F. Other Forms as Partial Substitutes for Form 990 or Form 990-EZ

Except as provided below, the Internal Revenue Service will not accept any form as a substitute for one or more parts of Form 990 or Form 990-EZ.

Labor organizations (section 501(c)(5))

A labor organization that files Form LM-2, Labor Organization Annual Report, or the shorter Form LM-3, Labor Organization Annual Report, with the U.S. Department of Labor (DOL) can attach a copy of the completed DOL form to Form 990, or Form 990-EZ, to provide some of the information required by Form 990 or Form 990-EZ. This substitution is not permitted if the organization files a DOL report that consolidates its financial statements with those of one or more separate subsidiary organizations.

Employee benefit plans (section 501(c)(9), (17), or (18))

An employee benefit plan may be able to substitute Form 5500 for part of Form 990 or Form 990-EZ. The substitution can be made if the organization filing Form 990, or Form 990-EZ, and the plan filing Form 5500, meet all the following tests:

1. The Form 990, or Form 990-EZ, filer is organized under section 501(c)(9), (17), or (18);
2. The Form 990, or Form 990-EZ, filer and Form 5500 filer are identical for financial reporting purposes and have identical receipts, disbursements, assets, liabilities, and equity accounts;
3. The employee benefit plan does not include more than one section 501(c) organization, and the section 501(c) organization is not a part of more than one employee benefit plan;
4. The organization's accounting year and the employee plan year are the same. If they are not, you may want to change the organization's accounting year, as explained in General Instruction G, so it will coincide with the plan year.

Allowable substitution areas

Whether an organization files Form 990, or Form 990-EZ, for a labor organization or for an employee benefit plan, the areas of Form 990, or Form 990-EZ, for which other forms can be substituted are the same. These areas are:

Form 990

• Lines 13 through 15 of Part I (but complete lines 16 through 21);
• Part II; and
• Part IV (but complete lines 59, 66, and 74, columns (A) and (B)).

Form 990-EZ

• Lines 10 through 16 of Part I (but complete lines 17 through 21).
• Part II (but complete lines 25 through 27, columns (A) and (B)).

If an organization substitutes Form LM-2 or LM-3 for any of the Form 990, or Form 990-EZ, Parts or line items mentioned above, it must attach a reconciliation sheet to show the relationship between the amounts on the DOL forms and the amounts on Form 990 or Form 990-EZ. This is particularly true of the relationship of disbursements shown on the DOL forms and the total expenses on line 17, Part I, of both Form 990 and Form 990-EZ. The organization must make this reconciliation because the cash disbursements section of the DOL forms includes nonexpense items. If the organization substitutes Form LM-2, be sure to complete its separate schedule of expenses.

G. Accounting Periods and Methods

Note:   For further information, see Pub. 538.

Accounting periods

Calendar year.   Use the 2002 Form 990, or Form 990-EZ, to report on the 2002 calendar year accounting period. A calendar year accounting period begins on January 1 and ends on December 31.

Fiscal year.   If the organization has established a fiscal year accounting period, use the 2002 Form 990, or Form 990-EZ, to report on the organization's fiscal year that began in 2002 and ended 12 months later. A fiscal year accounting period should normally coincide with the natural operating cycle of the organization. Be certain to indicate in the heading of Form 990, or Form 990-EZ, the date the organization's fiscal year began in 2002 and the date the fiscal year ended in the year 2003.

Short period.   Use the 2002 Form 990, or Form 990-EZ, to report on a short accounting period (less than 12 months) that began in 2002 and ended November 30, 2003, or earlier.

Because the Form 990, or Form 990-EZ, for the year 2003 may not be distributed until the year 2004, use the prior year form, the 2002 Form 990, or Form 990-EZ, to report on a short accounting period that begins in the year 2003 and ends November 30, 2003, or earlier. Strike the 2002 year on the form and show the year 2003.

If the organization changes its accounting period, it must file a return on Form 990, or Form 990-EZ, for the short period resulting from the change. Write Change of Accounting Period at the top of this short-period return.

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, or Form 990-EZ, 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.

Group return.   When affiliated organizations authorize their central organization to file a group return for them, the accounting period of the affiliated organizations and the central organization must be the same. See General Instruction R.

Accounting methods

Unless instructed otherwise, the organization should generally use the same accounting method on the return to figure revenue and expenses as it regularly uses to keep its books and records. To be acceptable for Form 990, or Form 990-EZ, reporting purposes, however, the method of accounting used must clearly reflect income.

Generally, the organization must file Form 3115 to change its accounting method. Notice 96-30, 1996-1 C.B. 378, provides relief from filing Form 3115 to section 501(c) organizations that change their methods of accounting to comply with the provisions of SFAS 116, Accounting for Contributions Received and Contributions Made. In SFAS 116, the Financial Accounting Standards Board revised certain generally accepted accounting principles relating to contributions received and contributions awarded by not-for-profit organizations.

A not-for-profit organization that changes its method of accounting for Federal income tax purposes to conform to the method provided in SFAS 116 should report any adjustment required by section 481(a) on line 20 of Form 990, or Form 990-EZ, as a net asset adjustment made during the year the change is made. The adjustment should be identified as the effect of changing to the method provided in SFAS 116. The beginning of year statement of financial position (balance sheet) should not be restated to reflect any prior period adjustments.

State reporting.   If the organization prepares Form 990, or Form 990-EZ, for state reporting purposes, it may file an identical return with the IRS even though the return does not 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, or Form 990-EZ, for filing with the IRS.

Example 1.   The organization maintains its books on the cash receipts and disbursements method of accounting but prepares a state return based on the accrual method. It could use that return for reporting to the IRS.

Example 2.   A state reporting requirement requires the organization to report certain revenue, expense, or balance sheet items differently from the way it normally accounts for them on its books. A Form 990, or Form 990-EZ, prepared for that state is acceptable for the IRS reporting purposes if the state reporting requirement does not conflict with the Form 990, or Form 990-EZ, instructions.

An organization should keep a reconciliation of any differences between its books of account and the Form 990, or Form 990-EZ, that is filed.

Most states that accept Form 990, or Form 990-EZ, in place of their own forms require that all amounts be reported based on the accrual method of accounting. For further information, see General Instruction E.

H. When and Where To File

File Form 990, or Form 990-EZ, by the 15th day of the 5th month after the organization's accounting period ends. If the regular due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. A business day is any day that is not a Saturday, Sunday, or legal holiday.

If the organization is liquidated, dissolved, or terminated, file the return by the 15th day of the 5th month after the liquidation, dissolution, or termination.

If the return is not filed by the due date (including any extension granted), attach a statement giving the reasons for not filing on time.

Send the return to the Internal Revenue Service Center, Ogden, UT 84201-0027.

Private delivery services.   You can use certain private delivery services designated by the IRS to meet the timely mailing as timely filing/paying rule for tax returns and payments. The most recent list of designated private delivery services was published by the IRS in September 2002. The list includes only the following:

• Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, Second Day Service.
• DHL Worldwide Express (DHL): DHL Same Day Service, DHL USA Overnight.
• Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, FedEx International First.
• United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The private delivery service can tell you how to get written proof of the mailing date.

I. Extension of Time To File

Use Form 8868 to request an automatic 3-month extension of time to file. Use Form 8868 also to apply for an additional (not automatic) 3-month extension if the original 3 months was not enough time. To obtain this additional extension of time to file, you must show reasonable cause for the additional time requested. See the instructions for Form 8868.

J. Amended Return/Final Return

To change the organization's return for any year, file a new return including any required attachments. Use the revision of Form 990, or Form 990-EZ, applicable to the year being amended. The amended return must provide all the information called for by the form and instructions, not just the new or corrected information. Check the Amended return box in the heading of the return.

The organization may file an amended return at any time to change or add to the information reported on a previously filed return for the same period. It must make the amended return available for public inspection for 3 years from the date of filing or 3 years from the date the original return was due, whichever is later.

The organization must also send a copy of the information or amended return to any state with which it filed a copy of Form 990, or Form 990-EZ, originally to meet that state's filing requirement.

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).

If the return is a final return, see the specific instructions for Form 990 for line 79, Part VI. For Form 990-EZ, see the specific instructions for line 36, Part V.

K. Penalties

Against the organization

Under section 6652(c)(1)(A), a penalty of $20 a day, not to exceed the smaller of $10,000 or 5% of the gross receipts of the organization for the year, may be charged when a return is filed late, unless the organization can show that the late filing was due to reasonable cause. Organizations with annual gross receipts exceeding $1 million are subject to a penalty of $100 for each day the failure continues (with a maximum penalty with respect to any one return of $50,000). The penalty begins on the due date for filing the Form 990 or Form 990-EZ.

The penalty may also be charged if the organization files an incomplete return. To avoid having to supply missing information later, be sure to complete all applicable line items; answer Yes, No, or N/A (not applicable) to each question on the return; make an entry (including a zero when appropriate) on all total lines; and enter None or N/A if an entire part does not apply.

Also, this penalty may be imposed if the organization's return contains incorrect information. For example, an organization that reports contributions net of related fundraising expenses may be subject to this penalty.

Use of a paid preparer does not relieve the organization of its responsibility to file a complete and accurate return.

Against responsible person(s)

If the organization does not file a complete return or does not furnish correct information, the IRS will send the organization a letter that includes a fixed time to fulfill these requirements. After that period expires, the person failing to comply will be charged a penalty of $10 a day. The maximum penalty on all persons for failures with respect to any one return shall not exceed $5,000 (section 6652(c)(1)(B)(ii)).

Any person who does not comply with the public inspection requirements, as discussed in General Instruction M, will be assessed a penalty of $20 for each day that inspection was not permitted, up to a maximum of $10,000 for each return. The penalties for failure to comply with the public inspection requirements for applications is the same as those for annual returns, except that the $10,000 limitation does not apply (sections 6652(c)(1)(C) and (D)). Any person who willfully fails to comply with the public inspection requirements for annual returns or exemption applications will be subject to an additional penalty of $5,000 (section 6685).

There are also penalties - fines and imprisonment - for willfully not filing returns and for filing fraudulent returns and statements with the IRS (sections 7203, 7206, and 7207). States may impose additional penalties for failure to meet their separate filing requirements. See also the discussion of the Trust Fund Recovery Penalty, General Instruction D.

L. Contributions

Schedule B (Form 990, 990-EZ, or 990-PF), Schedule of Contributors

Schedule B (Form 990, 990-EZ, or 990-PF) is a required attachment for the Form 990, 990-EZ, or 990-PF, and is used to report on tax-deductible and non-tax-deductible contributions. See the instructions for Schedule B for the public inspection rules applicable to that form. See also the Specific Instructions for both Form 990 and Form 990-EZ, under Completing the Heading . . .where the instructions are keyed to items in the heading of Form 990 or Form 990-EZ.

Solicitations of nondeductible contributions

Any fundraising solicitation by or on behalf of any section 501(c) or 527 organization that is not eligible to receive contributions deductible as charitable contributions for Federal income tax purposes must include an explicit statement that contributions or gifts to it are not deductible as charitable contributions. The statement must be in an easily recognizable format whether the solicitation is made in written or printed form, by television or radio, or by telephone. This provision applies only to those organizations whose annual gross receipts are normally more than $100,000 (section 6113 and Notice 88-120, 1988-2 C.B. 454).

Failure to disclose that contributions are not deductible could result in a penalty of $1,000 for each day on which a failure occurs. The maximum penalty for failures by any organization, during any calendar year, shall not exceed $10,000. In cases where the failure to make the disclosure is due to intentional disregard of the law, more severe penalties apply. No penalty will be imposed if the failure is due to reasonable cause (section 6710).

Keeping fundraising records for tax-deductible contributions

Section 501(c) organizations that are eligible to receive tax-deductible contributions under section 170(c) of the Code must keep sample copies of their fundraising materials, such as:

• Dues statements,
• Fundraising solicitations,
• Tickets,
• Receipts, or
• Other evidence of payments received in connection with fundraising activities.

IF . . .	THEN . . .
Organizations advertise their fundraising events,	They must keep samples of the advertising copy.
Organizations use radio or television to make their solicitations,	They must keep samples of: (a) Scripts, (b) Transcripts, or (c) Other evidence of on-air solicitations.
Organizations use outside fundraisers,	They must keep samples of the fundraising materials used by the outside fundraisers.

For each fundraising event, organizations must keep records to show that portion of any payment received from patrons that is not deductible; that is, the retail value of the goods or services received by the patrons. See Disclosure statement for quid pro quo contributions below.

Noncash contributions

See the instructions for Schedule B (Form 990, 990-EZ, or 990-PF).

If the organization received a partially completed Form 8283 from a donor, complete it and return it so the donor can get a charitable contribution deduction. Keep a copy for your records. See also the reference to Form 8282 in General Instruction D.

Substantiation and disclosure requirements for charitable contributions

Acknowledgment to substantiate charitable contributions.   An organization (donee) should be aware that a donor of a charitable contribution of $250 or more cannot take an income tax deduction unless the donor obtains the organization's acknowledgment to substantiate the charitable contribution.

The organization's acknowledgment must:

1. Be written
2. Be contemporaneous
3. State the amount of any cash it received
4. State:
   1. Whether the organization gave the donor any intangible religious benefits (no valuation needed)
   2. Whether or not the organization gave the donor any goods or services in return for the donor's contribution (a quid pro quo contribution)
5. Describe goods or services the organization:
   1. Received (no valuation needed)
   2. Gave (good faith estimate needed).

Exception.   An organization need not make a good faith estimate of a quid pro quo contribution if the goods or services given to a donor are:

• Insubstantial in value
• Certain membership benefits for $75 or less per year
• Certain goods or services given to the donor's employees or partners.

Disclosure statement for quid pro quo contributions.   If the organization receives a quid pro quo contribution of more than $75, an organization must provide a disclosure statement to the donor. The organization's disclosure statement must:

1. Be written
2. Estimate in good faith the organization's goods or services given in return for donor's contribution
3. Describe, but need not value, certain goods or services given donor's employees or partners
4. Inform donor that a deductible charitable contribution deduction is limited as follows:

	Donor's contribution
Less:	Organization's money, and goods or services given in return
Equals:	Donor's deductible charitable contribution.

Exception:   No disclosure statement required if the organization gave:

1. Goods or services of insubstantial value
2. Certain membership benefits, or
3. An intangible religious benefit.

See Regulations sections 1.170A-1, 1.170A-13, and 1.6115-1.

Certain goods or services disregarded for substantiation and disclosure purposes.  

Goods or services with insubstantial value.   Generally, under section 170, the deductible amount of a contribution is determined by taking into account the fair market value, not the cost to the charity, of any benefits received in return. However, the cost to the charity may be used in determining whether the benefits are insubstantial. See below.

Cost basis.   If a taxpayer makes a payment of $39.50 or more to a charity and receives only token items in return, the items have insubstantial value if they:

• Bear the charity's name or logo, and
• Have an aggregate cost to the charity of $7.90 or less (low-cost article amount of section 513(h)(2)).

Fair market value basis.   If a taxpayer makes a payment to a charitable organization in a fundraising campaign and receives benefits with a fair market value of not more than 2% of the amount of the payment, or $79, whichever is less, the benefits received have insubstantial value in determining the taxpayer's contribution.

The dollar amounts given above are applicable to tax year 2002. They are adjusted annually for inflation.

When a donee organization provides a donor only with goods or services having insubstantial value under Rev. Proc. 2001-59, 2001-52 I.R.B. 623 (2001-2 C.B. 623) (and any successor documents), the contemporaneous written acknowledgment may indicate that no goods or services were provided in exchange for the donor's payment.

Certain membership benefits.   Other goods or services that are disregarded for substantiation and disclosure purposes are annual membership benefits offered to a taxpayer in exchange for a payment of $75 or less per year that consist of:

1. Any rights or privileges that the taxpayer can exercise frequently during the membership period such as:
   1. Free or discounted admission to the organization's facilities or events,
   2. Free or discounted parking,
2. Admission to events that are:
   1. Open only to members, and are, per person,
   2. Within the low-cost article limitation.

Examples.  

1. E offers a basic membership benefits package for $75. The package gives members the right to buy tickets in advance, free parking, and a gift shop discount of 10%. E's $150 preferred membership benefits package also includes a $20 poster. Both the basic and preferred membership packages are for a 12-month period and include about 50 productions. E offers F, a patron of the arts, the preferred membership benefits in return for a payment of $150 or more. F accepts the preferred membership benefits package for $300. E's written acknowledgment satisfies the substantiation requirement if it describes the poster, gives a good faith estimate of its fair market value ($20), and disregards the remaining membership benefits.
2. If F received only the basic membership package for its $300 payment, E's acknowledgment need state only that no goods or services were provided.
3. G Theater Group performs four plays. Each play is performed twice. Nonmembers can purchase a ticket for $15. For a $60 membership fee, however, members are offered free admission to any of the performances. H makes a payment of $350 and accepts this membership benefit. Because of the limited number of performances, the membership privilege cannot be exercised frequently. Therefore, G's acknowledgment must describe the free admission benefit and estimate its value in good faith.

Certain goods or services provided to donor's employees or partners.   Certain goods or services provided to employees or partners of donors may be disregarded for substantiation and disclosure purposes. Describe such goods or services. A good faith estimate is not needed.

Example.   Museum J offers a basic membership benefits package for $40. It includes free admission and a 10% gift shop discount. Corporation K makes a $50,000 payment to J and in return, J offers K's employees free admission, a tee shirt with J's logo that costs J $4.50, and a 25% gift shop discount. Because the free admission is offered in both benefit packages and the value of the tee shirts is insubstantial, K's written acknowledgment need not value the free admission benefit or the tee shirts. However, because the 25% gift shop discount to K's employees differs from the 10% discount offered in the basic membership benefits package, K's written acknowledgment must describe the 25% discount, but need not estimate its value.

Definitions.
  

Substantiation.   It is the responsibility of the donor:

• To value a donation, and
• To obtain an organization's written acknowledgment substantiating the donation.

There is no prescribed format for the organization's written acknowledgment of a donation. Letters, postcards, or computer-generated forms may be acceptable. The acknowledgment must, however, provide sufficient information to substantiate the amount of the deductible contribution.

The organization may either provide:

• Separate statements for each contribution of $250 or more, or
• Furnish periodic statements substantiating contributions of $250 or more.

Separate contributions of less than $250 are not subject to the requirements of section 170(f)(8), regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a tax year equals $250 or more.

Contemporaneous.   A written acknowledgment is contemporaneous if the donor obtains it on or before the earlier of:

• The date the donor files the original return for the tax year in which the contribution was made; or
• The due date (including extensions) for filing the donor's original return for that year.

Substantiation of payroll contributions.   An organization may substantiate a payroll contribution by:

• A pay stub, Form W-2, or other document showing a contribution to a donee organization; and
• A pledge card or other document from the donee organization stating that organization provides no goods or services for any payroll contributions.

The amount withheld from each payment of wages to a taxpayer is treated as a separate contribution.

Substantiation of payments to a college or university for the right to purchase tickets to athletic events.   The right to purchase tickets for an athletic event is valued at 20% of the payment.

Example.   When a taxpayer pays $312.50 for the right to purchase tickets for an athletic event, the right is valued at $62.50. The remaining $250 is a charitable contribution that the taxpayer must substantiate.

Substantiation of matched payments.   If a taxpayer's payment to a donee organization is matched by another payor, and the taxpayer receives goods or services in consideration for its payment and some or all of the matching payment, those goods or services will be treated as provided in consideration for the taxpayer's payment and not in consideration for the matching payment.

Disclosure statement.   An organization must provide a written disclosure statement to donors who make a payment, described as a quid pro quo contribution, in excess of $75 (section 6115). This requirement is separate from the written substantiation acknowledgment a donor needs for deductibility purposes. While, in certain circumstances, an organization may be able to meet both requirements with the same written document, an organization must be careful to satisfy the section 6115 written disclosure statement requirement in a timely manner because of the penalties involved.

Quid pro quo contribution.   A "quid pro quo contribution" is a payment that is given both as a contribution and as a payment for goods or services provided by the donee organization.

Example.   A donor gives a charity $100 in consideration for a concert ticket valued at $40 (a quid pro quo contribution). In this example, $60 would be deductible. Because the donor's payment exceeds $75, the organization must furnish a disclosure statement even though the taxpayer's deductible amount does not exceed $75. Separate payments of $75 or less made at different times of the year for separate fundraising events will not be aggregated for purposes of the $75 threshold.

Good faith estimate.   An organization may use any reasonable method in making a good faith estimate of the value of goods or services provided by an organization in consideration for a taxpayer's payment to that organization. A good faith estimate of the value of goods or services that are not generally available in a commercial transaction may be determined by reference to the fair market value of similar or comparable goods or services. Goods or services may be similar or comparable even though they do not have the unique qualities of the goods or services that are being valued.

Goods or services.   Goods or services mean:

• Cash,
• Property,
• Services,
• Benefits, and
• Privileges.

In consideration for.   A donee organization provides goods or services in consideration for a taxpayer's payment if, at the time the taxpayer makes the payment to the donee organization, the taxpayer receives, or expects to receive, goods or services in exchange for that payment.

Goods or services a donee organization provides in consideration for a payment by a taxpayer include goods or services provided in a year other than the year in which the donor makes the payment to the donee organization.

Intangible religious benefits.   Intangible religious benefits must be provided by organizations organized exclusively for religious purposes.
 
Examples include:

• Admission to a religious ceremony, and
• De minimis tangible benefits, such as wine, provided in connection with a religious ceremony.

Distributing organization as donee.   An organization described in section 170(c), or an organization described as a Principal Combined Fund Organization for purposes of the Combined Federal Campaign, that receives a payment made as a contribution is treated as a donee organization even if the organization distributes the amount received to one or more organizations described in section 170(c).

Penalties.   A charity that knowingly provides a false substantiation acknowledgment to a donor may be subject to the penalties under section 6701 for aiding and abetting an understatement of tax liability.

Charities that fail to provide the required disclosure statement for a quid pro quo contribution of more than $75 will incur a penalty of $10 per contribution, not to exceed $5,000 per fundraising event or mailing. The charity may avoid the penalty if it can show that the failure was due to reasonable cause (section 6714).

Previous| First | Next

Instructions Index | 2002 Tax Help Archives | Tax Help Archives | Home