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IRS Announces Changes to the Form 990-PF for 2013

Tax-Exempt Organizations Law Update Janice E. Rodgers, Amanda K. Blaising

The Internal Revenue Service has announced changes to the Form 990-PF, the annual information return required to be filed by private foundations, for tax years beginning in 2013. The most significant change affecting most private foundations is to require more detailed reporting of the exact foundation status of grant recipients. The instructions to the 2013 Form 990-PF, which include a list of significant changes under the “What’s New” heading on page one, may be found here. The instructions to Part XV, Supplementary Information, line 3, now set forth specific codes to use when classifying grantees. The instructions require private foundations to use these new codes as provided below.

Foundation Status of Recipient

Use the following codes:

NC Non-charity (not 501(c)(3))
PF Private non-operating foundation (section 509(a))
POF Private operating foundation (section 4942(j)(3)) other than an EOF
EOF Exempt operating foundation (section 4940(d))
PC Public charity described in section 509(a)(1) or (2)
SO-DP Type I, type II, or type III functionally integrated supporting organization if a disqualified person of the private foundation controls the supporting organization or a supported organization (sections 509(a)(3) and 4942(g)(4))
SO I Type I supporting organization (sections 509(a)(3) and 509(a)(3)(B) (i)) other than an SO-DP
SO II Type II supporting organization (sections 509(a)(3) and 509(a)(3)(B) (ii)) other than an SO-DP
SO III FI Functionally integrated type III supporting organization (sections 509(a)(3), 509(a)(3)(B)(iii), and 4943(f) (5)(B)) other than an SO-DP
SO III NFI Non-functionally integrated type III supporting organization (sections 509(a)(3), 509(a)(3)(B)(iii), and 4943(f) (5)(B))
TPS Testing for public safety organization (section 509(a)(4))

The goals of the changes to Part XV are to create uniformity in reporting and provide greater information regarding the tax status of grantees.

The instructions to Part XV also clarify which amounts approved or set aside for future payment to grantees should be reported on Part XV, line 3b. The instructions refer filers to Treasury Regulations Section 1.509(a)-4, Notice 2006-109, and Revenue Procedure 2011-33 for guidance on determining whether a grantee is a type I, type II, type III functionally integrated, or type III non-functionally integrated supporting organization.

Quarles & Brady Comments:

As a result of these changes, most private foundations will need to review and update their records and recordkeeping processes (and possibly their grants management software) in order to document the tax classification of their grantees in sufficient detail. They also will need to report this information retroactively from the beginning of the 2013 tax year. In light of the IRS’s recent announcement of plans to conduct more audits of “small and medium”-sized private foundations, it is particularly important to review and update internal procedures as soon as possible in order to have the necessary information available before filing the Form 990-PF for 2013 and future years.

This update is intended as a general summary of legal matters and not as specific advice to any particular client. If you have any questions concerning the subject matter of this update, please contact Janice E. Rodgers, at (312) 715-5034 /, Amanda K. Blaising, at (312) 715-5112 /, or your Quarles & Brady LLP attorney.