IRS Revises 2014 Form 990, Schedule A

Healthcare

IRS Revises 2014 Form 990, Schedule A

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The IRS, as a result of the final regulations regarding the classification of Type III supporting organizations, has released the 2014 Form 990 Schedule A, Public Charity Status and Public Support, and the associated instructions.

The 2014 Schedule A contains a number of revisions from prior years’ forms; specifically the 2014 Schedule A expands the reporting requirements for supporting organizations with the introduction of two new Parts. Part IV, Supporting Organizations, must be completed by all supporting organizations, and Part V, Type III Non-Functionally Integrated 509(a)(3) Supporting Organizations, must be completed by those supporting organizations that are Type III Non-Functionally Integrated Supporting Organizations. For a more detailed discussion regarding both the Final and Temporary Regulations regarding classification of Type III supporting organizations as “functionally integrated” and “non-functionally integrated,” please see our tax tip released in March 2013, Final and Temporary Type III Supporting Organization Regulations Issued by the IRS, released in March 2013.

Form 990 Background

According to the IRS, the purpose of Schedule A is to be “used by an organization that files Form 990 or 990-EZ to provide the required information about public charity status and public support.” Schedule A is required to be attached to a Form 990-EZ, Short Form Return of Organization Exempt from Income Tax and the those Form 990, Return of Organization Exempt from Income Tax, filers that answer “Yes” to Form 990, Part IV, line 1. These organizations include:

Organizations that are described in Internal Revenue Code (“IRC”) §501(c)(3) and are public charities;
Organizations that are described in IRC §501(e), §501(f), §501(j), §501(k), or §501(n); and
Nonexempt charitable trusts described in IRC §4947(a)(1) that are not treated as private foundation.

Supporting Organizations described in IRC §509(a)(3)

Organizations described in IRC §509(a)(3) are commonly referred to as supporting organizations. “Supporting organizations achieve their public charity status by providing support to one or more organizations described in IRC §509(a)(1) or (2).” Commonly referred to as “types”, a supporting organization must maintain one of three defined relationships with their supported organizations. The following are the various types of supporting organizations:

  • Type I supporting organizations are “operated, supervised or controlled” by one or more supported organizations;
  • Type II supporting organizations are “supervised or controlled in connection with one or more” supported organizations; and
  • Type III supporting organizations are “operated in connection with” one or more supported organizations.

As outlined above, the 2014 Form 990, Schedule A includes two new sections, Parts IV and V for IRC §509(a)(3) supporting organizations. Additionally, Part I, line 11 of Schedule A has been modified in order that supporting organizations may answer a series of questions which demonstrate compliance with the detailed rules pertaining to these types of organizations, including the new regulations.

In order to satisfy the requirements as a Type III functionally integrated supporting organization, an organization must (1) meet the activities test, (2) be the parent of its supported organization or (3) support one or more governmental entities.

In order to satisfy the requirements as a Type III non-functionally integrated supporting organization, an organization must (1) meet the distribution requirement, and (2) meet the attentiveness test.

Conclusion

Although the revised Schedule A for 2014 contains several other less significant revisions from 2013 that should be addressed by filers of the Schedule A, the 2014 Schedule A, most significantly, expands the reporting requirements for those public charities classified as supporting organizations under IRC §509(a)(3). All nonprofit organizations that are either supporting organizations or that have supporting organizations within their affiliated group should review the Schedule A instructions to ensure their organizations are in compliance with the additional IRS Schedule A reporting requirements.

Form 990, Schedule A Instructions

Form 990, Schedule A

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.

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