The Redesigned 990-T, Take 3

While the Form 990 has not seen many changes since it was radically redesigned in 2008, the same cannot be said for the Form 990-T, Exempt Organization Business Income Tax. Exempt organizations with unrelated business taxable income will be filing on a form that has been updated three times over three years, with the most sweeping changes to the form occurring for the 2020 tax year. These changes have been made in order to incorporate the changes resulting from the Tax Cuts and Jobs Act of 2017, while addressing some of the issues with the prior changes.

There are three main areas of change for the Form 990-T this year: the header of the Form 990-T, Part I-VI of the core Form and Schedule A.

Specific changes to the header of the draft Form 990-T include:

• A checkbox in Item B for Section 529A qualified ABLE programs;
• An Item F checkbox to identify the return as an amended return;
• A checkbox in Item G for an applicable reinsurance entity;
• An Item H that allows a filing organization to identify that it is filing only to claim credit from Form 8941, Credit for Small Employer Health Insurance Premiums, or a refund shown on Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains; and
• An Item I that allows a Section 501(c)(3) filing organization to report that it is filing a consolidated return with a Section 501(c)(2) title-holding corporation.

Specific changes to the reporting in Parts I through VI of the draft core Form include:

• A reserved line in Part I (line 2) that was used for the now repealed disallowed transportation fringes and a new line (line 9) for a trust to report Section 199A deductions;
• A line in Part II for the reporting of “other tax amounts;”
• New reporting in Part III on the total tax line if the amount of tax reported includes tax previously deferred under Section 1294; and
• New questions in Part IV that ask whether the filing organization changed its method of accounting.

Specific changes to the reporting of UBTI on Schedule A, which was designed to consolidate the separate silos of taxable activity in a reader-friendly manner include:

• A way to identify the attached Schedule A by sequence number;
• Inclusion of checkboxes to identify “dual-use property;”
• Advertising income will be reported in a single part of the return and the filing organization can identify periodicals reported on a consolidated basis by checking a box; and
• The addition of a new Part XI, Supplemental Information.

The new Schedule A will create more uniform reporting across nonprofit organizations and is more user-friendly than the old Schedule M. The biggest benefit of reporting the taxable activity in a consistent way across the industry is that it generates an electronically transmittable return. For the first time, the IRS is not only accepting but requiring Forms 990-T filed after March 15, 2021, to be filed electronically.

As the COVID-19 pandemic has fundamentally changed how and where we work, the ability to file the 990-T electronically negates the need to get hard-copy signatures on a single document. Additionally, electronic filing provides peace of mind, as one can quickly tell that the return has been accepted by the IRS. This instant gratification and electronic paper trail is far superior to persistent mail delays and a backlog of mail waiting to be processed by the IRS.

Schedule a consultation with an experienced Aprio advisor to discuss your Business Tax needs.