Reporting requirements for exempt organizations with activities outside the U.S.

• Author: Klahsen, Rick

The IRS's introduction of the new Form 990, Return of Organization Exempt from Income Tax, for 2008 and subsequent tax years has in some respects streamlined reporting but in other ways has significantly increased disclosure requirements for exempt organizations. Significantly increased reporting requirements apply to exempt organization activities outside the United States. This item is intended to introduce and clarify the foreign disclosure requirements reported on Schedule F, Statement of Activities Outside the United States, of the new Form 990.

Introduction

Reporting foreign activities on the old Form 990 was limited to a few questions/areas on foreign bank accounts (including indirectly held accounts through an over-50%-owned stock entity) (line 91b), foreign grants (checkbox in Part III), and foreign offices (line 91c). New Form 990, introduced in 2008, requires exempt organizations that meet certain dollar amount thresholds for their international activities to present detailed information on Schedule F. Schedule F is a four-page schedule that consists of four parts. Supplementary Schedule F-1 is available for users that need extra space to report certain activities.

The filing exempt organization is required to report only the activities that it performed directly, or those performed indirectly through a disregarded entity or joint venture taxed as a partnership. In addition, financial accounts reported on Part V, lines 4a and 4b, are not considered for Schedule F disclosure. If the exempt organization qualifies and chooses to file Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, Schedule F does not need to be completed, even if there are foreign activities that meet Schedule F filing requirements.

Grantmaker Information and Activities per Region

Schedule F, Part I, is to be completed by exempt organizations that have aggregate revenues or expenses of more than $10,000 from grantmaking, fundraising, business, and program service activities outside the United States. Usually these activities are quickly identifiable and easy to define. However, in order to determine if the exempt organization meets this $10,000 threshold test, revenues and expenses attributable to foreign investments also must be taken into account. (If the investment is in a foreign corporation that is treated as a separate corporation for U.S. tax purposes, the corporation's revenue and expenses should not be considered for the purposes of the threshold test but may be disclosable as a foreign investment in Part I.)

For 2008 and 2009 tax years, investment activity should be reported on a region-by-region basis (a foreign partnership's legal domicile dictates which region to disclose, not the regions in which it may hold investments); all investments in a particular region may be aggregated for this purpose (e.g., all investments in South America may be reported...