Good news, we are halfway there, Now that we’ve made it through Parts I-VIII!
Let’s dig into Parts IX-XII!
Need a recap? No, problem! Form 990-PF is a 990 Series tax return that private foundations are required to file annually with the IRS. The information that the IRS requires on this form includes the organization’s financial activities, program-related investments, and details about its governing body.
For the blog on Parts I – IV click here, and for the blog on Parts V- VIII, click here!
Part IX – Minimum Investment Return (All domestic foundations must complete this part. Foreign foundations, see instructions.)
Part IX is used to report minimum investment return, this section is required by all domestic foundations. Foreign foundations are only required to complete this section if they are a Private Operating Foundation.
A private foundation that is not considered a private operating foundation is required to make payments on the distributable amount of the qualified distributions. The distributable amount is considered to be the minimum investment return. This is 5% of the total fair market values of the noncharitable assets.
- On lines 1a-1c, you will be asked to list the minimum investment return for assets, securities, and cash balances. The sum of these amounts will be reported on line 1d.
- Line 1e is used to report the fair market value of any securities, real estate holdings, or other assets reported on lines 1a and 1c that hold a blockage discount, or reduction from full fair market value.
- The aggregate amount of the discounts claimed is to be reported on line 1e.
- Line 2 is used to report the total acquisition indebtedness that applies to assets reported on line 1
- Line 3 will be a calculation line that will subtract line 2 from line 1d.
- Line 4 is used to report Cash deemed held for charitable activities.
- Line 5 and 6 are calculated lines, Line 5 will subtract line 4 from line 3, and line 6 will be 5% of line 5.
Part X – Distributable Amount (see instructions) (Section 4942(j)(3) and (j)(5) private operating foundations and certain foreign organizations, check here and do not complete this part.)
Part X is used to report distributable amounts. The distributable amount for 2022 is the amount that the foundation must distribute by the end of 2023 as a qualifying
distributions to avoid the 30% tax on the undistributed portion.
If you are considered a n 4942(j)(3) or (j)(5) foundation and operate as a private operating foundation, you may not be required to complete Part X and can check the header box to indicate you are not required to complete it.
If you are required to complete Part X, most of the information is pulled from other areas of the return:
- Line 1 will be the value reported in Part IX, line 6.
- Line 2 is the value reported on Part V, line 5. Line 3 is the difference between line 2 and line 1.
- In line 4 you can list the recoveries of amounts treated as qualifying distributions. line 5 will calculate the sum of lines 3 and 4.
- Line 6 is for reporting Deduction from distributable amount and line 7 will be the difference between lines 6 and 5.
- The final amount reported on line 7, will also be reported on Part XII, line 1.
For more detailed, step-by-step instructions for 990-PF, click here.
Part XI – Qualifying Distributions
Qualifying distributions are amounts spent or reserved for charitable purposes.
Qualifying distribution amounts are used to reduce the distributable amount for specific years to generate the undistributed income:
- Line 1a: Enter the amount from Part I, line 26, column (d).
- Line 1b: Enter the total of the Amount column from Part VIII-B.
- Line 3: Amounts set aside may be treated as qualifying distributions if the foundation ensures the amount will be paid within 60 months from the beginning date the amount was set aside.
- Line 4: Enter the sum of lines 1a through 3b. Enter this amount here and on Part XII, line 4.
Part XII – Undistributed Income
Part XII is used to ensure the foundation can comply with the rules for utilizing qualifying distributions for the year 2022.
Most of Part XII will be auto calculations and amounts generated from other areas of the return. If you are unsure of your reporting information of undistributed income, you will need to consult a tax preparer. Part XII will require information from prior year returns up to the last 5 years of reported undistributed income and distribution carryover.
- Line 1 is to report the Distributable amount for 2022 from Part X, line 7
- You will report the Undistributed income at the end of the year on line 2
- The organization’s excess distributions carryover to 2022 will be reported on line 3
- The amount reported for Qualifying distributions for 2022 from Part XI should also be reported on line 4.
- You will also report amounts applied to 2021, amounts applied to the undistributed income of prior years, amounts treated as distributions out of corpus, and amounts applied to 2022 distributable amounts on line 4.
- Line 5: If there is an amount on line 5, column d, the same amount for excess distributions carryover applied to 2022 should be reported on line 5 column a.
- Line 6 will be calculated based on information reported on the other lines of Part XII.
- Line 7 is where you will report the amounts treated as distributions out of corpus to satisfy requirements imposed by section 170(b)(1)(F) or 4942(g)(3)
- Excess distributions carryover from 2017 not applied on line 5 or line 7 is reported on line 8.
- Line 9 is a calculator line to determine the excess distributions carryover to 2023. This value is determined by subtracting lines 7 and 8 from line 6a
- Line 10 is used to report the excess from the prior five years.
Simplify the Form 990-PF Filing Process with Tax990!
Whew, that was a lot. Parts 9-12 are interesting because they are not required by all organizations. Keep in mind that, when filing with Tax990, we will help you determine what information is required based on how you complete the other parts of the 990-PF form. Plus, filing your returns with Tax990 is a great tool for recordkeeping purposes, making filing next year’s return even easier!
Keep an eye out for our final installment of the 990-PF blog series where we will review parts 13-16!
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