listed in Section A who received or accrued more than $150,000 of reportable and other compensation from the organization and related organizations. To determine whether any listed individual received or accrued more than $150,000 of reportable and other compensation, add all compensation included in Part VII, Section A, columns (D), (E), and (F), but disregard any decreases in the actuarial value of defined benefit plans.

The following chart explains which officers, directors, trustees, key employees, and highest compensated employees must be reported on Form 990, Part VII, Section A, and on Schedule J (Form 990). See also Line 5, later, for additional individuals who must be reported on Schedule J (Form 990), Part II.

Line 5.

Complete Schedule J (Form 990) for any individual listed on Form 990, Part VII, Section A, if the person receives or accrues compensation from an unrelated organization (other than from management companies and leasing companies, as discussed earlier) for services rendered to the filing organization in the person's capacity as an officer, director, trustee, or employee of the filing organization. Also, specify on Schedule J (Form 990), Part III, the name of the unrelated organization, the type and amount of compensation it paid or accrued, and the person receiving or accruing such compensation. See Compensation from unrelated organizations or individuals, earlier.

For purposes of line 5, disregard:

Column (C).

Enter the amount the organization paid, whether reported in box 1 of Form 1099-NEC, in box 6 of Form 1099-MISC, or paid under the parties' agreement or applicable state law, for the calendar year ending with or within the organization's tax year.

For a short year return in which there is no calendar year that ends with or within the short year, don't report any information in columns (A) through (C), unless the return is a final return. If the return is a final return, report the compensation paid to the independent contractor(s) under the parties' agreement during the short year or the compensation that is reportable compensation on Form 1099 for the short year, whether or not Form 1099 has been filed yet to report such compensation.

Compensation includes fees and similar payments to independent contractors but not reimbursement of expenses unless incidental to providing the service. However, for this purpose, the organization must report gross payments to the independent contractor that include expenses and fees if the expenses aren't separately reported to the organization.

Form 1099-NEC and/or Form 1099-MISC may be required to be issued for payments to an independent contractor, with compensation reported in box 1 of Form 1099-NEC and/or box 6 of Form 1099-MISC.

Line 1a.

Enter on line 1a the total amount of contributions received indirectly from the public through solicitation campaigns conducted by federated fundraising agencies and similar fundraising organizations (such as from a United Way organization). Federated fundraising agencies normally conduct fundraising campaigns within a single metropolitan area or some part of a particular state, and allocate part of the net proceeds to each participating organization on the basis of the donors' individual designations and other factors.

Line 1b.

Report on line 1b membership dues and assessments that represent contributions from the public rather than payments for benefits received or payments from affiliated organizations.

Membership dues can consist of both contributions and payment for goods and services. In that case, the portion of the membership dues that is a payment for goods or services should be reported on line 2, Program Service Revenue. The portion that exceeds the FMV of the goods or services provided should be reported on line 1b.

The portion of membership dues attributable to certain membership benefits that are considered to be insubstantial (for example, low-cost articles, free or discounted admission to the organization's activities, discounts on purchases from the organization's gift shop, free or discounted parking) may be reported as contributions on line 1, rather than as payments for goods or services on line 2. See Pub. 1771, Charitable Contributions—Substantiation and Disclosure Requirements, for more information on insubstantial membership benefits that need not be valued or reported.

Line 1c.

Enter the total amount of contributions received from fundraising events, which includes, but isn't limited to, dinners, auctions, and other events conducted for the sole or primary purpose of raising funds for the organization's exempt activities. Report contributions received from gaming activities on line 1f, not on line 1c.

Organizations that report more than $15,000 total on lines 1c and 8a must also answer “Yes” on Part IV, line 18, and complete Part II of Schedule G (Form 990).

Line 1d.

Enter on line 1d amounts contributed to the organization by related organizations. Don't report amounts reportable on line 1a.

Line 1e.

Enter the total amount of contributions in the form of grants or similar payments from local, state, or federal government sources, as well as foreign governments. Include grant amounts from U.S. territories.

Whether a payment from a governmental unit is labeled a “grant” or a “contract” doesn't determine where the payment should be reported on Part VIII. Rather, a grant or other payment from a governmental unit is reported here if its primary purpose is to enable the organization to provide a service to, or maintain a facility for, the direct benefit of the public rather than to serve the direct and immediate needs of the governmental unit. In other words, the payment is recorded on line 1e if the general public receives the primary and direct benefit from the payment and any benefit to the governmental unit is indirect and insubstantial as compared to the public benefit.

The following are examples of governmental grants and other payments that are treated as contributions and reported on line 1e.

Line 1f.

Enter all other contributions, gifts, and similar amounts the organization received from sources not reported separately on lines 1a through 1e. This amount includes contributions from donor advised funds (unless the sponsoring organization is a related organization) and from gaming activities. For a section 501(c)(21) trust, enter the total contributions received under section 192 from the coal mine operator who established the trust. Contributions to the trust must be in cash or property of the type in which the trust is permitted to invest (for example, public debt securities of the United States, obligations of a state or local government that are not in default as to principal or interest, or time and demand deposits in a bank or insured credit union as described in section 501(c)(21)(D)(ii)).

Line 1g.

Enter on line 1g the value of noncash contributions included on lines 1a through 1f. If this amount exceeds $25,000, the organization must answer “Yes” on Part IV, line 29, and complete and attach Schedule M (Form 990).

Noncash contributions are anything other than cash, checks, money orders, credit card charges, wire transfers, and other transfers and deposits to a cash account of the organization. Value noncash donated items, like cars and securities, as of the time of their receipt, even if they were sold immediately after they were received.

Museums and other organizations that elect not to capitalize their collections (according to ASC 958-360-45) shouldn't report an amount on line 1g for works of art and other collection items donated to them.

For more information on noncash contributions, see the instructions for Schedule M (Form 990).

Line 1h.

Enter on line 1h the total of lines 1a through 1f (but not line 1g).

The organization may also need to attach Schedule B (Form 990) to report certain contributors and their contributions. See the instructions for Schedule B (Form 990) for more information.

Line 2.

On lines 2a through 2e, enter the organization's five largest sources of program service revenue. Program services are primarily those that form the basis of an organization's exemption from tax. For a more detailed description of program service revenue, refer to the instructions for Part IX, column (B).

On line 2f, enter the total received from all other sources of program service revenue not listed individually on lines 2a through 2e. On line 2g, enter the total of column (A), lines 2a through 2f.

Program service revenue.

Program service revenue includes income earned by the organization for providing a government agency with a service, facility, or product that benefited that government agency directly rather than benefiting the public as a whole. Program service revenue also includes tuition received by a school; revenue from admissions to a concert or other performing arts event or to a museum; royalties received as author of an educational publication distributed by a commercial publisher; interest income on loans a credit union makes to its members; payments received by a section 501(c)(9) organization from participants or employers of participants for health and welfare benefits coverage; insurance premiums received by a fraternal beneficiary society; and registration fees received in connection with a meeting or convention.

Program-related investments.

Program service revenue also includes income from program-related investments. These investments are made primarily to accomplish an exempt purpose of the investing organization rather than to produce income. Examples are scholarship loans and low-interest loans to charitable organizations, indigents, or victims of a disaster.

Rental income from an exempt function is another example of program-related investment income. For purposes of this return, report all rental income from an affiliated organization on line 2.

Unrelated trade or business activities.

Unrelated trade or business activities (not including any fundraising events or fundraising activities) that generate fees for services can also be program service activities. A social club, for example, should report as program service revenue the fees it charges both members and nonmembers for the use of its tennis courts and golf course.

Sales of inventory items by hospitals, colleges, and universities.

Books and records maintained according to GAAP for hospitals, colleges, and universities are more specialized than books and records maintained according to those accounting principles for other types of organizations that file Form 990. Accordingly, hospitals, colleges, and universities can report, as program service revenue on line 2, sales of inventory items otherwise reportable on line 10a. In that event, enter the applicable cost of goods sold as program service expenses in column (B) of Part IX. No other organizations should report sales of inventory items on line 2.

Common types of program service revenue.

Examples of membership benefits include:

For each amount entered on lines 2a through 2e, the organization must also enter a corresponding business activity code from Business Activity Codes, later. If you don't see a code for the activity you are trying to categorize, select the appropriate code from the NAICS website at 2022 NAICS Census Chart. Select the most specific 6-digit code available that describes the activity producing the income. Note that most codes describe more than one type of activity. Avoid using codes that describe the organization rather than the income-producing activity. For example, a credit union reporting income from consumer lending activities should use code 522291. Sales revenue from a museum gift shop should be reported with code 459420. An organization providing credit counseling services should use code 541990. If none of the listed codes accurately describe the activity, enter “900099.” Use of these codes doesn't imply that the activity is unrelated to the organization's exempt purpose.

Line 3.

Enter the gross amount of interest income from savings and temporary cash investments, dividend and interest income from equity and debt securities (stocks and bonds), and amounts received from payments on securities loans, as defined in section 512(a)(5), as well as interest from notes and loans receivable. Don't include unrealized gains and losses on investments carried at FMV . Don't deduct investment management fees from this amount, but report these fees on Part IX, line 11f.

Line 4.

Enter all investment income actually or constructively received from investing the proceeds of a tax-exempt bond issue , which are under the control of the organization. For this purpose, don't include any investment income received from investing proceeds that are technically under the control of the governmental issuer. For example, proceeds deposited into a defeasance escrow that is irrevocably pledged to pay the principal and interest (debt service) on a bond issue isn't under the control of the organization.