Docstoc

IRS Instructions for Schedule K (Form 990) - 2009

Document Sample
IRS Instructions for Schedule K (Form 990) - 2009 Powered By Docstoc
					2009                                                                                                    Department of the Treasury
                                                                                                        Internal Revenue Service



Instructions for Schedule K
(Form 990)
Supplemental Information on Tax-Exempt Bonds
Section references are to the Internal         • Had an outstanding principal amount in      • At least 95% of the net proceeds of the
Revenue Code unless otherwise noted.           excess of $100,000 as of the last day of      bond issue are used by either a state or
                                               the tax year, and                             local governmental unit or a section
General Instructions                           • Was issued after December 31, 2002.         501(c)(3) organization in activities which
                                                                                             do not constitute unrelated trade or
                                                   Up to five separate outstanding           businesses (determined by applying
Purpose of Schedule                            tax-exempt liabilities can be reported on     section 513).
Schedule K (Form 990) is used by an            each Schedule K (Form 990). The
                                               schedule can be duplicated, if needed to          Bond issue. This is an issue of two
organization that files Form 990 to                                                          or more bonds which are sold at
provide certain information on their           report more than five tax-exempt
                                               liabilities. If the organization is not       substantially the same time; sold pursuant
outstanding liabilities associated with                                                      to the same plan of financing; and
tax-exempt bond issues.                        required to file Form 990 but chooses to
                                               do so, it must file a complete return and     payable from the same source of funds.
     If the organization has one or more       provide all of the information requested,     See Regulations section 1.150-1(c).
related organizations (for example,            including the required schedules.                 Governmental issuer. A state or
parent and subsidiary relationship), it                                                      local governmental unit that issues
must complete Schedule K (Form 990)                                                          tax-exempt bonds.
consistent with the filing(s) of its related   Period Covered                                    On behalf of issuer. A corporation
organization(s). The same liability should     The organization can complete this            organized under the general nonprofit
not be reported by more than one of the        schedule for any tax-exempt liability using   corporation law of a state whose
related organizations. For example, if a       the same period as the Form 990 with          obligations are considered obligations of
parent organization issues a tax-exempt        which it is filed. Alternatively, the         a state or local governmental unit. See
bond issue and loans or allocates that         organization can use any other 12-month       Rev. Proc. 82-26, 1982-1 C.B. 476, for a
issue to a subsidiary organization, only       period or periods selected by the             description of the circumstances under
one organization (either the parent or         organization and which, used consistently     which the Service will ordinarily issue an
subsidiary) should report the liability on     for a tax-exempt liability for purposes of    advance ruling that the obligations of a
Form 990 and the Schedule K. Similarly,        this schedule and computations, is in         nonprofit corporation were issued on
if a parent organization loans or allocates    accordance with the requirements under        behalf of a state or local governmental
the proceeds of a tax-exempt bond issue        sections 141 through 150. Under this          unit. See also: Rev. Rul. 63-20, 1963-1
to a group of subsidiary organizations,        alternative, the organization can use         C.B. 24; Rev. Rul. 59-41, 1959-1 C.B. 13;
only one level (either the parent or the       different 12-month periods for each           and Rev. Rul. 54-296, 1954-2 C.B. 59. An
group of subsidiaries) should report the       tax-exempt liability reported, provided       “on behalf of ” issuer also includes a
liability on Form 990 and the Schedule K.      each 12-month period is sufficiently          constituted authority organized by a state
For this purpose, if the subsidiary            described in Schedule O (Form 990).           or local governmental unit specifically to
organizations report the liability, each                                                     issue tax-exempt bonds in order to
subsidiary should only report the amount                                                     further public purposes. See Rev. Rul.
it is loaned or allocated.                     Specific Instructions                         57-187, 1957-1 C.B. 65.
    Use Schedule O (Form 990),                                                                   Gross Proceeds. This generally
Supplemental Information to Form 990, to
                                               Definitions                                   means any sale proceeds, investment
provide additional information or                 Tax-exempt bond. This is an                proceeds, transferred proceeds, and
comments relating to the information           obligation issued by or on behalf of a        replacement proceeds of an issue. See
provided on this schedule. For example,        governmental issuer for which the             Regulations sections 1.148-1(b) and
use Schedule O (Form 990) to provide           interest paid is excluded from the holder’s   1.148-1(c).
additional information or comments             gross income under section 103. For this          Proceeds. This generally means the
relating to the reporting of liabilities by    purpose, a bond can be in any form of         sale proceeds of an issue (other than
related organizations. In addition, an         indebtedness under federal tax law,           those sale proceeds used to retire bonds
organization can use Schedule O (Form          including a bond, note, loan, or              of the issue that are not deposited in a
990) to describe certain assumptions           lease-purchase agreement.                     reasonably required reserve or
which are used to complete Schedule K              Qualified 501(c)(3) bond. This is a       replacement fund). Proceeds also include
(Form 990) when the information provided       tax-exempt bond the proceeds of which         any investment proceeds from
is not fully supported by existing records.    are used by a section 501(c)(3)               investments that accrue during the project
                                               organization in furtherance of its            period (net of rebate amounts attributable
Who Must File                                  charitable purpose. Requirements              to the project period). See Regulations
An organization that answered “Yes” to         generally applicable to a qualified           section 1.141-1(b).
question 24a of Form 990, Part IV,             501(c)(3) bond under section 145 include          Defeasance escrow. This is an
Checklist of Required Schedules, must          the following.                                irrevocable escrow established to redeem
complete and attach Schedule K to Form         • All property financed by the bond issue     the bonds on their earliest call date in an
990. This means the organization               is to be owned by a section 501(c)(3)         amount that, together with investment
reported an outstanding tax-exempt bond        organization or a state or local              earnings, is sufficient to pay all the
issue that:                                    governmental unit.                            principal of, and interest and call

                                                             Cat. No. 20378D
premiums on, bonds from the date the          and must provide all Part I, Part II, and     example, a bond). In no event is the issue
escrow is established to the earliest call    Part IV information for such refunding        date earlier than the first day on which
date. See Regulations section                 issue. Because the refunded bonds were        interest begins to accrue on the bond for
1.141-12(d)(5). A defeasance escrow           issued prior to 2003, the organization        federal income tax purposes. See
can be established for several purposes,      need not complete Part III for the            Regulations section 1.150-1(b).
including the remediation of nonqualified     refunding bond issue or the refunded          Column (e). Enter the issue price of the
bonds. However, for purposes of               bonds.                                        obligation. The issue price generally
completing this schedule, an escrow               Example 2. Refunding of post-2002         should be identical to the issue price
established with proceeds of a refunding      bonds. Bonds issued in 2003 were              listed on Form 8038, Part III, line 21(b)
issue to defease a prior issue is referred    current refunded in 2006. As of December      filed for the bond issue. The issue price
to as a refunding escrow.                     31, 2009, the last day of the                 generally is determined under
   Refunding escrow. This is one or           organization’s tax year, the refunding        Regulations section 1.148-1(b). If the
more funds established as part of a single    bonds had an outstanding principal            issue price is not identical to the issue
transaction or a series of related            amount exceeding $100,000. The                price listed on the filed Form 8038, use
transactions, containing proceeds of a        organization must list the refunding bonds    Schedule O (Form 990) to explain the
refunding issue and any other amounts         in Part I for each year the outstanding       difference.
to provide for payment of principal or        principal amount exceeds $100,000 as of       Column (f). Describe the purpose of the
interest on one or more prior issues. See     the last day of the year, and must provide    bond issue, such as to construct a
Regulations section 1.148-1(b).               all Part I, Part II, Part III, and Part IV    hospital or provide funds to refund a prior
   Refunding issue. This is an issue of       information for such refunding bonds.         issue. If any of the bond proceeds were
obligations the proceeds of which are                                                       used to refund a prior issue, enter the
used to pay principal, interest, or           Part I. Bond Issues                           date of issue for each of the refunded
redemption price on another issue (a prior    In Part I, provide the requested              issues. If the issue has multiple purposes,
issue), including the issuance costs,         information for each outstanding              enter each purpose. If the issue financed
accrued interest, capitalized interest on     tax-exempt bond issue (including              various projects or activities
the refunding issue, a reserve or             refunding bonds) that:                        corresponding to a related purpose, only
replacement fund, or similar costs, if any,   • Had an outstanding principal amount in      enter the purpose once. For example, if
properly allocable to that refunding issue.   excess of $100,000 as of the last day of      proceeds are used to acquire various
A current refunding issue is a refunding      the tax year (or other selected 12-month      items of office equipment, the amount of
issue that is issued not more than 90         period), and                                  such expenditures should be aggregated
days before the last expenditure of any       • Was issued after December 31, 2002.         and identified with the stated purpose of
proceeds of the refunding issue for the                                                     “office equipment.” Alternatively, if
payment of principal or interest on the           Use one row for each issue, and use       proceeds are used to construct and equip
prior issue. An advance refunding issue is    the Part I row designation for a particular   a single facility, the expenditures should
a refunding issue that is not a current       issue (for example, “A” or “B”)               be aggregated and identified with the
refunding issue. See Regulations sections     consistently throughout Parts I through IV.   stated purpose of “construct & equip
1.150-1(d)(1), (3), and (4).                  The information provided in columns (a)       facility” where the identification of the
                                              through (e) should be consistent with the     facility is distinguishable from other
   Private business use. Private              corresponding information included on
business use means use of the                                                               bond-financed facilities, if any. Use
                                              Form 8038, Information Return for             Schedule O (Form 990) if additional
proceeds of an issue by the organization      Tax-Exempt Private Activity Bond Issues,
or another section 501(c)(3) organization                                                   space is needed for this purpose.
                                              filed by the governmental issuer upon the
in an unrelated trade or business as          issuance of the bond issue. Complete          Column (g). Check “Yes” or “No” to
defined by section 513. Private business      multiple schedules if necessary to            indicate whether a defeasance escrow
use also generally includes any use by a      account for all outstanding tax-exempt        or refunding escrow has been
nongovernmental person other than a           bond issues.                                  established to irrevocably defease the
section 501(c)(3) organization unless                                                       bond issue.
otherwise permitted through an exception      Columns (a) and (b). Enter the name
                                              and employer identification number (EIN)      Column (h). Check “Yes” if the
or safe harbor provided under the
                                              of the issuer of the bond issue. The          organization acted as an “on behalf of”
regulations or a revenue procedure.
                                              issuer’s name is the name of the entity       issuer in issuing the bond issue. Check
Special rules for refunding of pre-2003                                                     “No” if the organization only acted as the
issues. Bonds issued after December           which issued the bond issue (typically a
                                              state or local governmental unit). The        borrower of the bond proceeds under the
31, 2002, to refund bonds issued before                                                     terms of a conduit loan with the
January 1, 2003, have special reporting       issuer’s name and EIN should be identical
                                              to the name and EIN listed on Form 8038,      governmental issuer of the bond issue.
requirements. Such refunding bonds are
subject to the generally applicable           Part I, lines 1 and 2 filed for the bond
reporting requirements of Parts I, II, and    issue.                                        Part II. Proceeds
IV. However, the organization need not        Column (c). Enter the Committee on            Complete for each bond issue listed in
complete Part III to report private           Uniform Securities Identification             rows A through E of Part I. Complete
business use information for the issue for    Procedures (CUSIP) number on the bond         multiple schedules if necessary to
such refunding bonds. These special           with the latest maturity. The CUSIP           account for all outstanding tax-exempt
rules do not apply to bonds issued after      number should be identical to the CUSIP       bond issues. Note that lines 1 and 3
December 31, 2002, to refund bonds that       number listed on Form 8038, Part I, line      through 7 concern the amount of
were also issued after 2002.                  8, filed for the bond issue. If the bond      proceeds of the bond issue, but line 2
                                              issue was not publicly offered and there      concerns the amount of gross proceeds
   Example 1. Refunding of pre-2003                                                         of the bond issue. Because of this, the
bonds. Bonds issued in 1998 were              is no assigned CUSIP number, write
                                              “None.”                                       aggregate of the amounts entered on
current refunded in 2008. As of December                                                    lines 2 through 7 may not equal the
31, 2009, the last day of the                 Column (d). Enter the issue date of the       amount entered on line 1.
organization’s tax year, the refunding        obligation. The issue date should be
bonds had an outstanding principal            identical to the issue date listed on Form    Line 1. Enter the total amount of
amount exceeding $100,000. The                8038, Part I, line 6, filed for the bond      proceeds of the bond issue as of the end
organization must list the refunding bond     issue. The issue date generally is the        of the 12-month period used in
issue in Part I for each year the             date on which the issuer receives the         completing this schedule.
outstanding principal amount exceeds          purchase price in exchange for delivery of    Line 2. Enter the amount of gross
$100,000 as of the last day of such year,     the evidence of indebtedness (for             proceeds held in a reasonably required
                                                                 -2-
reserve or replacement fund, sinking            operation at substantially its design level       Line 3a. Check “Yes” or “No” to indicate
fund, or pledged fund as of the end of the      and it is, in fact, in operation at such level.   if any management or service contract
12-month period. See Regulations                See Regulations section 1.150-2(c). If the        that may result in private business use
sections 1.148-1(c)(2), 1.148-1(c)(3), and      bond issue financed multiple projects,            was effective at any time during the year
1.148-2(f).                                     enter the latest year in which                    with respect to property financed by the
Line 3. Enter the amount of proceeds            construction, acquisition, or rehabilitation      bond issue. For this purpose, answer
held in either a defeasance escrow or           of each of the financed projects was              “Yes” even if the organization has
refunding escrow as of the end of the           substantially completed. For example, if a        determined that the management or
12-month period. For this purpose,              bond issue financed the construction of           service contract meets the safe harbor
proceeds deposited into a refunding             three projects which were substantially           under Rev. Proc. 97-13, 1997-1 C.B. 632,
escrow are irrevocably pledged to refund        completed in 2004, 2005, and 2006,                and will not result in actual private
a prior bond issue (the refunded issue).        respectively, then enter “2006.” If the           business use. A management or service
Unless the amount of proceeds of the            bond issue financed working capital               contract for the financed property can
bond issue used to current or advance           expenditures, provide the latest year in          result in private business use of the
refund a prior issue exceeds the amount         which the proceeds of the issue were              property, based on all facts and
reported on Form 8038, Part IV, lines 27        allocated to those expenditures.                  circumstances. A management or service
and 28 filed for the bond issue, the                                                              contract for the financed property
                                                Line 9. Check “Yes” or “No” to indicate if
aggregate amount listed on those lines                                                            generally results in private business use
                                                the bond issue is a current refunding
can be entered here. Also for this                                                                of that property if the contract provides for
                                                issue.
purpose, proceeds are typically used to                                                           compensation for services rendered with
fund the establishment of a defeasance          Line 10. Check “Yes” or “No” to indicate          compensation based, in whole or in part,
escrow for the purpose of remediating           if the bond issue is an advance refunding         on a share of net profits from the
nonqualified bonds.                             issue.                                            operation of the facility. See Regulations
                                                                                                  section 1.141-3(b)(4).
Line 4. Enter the cumulative amount of          Line 11. Check “Yes” or “No” to indicate
unspent proceeds as of the end of the           if the final allocation of proceeds has           Line 3b. Check “Yes” or “No” to indicate
12-month period other than those                been made. Proceeds of a bond issue               if any research agreement that may result
amounts identified in Part II, lines 2 and 3.   must be accounted for using any                   in private business use was effective at
                                                reasonable, consistently applied                  any time during the year for property
Line 5. Enter the cumulative amount of          accounting method. Allocations must be            financed by the bond issue. For this
proceeds used to pay bond issuance              made by certain applicable due dates and          purpose, answer “Yes” even if the
costs, including (but not limited to)           are generally not considered final until the      organization has determined that the
underwriters’ spread as well as fees for        expiration of such due dates. See                 research agreement meets the safe
trustees and bond counsel as of the end         Regulations section 1.148-6.                      harbor under Rev. Proc. 2007-47, 2007-2
of the 12-month period. Issuance costs                                                            C.B. 108, and will not result in actual
are costs incurred in connection with, and      Line 12. Check “Yes” or “No” to indicate          private business use. An agreement by
allocable to, the issuance of a bond            if the organization maintains adequate            a nongovernmental person to sponsor
issue. See Regulations section                  books and records to support the final            research performed by the organization
1.150-1(b) for an example list of issuance      allocation of proceeds. Answer this               can result in private business use of the
costs. For 2009 only, add to this amount        question only with respect to the tax year        property used for the research, based on
the cumulative amount of proceeds used          applicable to this schedule.                      all the facts and circumstances. A
to pay fees for credit enhancement that                                                           research agreement for the financed
are taken into account in determining the       Part III. Private Business                        property will generally result in private
yield on the issue for purposes of section                                                        business use of that property if the
148(h) (for example, bond insurance             Use                                               sponsor is treated as the lessee or owner
premiums and certain fees for letters of        Complete for bond issues listed in rows           of financed property for federal income
credit) as of the end of the 12-month           A through E of Part I that are not                tax purposes. See Regulations section
period. Use Schedule O to identify the          post-December 31, 2002, bond issues               1.141-3(b)(6).
portions of the amount entered relating to      consisting of refunding issue which
issuance costs and credit enhancement           refund a pre-January 1, 2003, issue.              Line 3c. Check “Yes” or “No” to indicate
fees.                                           Complete multiple schedules if necessary          if the organization routinely engages bond
                                                to account for all outstanding tax-exempt         counsel or other outside counsel to
Line 6. Enter the cumulative amount of                                                            review any management or service
proceeds used to finance working capital        bond issues. A refunding bond issue also
                                                includes allocation and treatment of              contracts or research agreements relating
expenditures as of the end of the                                                                 to the financed property. If there are no
12-month period. A working capital              bonds of a multipurpose issue as a
                                                separate refunding issue under                    such agreements, enter “None.” Answer
expenditure is any cost that is not a                                                             this question only for the tax year
capital expenditure (for example, current       Regulations section 1.141-13(d).
                                                                                                  applicable to this schedule.
operating expenses). See Regulations            Line 1. Check “Yes” or “No” to indicate if
section 1.150-1(b).                                                                               Line 4. Enter the average percentage
                                                the organization was at any time during
                                                                                                  during the year of the property financed
Line 7. Enter the cumulative amount of          the year a partner in a partnership or a
                                                                                                  by the bond issue that was used in a
proceeds used to finance capital                member of a limited liability company
                                                                                                  private business use by a
expenditures as of the end of the               which both owned property that was
                                                                                                  nongovernmental person other than a
12-month period. Capital expenditures           financed by the bond issue and included
                                                                                                  section 501(c)(3) organization. Enter the
include costs incurred to acquire,              as partner(s) or member(s) entities other
                                                                                                  yearly average percentage to the nearest
construct, or improve land, buildings, and      than a section 501(c)(3) organization.
                                                                                                  tenth of a percentage point (for example,
equipment. See Regulations section              Line 2. Check “Yes” or “No” to indicate if        8.9%). For this purpose, do not include
1.150-1(b).                                     any lease arrangements that may result in         any use relating to either a management
Line 8. Enter the year in which                 private business use were effective at            or service contract identified on line 3a
construction, acquisition, or rehabilitation    any time during the year with respect to          that the organization has determined
of the financed project was substantially       property financed by the bond issue. The          meets the safe harbor under Rev. Proc.
completed. A project can be treated as          lease of financed property to a                   97-13, 1997-1 C.B. 632, or otherwise
substantially completed when, based             nongovernmental person other than a               does not result in private business use.
upon all the facts and circumstances, the       section 501(c)(3) organization is generally       Similarly, do not include any use relating
project has reached a degree of                 private business use. See Regulations             to a research agreement identified on line
completion which would permit its               section 1.141-3(b)(3).                            3b that the organization has determined

                                                                     -3-
meets the safe harbor under Rev. Proc.       Line 1. Check “Yes” or “No” to indicate if    specifically negotiated withdrawal or
2007-47, 2007-2 C.B. 108, or otherwise       Form 8038-T, Arbitrage Rebate, Yield          reinvestment provisions and a specifically
does not result in private business use.     Restriction and Penalty in Lieu of            negotiated interest rate. It also includes
Line 5. Enter the average percentage         Arbitrage Rebate, has been filed for the      any agreement to supply investments on
during the year of the property financed     bond issue.                                   two or more dates (for example, a forward
by the bond issue that was used in an        Line 2. Check “Yes” or “No” to indicate if    supply contract). If the answer on line 4a
unrelated trade or business activity (a      the bond issue is a variable rate issue. A    is “Yes”:
private business use) by the                 variable rate issue is an issue containing    • Enter the name of the provider of the
organization, another section 501(c)(3)      a bond with a yield not fixed and             GIC on line 4b,
organization, or a state or local            determinable on the issue date.               • Enter the term of the GIC rounded to
government unit. Enter the yearly            Lines 3a, 3b, and 3c. In general,             the nearest tenth of a year on line 4c, and
average percentage rounded to the            payments made or received by a                • Enter “Yes” or “No” on line 4d to
nearest tenth of a percentage point (for     governmental issuer or borrower of            indicate if the regulatory safe harbor for
example, 8.9%). For this purpose, do not     bond proceeds under a qualified hedge         establishing fair market value provided in
include any use relating to either a         are taken into account to determine the       Regulations section 1.148-5(d)(6)(iii) was
management or service contract identified    yield on the bond issue. A hedge can be       satisfied.
on line 3a that the organization has         entered into before, at the same time as,     Line 5. Check “Yes” or “No” to indicate if
determined meets the safe harbor under       or after the date of issue. See               any gross proceeds were invested
Rev. Proc. 97-13, 1997-1 C.B. 632, or a      Regulations section 1.148-4(h). Check         beyond a temporary period (for example,
research agreement identified on line 3b     “Yes” or “No” on line 3a to indicate if the   the 3-year temporary period applicable to
that the organization has determined         organization or the governmental issuer       proceeds spent on expenditures for
meets the safe harbor under Rev. Proc.       has entered into a qualified hedge and        capital projects, or the 13-month
2007-47, 2007-2 C.B. 108.                    identified it on the entity’s books and       temporary period applicable to proceeds
Line 7. Check “Yes” or “No” to indicate      records. If the answer to line 3a is “Yes”:   spent on working capital expenditures).
whether the organization has adopted         • Enter the name of the provider of the       See Regulations section 1.148-2(e).
management practices and procedures to       hedge on line 3b, and                         Line 6. Check “Yes” or “No” to indicate if
ensure post-issuance compliance of its       • Enter the term of the hedge rounded to      the bond issue qualified for an exception
tax-exempt bond liabilities. Answer this     the nearest tenth of a year (for example,     to rebate set forth in Regulations sections
question only with respect to the tax year   2.4 years) on line 3c.                        1.148-7 or 1.148-8 (for example, the
applicable to this schedule.                 Lines 4a through 4d. Check “Yes” or           2-year spending exception described
                                             “No” on line 4a to indicate if any gross      under section 1.148-7(e)). For this
Part IV. Arbitrage.                          proceeds of the bond issue were               purpose, check “Yes” when the
Complete for each bond issue listed in       invested in a guaranteed investment           organization reasonably expects to meet
rows A through E of Part I. Complete         contract (GIC). A GIC includes any            an available exception but has not yet
multiple schedules if necessary to           nonpurpose investment that has                satisfied all applicable requirements.
account for all outstanding tax-exempt
bond issues.




                                                                 -4-

				
DOCUMENT INFO
Description: IRS Instructions for Schedule K (Form 990) - Supplemental Information on Tax-Exempt Bonds - 2009