Parts IV-A and IV-B - Reconciliation Statements

Use these reconciliation statements to reconcile the differences between the revenue and expenses shown on the organization's audited financial statements prepared in accordance with SFAS 117 and the revenue and expenses shown on the organization's Form 990.

If the organization did not receive an audited financial statement for 2001 (or the fiscal year for which it is completing this Form 990) and prepared the return in accordance with SFAS 117, it does not need to complete Parts IV-A or IV-B and should instead enter
N/A on line a of each Part.

These two Parts do not have to be completed on group returns.

On line d(1) of Parts IV-A and IV-B, include only those investment expenses netted against investment income in the revenue portion of the organization's audited financial statements. Do not include program-related investment expenses or other expenses reported as program service expenses in the audited statement of activities.

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Part V - List of Officers, Directors, Trustees, and Key Employees

List each person who was an officer, director, trustee, or key employee (defined below) of the organization or disregarded entity described in Regulations sections 301.7701-1 through 301.7701-3 at any time during the year even if they did not receive any compensation from the organization.

Enter a zero in columns (B), (C), (D), or (E) if no hours were entered in column (B) and no compensation, contributions, expenses and other allowances were paid during the reporting year, or deferred for payment to a future accounting period.

Aid in the processing of your return by grouping together, preferably at the end of your list, those who received no compensation. Be careful not to repeat names.

Give the preferred address at which officers, etc., want the Internal Revenue Service to contact them.

Use an attachment if there are more persons to list in Part V.

Show all forms of cash and noncash compensation received by each listed officer, etc., whether paid currently or deferred.

If you pay any other person, such as a management services company, for the services provided by any of your officers, directors, trustees, or key employees, report the compensation and other items in Part V as if you had paid the officers, etc., directly.

A failure to fully complete Part V can subject both the organization and the individuals responsible for such failure to penalties for filing an incomplete return. See General Instruction K. In particular, entering the phrase on Part V, Information available upon request, or a similar phrase, is not acceptable.

The organization may also provide an attachment to explain the entire 2001 compensation package for any person listed in Part V.

Each person listed in Part V should report the listed compensation on his or her income tax return unless the Code specifically excludes any of the payments from income tax. See Pub. 525 for details.

A key employee is any person having responsibilities or powers similar to those of officers, directors, or trustees. The term includes the chief management and administrative officials of an organization (such as an executive director or chancellor) but does not include the heads of separate departments or smaller units within an organization.

A chief financial officer and the officer in charge of administration or program operations are both key employees if they have the authority to control the organization's activities, its finances, or both. The heads of separate departments reference applies to persons such as the head of the radiology department or coronary care unit of a hospital or the head of the chemistry, history, or English department at a college. These persons are managers within their specific areas but not for the organization as a whole and, therefore, are not key employees.

Column (B)

In column (B), a numerical estimate of the average hours per week devoted to the position is required for a complete answer. Statements such as as needed, as required, or 40+ are unacceptable.

Column (C)

For each person listed, report salary, fees, bonuses, and severance payments paid. Include current-year payments of amounts reported or reportable as deferred compensation in any prior year.

Column (D)

Include in this column all forms of deferred compensation and future severance payments (whether or not funded; whether or not vested; and whether or not the deferred compensation plan is a qualified plan under section 401(a)). Include also payments to welfare benefit plans on behalf of the officers, etc. Such plans provide benefits such as medical, dental, life insurance, severance pay, disability, etc. Reasonable estimates may be used if precise cost figures are not readily available.

Unless the amounts were reported in column (C), report, as deferred compensation in column (D), salaries and other compensation earned during the period covered by the return, but not yet paid by the date the organization files its return.

Column (E)

Enter both taxable and nontaxable fringe benefits (other than de minimis fringe benefits described in section 132(e)). Include expense allowances or reimbursements that the recipients must report as income on their separate income tax returns. Examples include amounts for which the recipient did not account to the organization or allowances that were more than the payee spent on serving the organization. Include payments made under indemnification arrangements, the value of the personal use of housing, automobiles, or other assets owned or leased by the organization (or provided for the organization's use without charge), as well as any other taxable and nontaxable fringe benefits. See Pub. 525 for more information.

Line 75 - Compensation from related organizations

Answer Yes to this question if any officer, director, trustee, or key employee received total compensation of more than $100,000 from your organization and all related organizations (as defined below) and more than $10,000 of this compensation was provided by the related organization. For this purpose, compensation includes any amount that would be reportable in column (C), (D), or (E) of Part V if provided by the filing organization.

Report any compensation paid by a related organization for only that period where a control or other relationship existed between the organizations. Report compensation paid by a related organization in the same period (calendar or fiscal year) as compensation paid by the Form 990 filer.

Organizations answering Yes must attach a schedule that lists, for each officer, director, trustee, or key employee receiving such compensation, the name and EIN of each related organization that provided the compensation and the amount each provided. Use the same format as required by columns (C) through (E) of Part V.

Providing information on compensation received from related organizations does not violate the disclosure provisions of section 7216(a). See also section 6033(a)(1).

A related organization is any entity (whether tax-exempt or taxable) that the filing organization directly or indirectly owns or controls, or that directly or indirectly owns or controls the filing organization. For example, if Organization A owns 90% of B, and B owns 80% of C, then A would directly own 90% of B and indirectly own 72% (90% of 80%) of C.

Owns means holding (directly or indirectly) 50% or more of the voting membership rights, voting stock, profits interest, or beneficial interest.

Control means that:

1. Fifty percent (50%) or more of the filing organization's officers, directors, trustees, or key employees are also officers, directors, trustees, or key employees of the second organization being tested for control;
2. The filing organization appoints 50% or more of the officers, directors, trustees, or key employees of the second organization; or
3. Fifty percent (50%) or more of the filing organization's officers, directors, trustees, or key employees are appointed by the second organization.

Control exists if the 50% test is met by any one group of persons even if collectively the 50% test is not met.

Whether or not any elements of ownership or control are present, a related organization also includes:

• A supporting organization operated in connection with the filing organization where one of the purposes of the supporting organization is to benefit or further the purposes of the filing organization; and
• A supported organization operated in connection with the filing organization where one of the purposes of the filing organization is to benefit or further the purposes of the supported organization.

For example, a hospital auxiliary that raises funds for Hospital Y or coordinates the efforts of that hospital's volunteer staff would be a supporting organization of Hospital Y and, thus, a related organization, even if the hospital does not own or control the auxiliary. Hospital Y, in turn, would be a supported organization of the auxiliary. In any case where the $10,000 and $100,000 minimums were met, the hospital must report (on an attachment to its return) the compensation paid by the auxiliary to the officer, director, trustee, or key employee of the hospital. The same reporting requirement would apply to compensation paid by Hospital Y to an officer, etc., of the auxiliary.

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Part VI - Other Information

• Section 501(c)(3) organizations and section 4947(a)(1) nonexempt charitable trusts must also complete and attach a Schedule A (Form 990 or 990-EZ) to their Form 990 or Form 990-EZ. See General Instruction D for information on Schedule A (Form 990 or 990-EZ).
• Answer Yes, No, or N/A to each question.

Line 76 - Change in activities

Attach a statement to explain any significant changes in the kind of activities the organization conducts to further its exempt purpose. Include new or modified activities not listed as current or planned in the organization's application for recognition of exemption, or not yet reported to the IRS by a letter to its Director EO Examination or by an attachment to the organization's return for any earlier year. Also include any major program activities that are being discontinued.

Line 77 - Changes in organizing or governing documents

Attach a conformed copy of any changes to the articles of incorporation, or association, constitution, trust instrument, or other organizing document, or to the bylaws or other governing document.

A conformed copy is one that agrees with the original document and all amendments to it. If the copies are not signed, they must be accompanied by a written declaration signed by an officer authorized to sign for the organization, certifying that they are complete and accurate copies of the original documents.

Photocopies of articles of incorporation showing the certification of an appropriate state official do not have to be accompanied by such a declaration. See Rev. Proc. 68-14, 1968-1 C.B. 768, for details. When a number of changes are made, attach a copy of the entire revised organizing instrument or governing document.

However, if your exempt organization changes its legal structure, such as from a trust to a corporation, you must file a new exemption application to establish that the new legal entity qualifies for exemption.

Line 78 - Unrelated business income

Political organizations described in section 527 are not required to answer this question.

Check Yes on line 78a if the organization's total gross income from all of its unrelated trades and businesses is $1,000 or more for the year. Gross income is the amount of gross receipts less the cost of goods sold. See Pub. 598 for a description of unrelated business income and the Form 990-T filing requirements for section 501(c), (e), (f), (k), and (n) organizations having such income. Form 990-T is not a substitute for Form 990. Report on Form 990, or Form 990-EZ, items of income and expense that are also reported on Form 990-T when the organization is required to file both forms.

Note: All tax-exempt organizations must pay estimated taxes with respect to their unrelated business income if they expect their tax liability to be $500 or more. Use Form 990-W to compute this tax.

Line 79 - Liquidation, dissolution, termination, or substantial contraction

For a complete liquidation of a corporation or termination of a trust, check the Final return box in the heading of Form 990 or Form 990-EZ. If there was a liquidation, dissolution, termination, or substantial contraction, attach a statement explaining what took place.

On the attached statement, show whether the assets have been distributed and the date of distribution. Also attach a certified copy of any resolution, or plan of liquidation or termination, etc., with all amendments or supplements not already filed. In addition, attach a schedule listing the names and addresses of all persons who received the assets distributed in liquidation or termination, the kinds of assets distributed to each one, and each asset's fair market value.

A substantial contraction is a partial liquidation or other major disposition of assets except transfers for full consideration or distributions from current income.

A major disposition of assets means any disposition for the tax year that is:

1. At least 25% of the fair market value of the organization's net assets at the beginning of the tax year; or
2. One of a series of related dispositions begun in earlier years that add up to at least 25% of the net assets the organization had at the beginning of the tax year when the first disposition in the series was made. Whether a major disposition of assets took place through a series of related dispositions depends on the facts in each case.

See Regulations section 1.6043-3 for special rules and exceptions.

Line 80 - Relation to other organizations

Answer Yes if most (more than 50%) of the organization's governing body, officers, directors, trustees, or membership are also officers, directors, trustees, or members of any other organization.

Disregard any coincidental overlap of membership with another organization; that is, when membership in one organization is not a condition of membership in another organization. For example, assume that a majority of the members of a section 501(c)(4) civic organization also belong to a local chamber of commerce described in section 501(c)(6). The civic organization should answer No on line 80 if it does not require its members to belong to the chamber of commerce.

Also disregard affiliation with any statewide or nationwide organization. Thus, the civic organization in the above example would still answer No on line 80 even if it belonged to a state or national federation of similar organizations. A local labor union whose members are also members of a national labor organization would answer No on line 80.

Line 81 - Expenditures for political purposes

Political organizations described in section 527 are not required to answer this question.

A political expenditure is one intended to influence the selection, nomination, election, or appointment of anyone to a Federal, state, or local public office, or office in a political organization, or the election of Presidential or Vice Presidential electors. It does not matter whether the attempt succeeds.

An expenditure includes a payment, distribution, loan, advance, deposit, or gift of money, or anything of value. It also includes a contract, promise, or agreement to make an expenditure, whether or not legally enforceable.

All section 501(c) organizations. An exempt organization that is not a political organization must file Form 1120-POL if it is treated as having political organization taxable income under section 527(f)(1).

If a section 501(c) organization establishes and maintains a section 527(f)(3) separate segregated fund, it is the fund's responsibility to file its own Form 1120-POL if the fund meets the Form 1120-POL filing requirements. Do not include the segregated fund's receipts, expenditures, and balance sheet items on the Form 990, or Form 990-EZ, of the section 501(c) organization that establishes and maintains the fund. When answering questions 81a and 81b on its Form 990, this section 501(c) organization should disregard the political expenses and Form 1120-POL filing requirement of the segregated fund.

However, when a section 501(c) organization transfers its own funds, to a separate segregated section 527(f)(3) fund for use as political expenses, the 501(c) organization must report the transferred funds as its own political expenses on its Form 990 or Form 990-EZ.

Section 501(c)(3) organizations. A section 501(c)(3) organization will lose its tax-exempt status if it engages in political activity.

A section 501(c)(3) organization must pay a section 4955 excise tax for any amount paid or incurred on behalf of, or in opposition to, any candidate for public office. The organization must pay an additional excise tax if it fails to correct the expenditure timely.

A manager of a section 501(c)(3) organization who knowingly agrees to a political expenditure must pay a section 4955 excise tax, unless the agreement is not willful and there is reasonable cause. A manager who does not agree to a correction of the political expenditure may have to pay an additional excise tax.

When a section 501(c)(3) organization promotes a candidate for public office (or is used or controlled by a candidate or prospective candidate), amounts paid or incurred for the following purposes are political expenditures:

• Remuneration to such individual (a candidate or prospective candidate) for speeches or other services;
• Travel expenses of such individual;
• Expenses of conducting polls, surveys, or other studies, or preparing papers or other material for use by such individual;
• Expenses of advertising, publicity, and fundraising for such individual; and
• Any other expense that has the primary effect of promoting public recognition or otherwise primarily accruing to the benefit of such individual.

An organization is effectively controlled by a candidate or prospective candidate only if such individual has a continuing, substantial involvement in the day-to-day operations or management of the organization.

A determination of whether the primary purpose of an organization is promoting the candidacy or prospective candidacy of an individual for public office is made on the basis of all the facts and circumstances. See section 4955 and Regulations section 53.4955.

Use Form 4720 to figure and report the excise taxes.

Line 82 - Donated services or facilities

Because Form 990, or Form 990-EZ, is open to public inspection, you may want the return to show contributions the organization received in the form of donated services or the use of materials, equipment, or facilities at less than fair rental value. If so, and if the organization's records either show the amount and value of such items or give a clearly objective basis for an estimate, the organization may choose to enter this optional information on line 82b. The IRS does not require any organization to keep such records. However, do not include the value of such items in Part I or II, or in the expense column in Part III. You may indicate the value of donated services or use of materials, equipment, or facilities in Part III in the narrative description of program services rendered. See the instructions for Part III.

Line 83 - Public inspection requirements

Answer Yes only if the organization complied with its public inspection obligations described in General Instruction M.

Line 83b - Disclosure requirements for quid pro quo contributions

See General Instruction L.

Line 84a - Solicitations of contributions

All organizations that qualify under section 170(c) to receive contributions that are deductible as charitable contributions for Federal income tax purposes, enter N/A. See General Instruction L.

Line 85 - Section 501(c)(4), (5), or (6) organizations

Reporting membership dues, lobbying, and political expenses under section 6033(e). Only certain organizations that are tax-exempt under:

• Section 501(c)(4) (social welfare organizations),
• Section 501(c)(5) (agricultural and horticultural organizations), or
• Section 501(c)(6) (business leagues) are subject to (a) the section 6033(e) notice and reporting requirements, and (b) a potential proxy tax. These organizations must report their total lobbying expenses, political expenses, and membership dues, or similar amounts, on line 85 of Form 990.

Section 6033(e) notice and reporting requirements and proxy tax. Section 6033(e) requires certain section 501(c)(4), (5), and (6) organizations to tell their members what portion of their membership dues were allocable to the political or lobbying activities of the organization. If an organization does not give its members this information, then the organization is subject to a proxy tax. The tax is reported on Form 990-T.

However, if the organization meets Exception 1 or 2, it is excluded from the notice, reporting, and proxy tax requirements of section 6033(e). See also Rev. Proc. 98-19, 1998-1 C.B. 547.

Exception 1. Section 6033(e)(3) exception for organizations whose dues are nondeductible. (Check Yes for line 85a.)

1. All organizations exempt from tax under section 501(a), other than section 501(c)(4), (5), and (6) organizations.
2. Local associations of employees' and veterans' organizations described in section 501(c)(4), but not section 501(c)(4) social welfare organizations.
3. Labor unions and other labor organizations described in section 501(c)(5), but not section 501(c)(5) agricultural and horticultural organizations.
4. Section 501(c)(4), (5), and (6) organizations that receive more than 90% of their dues from:
   1. Section 501(c)(3) organizations,
   2. State or local governments,
   3. Entities whose income is exempt from tax under section 115, or
   4. Organizations described in 1 through 3, above.
5. Section 501(c)(4) and (5) organizations that receive more than 90% of their annual dues from:
   1. Persons,
   2. Families, or
   3. Entities who each paid annual dues of $81 or less in 2001 (adjusted annually for inflation). See Rev. Proc. 2001-13, 2001-3 I.R.B. 337.
6. Any organization that receives a private letter ruling from the IRS stating that the organization satisfies the section 6033(e)(3) exception.
7. Any organization that keeps records to substantiate that 90% or more of its members cannot deduct their dues (or similar amounts) as business expenses whether or not any part of their dues are used for lobbying purposes.
8. Any organization that is not a membership organization.

Note: Special rules treat affiliated social welfare organizations, agricultural and horticultural organizations, and business leagues as parts of a single organization for purposes of meeting the nondeductible dues exception. See Rev. Proc. 98-19.

Exception 2. Section 6033(e)(1) $2,000 in-house lobbying exception. (Check Yes for line 85b.) An organization satisfies the $2,000 in-house lobbying exception if it:

1. Did not receive a waiver for proxy tax owed for the prior year.
2. Did not make any political or foreign lobbying expenditures during the 2001 reporting year,
3. Made lobbying expenses during the 2001 reporting year consisting only of in-house direct lobbying expenses totaling $2,000 or less, but excluding:
   1. Any allocable overhead expenses, and
   2. All direct lobbying expenses of any local council regarding legislation of direct interest to the organization or its members.

Dues notices. An organization that checked No for both lines 85a and 85b, and is thus responsible for reporting on line 85c through 85h, must send dues notices to its members at the time of assessment or payment of dues, unless the organization chooses to pay the proxy tax instead of informing its members of the nondeductible portion of its dues. These dues notices must reasonably estimate the dues allocable to the nondeductible lobbying and political expenditures reported on line 85d.

IF . . .	THEN . . .
The organization's lobbying and political expenses are more than its membership dues for the year,	The organization must: (a) Allocate all membership dues to its lobbying and political activities, and (b) Carry forward any excess lobbying and political expenses to the next tax year.
The organization: (a) Had only de minimis in-house expenses ($2,000 or less) and no other nondeductible lobbying or political expenses; or	The organization need not disclose to its membership the allocation of dues, etc., to its lobbying and political activities.
(b) Paid a proxy tax, instead of notifying its members on the allocation of dues to lobbying and political expenses*; or
(c) Established that substantially all of its membership dues, etc., are not deductible by members,
*(such as political campaign or grassroots lobbying expenses)

Members of the organization cannot take a trade or business expense deduction on their tax returns for the portion of their dues, etc., allocable to the organization's lobbying and political activities.

Proxy tax.

IF . . .	THEN . . .
The organization's actual lobbying and political expenses are more than it estimated in its dues notices,	The organization is liable for a proxy tax on the excess and reports it on Form 990-T.
The organization: (a) Elects to pay the proxy tax, and (b) Chooses not to give its members a notice allocating dues to lobbying and political activities,	All the members' dues remain eligible for a section 162 trade or business expense deduction.
The organization: (a) Makes a reasonable estimate of dues allocable to nondeductible lobbying and political activities, and (b) Agrees to adjust its estimate in the following year*,	The IRS may permit a waiver of the proxy tax.
*A facts and circumstances test determines whether or not a reasonable estimate was made in good faith.

Allocation of costs to lobbying activities and influencing legislation. An organization that is subject to the lobbying disclosure rules of section 6033(e) must use a reasonable allocation method to determine its total costs of its direct lobbying activities; that is, costs to influence:

• Legislation, and
• The actions of a covered executive branch official through direct communication (e.g., President, Vice President, or cabinet-level officials, and their immediate deputies) (sections 162(e)(1)(A) and (D)).

  Reasonable methods of allocating costs to direct lobbying activities include, but are not limited to:

• The ratio method,
• The gross-up and alternative gross-up methods, and
• A method applying the principles of section 263A.

  See Regulations sections 1.162-28 and 1.162-29 and the special rules and definitions for these allocation methods given below.

An organization that is subject to the lobbying disclosure rules of section 6033(e) must also determine its total costs of:

• de minimis in-house lobbying,
• grassroots lobbying, and
• political activities.

There are no special rules related to determining these costs.

All methods. For all the allocation methods, include labor hours and costs of personnel whose activities involve significant judgment with respect to lobbying activities (lobbying personnel).

Special rules and definitions.

Ratio and gross-up methods.

1. May use even if volunteers conduct activities.
2. May disregard labor hours and costs of clerical or support personnel (other than lobbying personnel) under the ratio method.

Alternative gross-up method.

• Disregard labor hours and
• Costs of clerical or support personnel (other than lobbying personnel).

Third-party costs are those paid to:

• Outside parties for conducting lobbying activities,
• Dues paid to another membership organization that were declared to be nondeductible lobbying expenses, and
• Travel and entertainment costs for lobbying activities.

Direct contact lobbying is a:

• Meeting,
• Telephone conversation,
• Letter, or
• Similar means of communication that is with a:
  1. Legislator (other than a local legislator) or
  2. Covered executive branch official

and that otherwise qualifies as a lobbying activity.

Treat all hours spent by a person in connection with direct contact lobbying as labor hours allocable to lobbying activities.

Do not treat the hours spent by a person who engages in research and other background activities related to direct contact lobbying, but who makes no direct contact with a legislator, or covered executive branch official, as direct contact lobbying.

De minimis rule. If less than 5% of a person's time is spent on lobbying activities, and there is no direct contact lobbying, an organization may treat that person's time spent on lobbying activities as zero.

Influencing legislation means:

• Any attempt to influence legislation through a lobbying communication; and
• All activities, such as research and coordination for the purpose of making or supporting a lobbying communication, even if not yet made.

A lobbying communication is any communication with any member or employee of a legislative body, or any other government official participating in the formulation of the legislation that:

• Refers to specific legislation and reflects a view on that legislation; or
• Provides support for views in a prior lobbying communication.

Purpose for engaging in an activity is based on all the facts and circumstances. If an organization's lobbying communication was for a lobbying and a nonlobbying purpose, the organization must make a reasonable allocation of costs to influencing legislation.

Correction of prior year lobbying costs. If in a prior year, an organization treated costs incurred for a future lobbying communication as a lobbying cost to influence legislation, but after the organization filed a timely return, it appears the lobbying communication will not be made under any foreseeable circumstance, the organization may apply these costs to reduce its current year's lobbying costs, but not below zero. The organization may carry forward any amount of the costs not used to reduce its current year's lobbying costs to subsequent years.

Example: Ratio method. X Organization incurred:

1. 6,000 labor hours for all activities
2. 3,000 labor hours for lobbying activities (three employees)
3. $300,000 for operational costs
4. No third-party lobbying costs

X Organization allocated its lobbying costs as follows:

Lobbying labor hrs.
3,000 6,000	×	$300,000	+	0	=	$150,000
Total labor hrs.		Total costs of operations		Allocable third-party costs		Costs allocable to lobbying activities

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