Return of Private Foundation or Section 4947(a)(1)
Nonexempt Charitable Trust Treated as a Private Foundation

E. Useful Publications

The following publications may be helpful in preparing Form 990-PF:

Publication 525, Taxable and Nontaxable Income.

Publication 578, Tax Information for Private Foundations and Foundation Managers.

Publication 583, Starting a Business and Keeping Records.

Publication 598, Tax on Unrelated Business Income of Exempt Organizations.

Publication 910, Guide to Free Tax Services.

Publication 1391, Deductibility of Payments Made to Charities Conducting Fund-Raising Events.

Publications and forms are available at no charge through IRS offices or by calling 1-800-TAX-FORM (1-800-829-3676).

F. Use of Form 990-PF To Satisfy State Reporting Requirements

Some states and local government units will accept a copy of Form 990-PF and required attachments instead of all or part of their own financial report forms.

If the organization plans to use Form 990-PF to satisfy state or local filing requirements, such as those from state charitable solicitation acts, note the following:

Determine state filing requirements. Consult the appropriate officials of all states and other jurisdictions in which the organization does business to determine their specific filing requirements. Doing business in a jurisdiction may include any of the following:

• Soliciting contributions or grants by mail or otherwise from individuals, businesses, or other charitable organizations,
• Conducting programs,
• Having employees within that jurisdiction, or
• Maintaining a checking account or owning or renting property there.

Monetary tests may differ. Some or all of the dollar limitations that apply to Form 990-PF when filed with the IRS may not apply when using Form 990-PF instead of state or local report forms. IRS dollar limitations that may not meet some state requirements are the $5,000 total assets minimum that requires completion of Part II, column (c), and Part XV; and the $50,000 minimum for listing the highest paid employees and for listing professional fees in Part VIII.

Additional information may be required. State and local filing requirements may require attaching to Form 990-PF one or more of the following:

• Additional financial statements, such as a complete analysis of functional expenses or a statement of changes in net assets,
• Notes to financial statements,
• Additional financial schedules,
• A report on the financial statements by an independent accountant, and
• Answers to additional questions and other information.

Each jurisdiction may require the additional material to be presented on forms they provide. The additional information does not have to be submitted with the Form 990-PF filed with the IRS.

If required information is not provided to a state, the organization may be asked by the state to provide it or to submit an amended return, even if the Form 990-PF is accepted by the IRS as complete.

Amended returns. If the organization submits supplemental information or files an amended Form 990-PF with the IRS, it must also include a copy of the information or amended return to any state with which it filed a copy of Form 990-PF.

Method of accounting. Many states require that all amounts be reported based on the accrual method of accounting.

Time for filing may differ. The time for filing Form 990-PF with the IRS may differ from the time for filing state reports.

G. Furnishing Copies of Form 990-PF to State Officials

The foundation managers must furnish a copy of the annual return Form 990-PF (and Form 4720 (if applicable)) to the attorney general of:

1. Each state required to be listed in Part VII-A, line 8a,
2. The state in which the foundation's principal office is located, and
3. The state in which the foundation was incorporated or created.

A copy of the annual return must be sent to the attorney general at the same time the annual return is filed with the IRS.

Other requirements. If the attorney general or other appropriate state official of any state requests a copy of the annual return, the foundation managers must give them a copy of the annual return.

Exceptions. These rules do not apply to any foreign foundation which, from the date of its creation, has received at least 85% of its support (excluding gross investment income) from sources outside the United States. (See Exceptions in General Instruction Q for other exceptions that affect this type of organization.)

Coordination with state reporting requirements. If the foundation managers submit a copy of Form 990-PF and Form 4720 (if applicable) to a state attorney general to satisfy a state reporting requirement, they do not have to furnish a second copy to that attorney general to comply with the Internal Revenue Code requirements discussed in this section.

If there is a state reporting requirement to file a copy of Form 990-PF with a state official other than the attorney general (such as the secretary of state), then the foundation managers must also send a copy of the Form 990-PF and Form 4720 (if applicable) to the attorney general of that state.

H. Accounting Period

1. File the 2001 return for the calendar year 2001 or fiscal year beginning in 2001. If the return is for a fiscal year, fill in the tax year space at the top of the return.
2. The return must be filed on the basis of the established annual accounting period of the organization. If the organization has no established accounting period, the return should be on the calendar-year basis.
3. For initial or final returns or a change in accounting period, the 2001 form may also be used as the return for a short period (less than 12 months) ending November 30, 2002, or earlier.

In general, to change its accounting period the organization must file Form 990-PF by the due date for the short period resulting from the change. At the top of this short period return, write Change of Accounting Period.

If the organization changed its accounting period within the 10-calendar-year period that includes the beginning of the short period, and it had a Form 990-PF filing requirement at any time during that 10-year period, it must also attach a Form 1128 to the short-period return. See Rev. Proc. 85-58, 1985-2 C.B. 740.

I. Accounting Methods

Generally, you should report the financial information requested on the basis of the accounting method the foundation regularly uses to keep its books and records.

Exception. Complete Part I, column (d) on the cash receipts and disbursements method of accounting.

Change required by Statement of Financial Accounting Standards (SFAS) No. 116. Foundations that are changing their methods of accounting for Federal income tax purposes to comply with SFAS 116 are not required to file Form 3115, Application for Change in Accounting Method. Foundations may change to the methods described in SFAS 116 for Federal income tax purposes for any tax year beginning after December 15, 1994, by reflecting the change in the manner described in Notice 96-30, 1996-1 C.B. 378.

J. When and Where To File

This return must be filed by the 15th day of the 5th month following the close of the foundation's accounting period. If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. If the return is filed late, see General Instruction M.

In case of a complete liquidation, dissolution, or termination, file the return by the 15th day of the 5th month following complete liquidation, dissolution, or termination.

To file the return, mail or deliver it to: Internal Revenue Service Center Ogden, UT 84201-0027

K. Extension of Time To File

A foundation uses Form 8868 to request an automatic or additional extension of time to file its return.

An automatic 3-month extension will be granted if you properly complete this form, file it, and pay any balance due by the due date for Form 990-PF.

If more time is needed, Form 8868 is also used to request an additional extension of up to 3 months. However, these extensions are not automatically granted. To obtain this additional extension of time to file, you must show reasonable cause for the additional time requested.

L. Amended Return

To change the organization's return for any year, file an amended return, including attachments, with the correct information. The amended return must provide all the information required by the form and instructions, not just the new or corrected information. Check the Amended Return box in G at the top of the return.

If the organization files an amended return to claim a refund of tax paid under section 4940 or 4948, it must file the amended return within 3 years after the date the original return was due or filed, or within 2 years from the date the tax was paid, whichever date is later.

State reporting requirements. See Amended returns under General Instruction F.

Need a copy of an old return or form? Use Form 4506-A to obtain a copy of a previously filed return. You can obtain blank forms for prior years by calling 1-800-TAX-FORM (1-800-829-3676).

M. Penalty for Failure To File Timely, Completely, or Correctly

To avoid filing an incomplete return or having to respond to requests for missing information, see General Instruction B.

Against the organization. If an organization does not file timely and completely, or does not furnish the correct information, it must pay $20 for each day the failure continues ($100 a day if it is a large organization), unless it can show that the failure was due to reasonable cause. Those filing late (after the due date, including extensions) must attach an explanation to the return. The maximum penalty for each return will not exceed the smaller of $10,000 ($50,000 for a large organization) or 5% of the gross receipts of the organization for the year.

Large organization. A large organization is one that has gross receipts exceeding $1 million for the tax year.

Gross receipts. Gross receipts means the gross amount received during the foundation's annual accounting period from all sources without reduction for any costs or expenses.

To figure the foundation's gross receipts, start with Part I, line 12 column (a) then add to it lines 6b and 10b, then subtract line 6a from that amount.

Against the responsible person. The IRS will make written demand that the delinquent return be filed or the information furnished within a reasonable time after the mailing of the notice of the demand. The person failing to comply with the demand on or before the date specified will have to pay $10 for each day the failure continues, unless there is reasonable cause. The maximum penalty imposed on all persons for any one return is $5,000. If more than one person is liable for any failures, all such persons are jointly and severally liable for such failures (see section 6652(c)).

Other penalties. Because this return also satisfies the filing requirements of a tax return under section 6011 for the tax on investment income imposed by section 4940 (or 4948 if an exempt foreign organization), the penalties imposed by section 6651 for not filing a return (without reasonable cause) also apply.

There are also penalties for willful failure to file and for filing fraudulent returns and statements. See sections 7203, 7206, and 7207.

N. Penalties for Not Paying Tax on Time

There is a penalty for not paying tax when due (section 6651). The penalty generally is ½ of 1% of the unpaid tax for each month or part of a month the tax remains unpaid, not to exceed 25% of the unpaid tax. If there was reasonable cause for not paying the tax on time, the penalty can be waived. However, interest is charged on any tax not paid on time, at the rate provided by section 6621.

Estimated tax penalty. The section 6655 penalty for failure to pay estimated tax applies to the tax on net investment income of domestic private foundations and section 4947(a)(1) nonexempt charitable trusts. The penalty also applies to any tax on unrelated business income of a private foundation. Generally, if a private foundation's tax liability is $500 or more and it did not make the required payments on time, then it is subject to the penalty.

For more details, see the discussion of Form 2220 in General Instruction D.

O. Figuring and Paying Estimated Tax

A domestic exempt private foundation, a domestic taxable private foundation, or a nonexempt charitable trust treated as a private foundation must make estimated tax payments for the excise tax based on investment income if it can expect its estimated tax (section 4940 tax minus allowable credits) to be $500 or more. The number of installment payments it must make under the depository method is determined at the time during the year that it first meets this requirement. For calendar-year taxpayers, the first deposit of estimated taxes for a year generally should be made by May 15 of the year.

Although Form 990-W is used primarily to compute the installment payments of unrelated business income tax, it is also used to determine the timing and amounts of installment payments of the section 4940 tax based on investment income. Compute separately any required deposits of excise tax based on investment income and unrelated business income tax.

To figure the estimated tax for the excise tax based on investment income, apply the rules of Part VI to your tax year 2002 estimated amounts for that part. Enter the tax you figured on line 9a of Form 990-W.

The Form 990-W line items and instructions for large organizations also apply to private foundations. For purposes of paying the estimated tax on net investment income, a large organization is one that had net investment income of $1 million or more for any of the 3 tax years immediately preceding the tax year involved.

Penalty. A foundation that does not pay the proper estimated tax when due may be subject to the estimated tax penalty for the period of the underpayment. (See sections 6655(b) and (d) and the Form 2220 instructions.)

Special Rules

Section 4947(a)(1) nonexempt charitable trusts should use Form 1041-ES for paying any estimated tax on income subject to tax under section 1. Form 1041-ES also contains the estimated tax rules for paying the tax on that income.

Taxable private foundations should use Form 1120-W for figuring any estimated tax on income subject to tax under section 11. Form 1120-W contains the estimated tax rules for paying the tax on that income.

P. Tax Payment Methods for Domestic Private Foundations

Whether the foundation uses the depository method of tax payment or the special option for small foundations, it must pay the tax due (see Part VI) in full by the 15th day of the 5th month after the end of its tax year.

Depository Method of Tax Payment

Some foundations (described below) are required to electronically deposit all depository taxes, including their tax payments for the excise tax based on investment income.

Electronic Deposit Requirement

The foundation must make electronic deposits of all depository taxes (such as employment tax or the excise tax based on investment income) using the Electronic Federal Tax Payment System (EFTPS) in 2002 if:

• The total deposits of such taxes in 2000 were more than $200,000 or
• The foundation was required to use EFTPS in 2001.

If the foundation is required to use EFTPS and fails to do so, it may be subject to a 10% penalty. If the foundation is not required to use EFTPS, it may participate voluntarily. To enroll in or get more information about EFTPS, call 1-800-555-4477 or 1-800-945-8400. To enroll online, visit www.irs.gov.

Depositing on time. For deposits made by EFTPS to be on time, the foundation must initiate the transaction at least 1 business day before the date the deposit is due.

Deposits With Form 8109

If the foundation does not use EFTPS, deposit estimated tax payments and any balance due for the excise tax based on investment income with Form 8109, Federal Tax Deposit Coupon. If you do not have a preprinted Form 8109, use Form 8109-B to make deposits. You can get this form only by calling 1-800-829-1040. Be sure to have your employer identification number (EIN) ready when you call.

Do not send deposits directly to an IRS office; otherwise, the foundation may have to pay a penalty. Mail or deliver the completed Form 8109 with the payment to an authorized depositary, i.e., a commercial bank or other financial institution authorized to accept Federal tax deposits.

Make checks or money orders payable to the depositary. To help ensure proper crediting, write the foundation's EIN, the tax period to which the deposit applies, and Form 990-PF on the check or money order. Be sure to darken the 990-PF box on the coupon. Records of these deposits will be sent to the IRS.

For more information on deposits, see the instructions in the coupon booklet (Form 8109) and Pub. 583, Starting a Business and Keeping Records.

Special Payment Option for Small Foundations

A private foundation may enclose a check or money order, payable to the United States Treasury, with the Form 990-PF or Form 8868, if it meets all of the following requirements.

1. The foundation must not be required to use EFTPS.
2. The tax based on investment income shown on line 5, Part VI of Form 990-PF is less than $500.
3. If Form 8868 is used, the amount entered on line 3a of Part I or 8a of Part II of Form 8868 must be less than $500 and it must be the full balance due.

Be sure to write 2001 Form 990-PF and the foundation's name, address, and EIN on its check or money order.

Foreign organizations should see the instructions for Part VI, line 9.

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