Hints for the Wise and Traps for the Unwary -
A 501(c)(3) organization with outstanding tax-exempt debt generally is required to file Schedule K “Supplemental Information on Tax-Exempt Bonds” with its annual IRS Form 990. This article seeks to assist the preparer of Schedule K by focusing on questions that are confusing or that could trigger an audit if answered inappropriately or without complete explanations. We will not address Part I of Schedule K which relates to basic information about bond issues or every line on the remaining parts of Schedule K, but instead will provide explanations on tricky topics and suggest best practices for topics that most frequently raise questions or concerns.
In 2007, the IRS revamped the Form 990 and introduced Schedule K. Schedule K has been a work in process ever since, having been modified several times in the intervening years. Currently, Schedule K is divided into six sections. Part I focuses on basic information about the bond issues, Part II analyzes the use of proceeds, Part III reviews the amount of the private business use, Part IV discusses arbitrage, Part V inquires about the conduit borrower’s remediation actions and Part VI is space for the conduit borrower to provide additional information. The regular filing deadline for a 501(c)(3) organization with a tax year ending June 30 is the immediately following November 15th.
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