Schedule D (Form 990) Instructions⁚ A Comprehensive Guide

Schedule D (Form 990) is a supplemental financial statement that organizations filing Form 990 use to report additional information about their financial status. It is used to provide detailed reporting on donor-advised funds, conservation easements, certain art and museum collections, escrow or custodial accounts or arrangements, endowment funds, and other supplemental financial information. This comprehensive guide will cover the purpose, filing requirements, and instructions for completing Schedule D.

Introduction

The Internal Revenue Service (IRS) requires certain nonprofit organizations to file Form 990, which is an information return that provides details about the organization’s activities and finances. Schedule D, which is attached to Form 990, is used to report additional financial information that is not included on other sections of the form. It allows the IRS to gain a more comprehensive understanding of the organization’s financial activities and ensure compliance with tax regulations. Schedule D is a crucial component of the Form 990 filing process and serves as a valuable resource for stakeholders interested in evaluating an organization’s financial transparency and stewardship.

Purpose of Schedule D (Form 990)

Schedule D (Form 990) serves a crucial role in providing transparency and accountability for nonprofit organizations by offering a platform for reporting detailed financial information that complements the main Form 990. This schedule is particularly important for organizations that engage in activities involving donor-advised funds, conservation easements, art and museum collections, escrow or custodial accounts, endowment funds, and other specific financial arrangements. By requiring these organizations to disclose detailed information about these activities, Schedule D allows stakeholders, including the IRS, to understand how these funds are managed and utilized. It ensures compliance with tax regulations and fosters public trust in the financial management practices of nonprofit organizations.

Filing Requirements

Nonprofit organizations that file Form 990 are required to attach Schedule D if they answered “Yes” to specific questions on Part IV of Form 990. These questions cover various aspects of the organization’s financial activities, including the presence of donor-advised funds, conservation easements, art and museum collections, escrow or custodial accounts, endowment funds, and other supplemental financial information. Organizations that meet these criteria are obligated to complete and submit Schedule D along with their Form 990, providing the IRS and the public with a comprehensive view of their financial operations. Failure to comply with these filing requirements can result in penalties and jeopardize the organization’s tax-exempt status.

Information Reported on Schedule D

Schedule D (Form 990) requires organizations to provide detailed information about various aspects of their finances. This includes reporting on donor-advised funds, such as the total number of funds at the end of the year, the aggregate value of contributions received during the year, and the aggregate value of grants distributed during the year. Information on conservation easements, including the total acreage protected, the fair market value of the easement, and the amount of any related expenses, is also required. Schedule D further requests details about certain art and museum collections, including the aggregate value of the collection, the number of items in the collection, and the method used to determine the value. Additionally, organizations must report information about escrow or custodial accounts or arrangements, including the nature of the accounts, the amount of funds held, and the purpose of the accounts. Finally, Schedule D requires detailed reporting on endowment funds, including the total amount of endowment assets, the amount of income earned, and the amount of expenditures made from the endowment.

Donor Advised Funds

Schedule D requires organizations to provide detailed information about donor-advised funds (DAFs), which are charitable giving vehicles that allow donors to make contributions, receive tax deductions, and recommend grants from the fund over time. The reporting requirements for DAFs include the total number of funds held by the organization at the end of the tax year, the aggregate value of contributions received during the year, and the aggregate value of grants distributed during the year. The organization must also report the total amount of assets held in DAFs at the end of the tax year. This information provides transparency to the IRS and the public about the organization’s management of DAFs and its charitable giving activities.

Conservation Easements

Organizations that hold conservation easements, which are legal agreements that restrict the development of land for conservation purposes, must report information about these easements on Schedule D. The reporting requirements include the total number of easements held by the organization, the aggregate value of the easements at the end of the tax year, and any changes in the value of the easements during the year. The organization must also provide information about the property subject to the easements, including the location and acreage, and the terms of the easements, such as the duration and the restrictions on development. This information helps the IRS understand the organization’s conservation activities and the impact of these easements on the protected land.

Art and Museum Collections

If an organization maintains a collection of art or museum artifacts, Schedule D requires reporting information about these assets. This includes the total number of items in the collection, their estimated aggregate fair market value at the end of the tax year, and any changes in value during the year. The organization must also report any acquisitions or disposals of art or museum items during the year, including the cost of acquisition or the proceeds from any sales. This information allows the IRS to assess the organization’s stewardship of its collection and to ensure that any sales of art or museum items are properly reported for tax purposes. Additionally, reporting details about the collection helps demonstrate the organization’s commitment to preserving cultural heritage and its impact on the community.

Escrow or Custodial Accounts

Organizations often hold funds or assets in escrow or custodial accounts for various purposes, such as managing donations, holding funds for specific projects, or facilitating transactions. Schedule D requires reporting information about these accounts, including the total balance at the end of the tax year, the purpose of the account, and any transactions that occurred during the year. This includes deposits, withdrawals, and any changes in the account balance. The organization must also disclose the identity of the parties involved in the escrow or custodial arrangement, such as the donor, the beneficiary, and the trustee. This information helps the IRS ensure that these accounts are managed appropriately and that the funds are used for their intended purpose.

Endowment Funds

Endowment funds are a crucial component of many nonprofit organizations, providing a sustainable source of income for their mission. Schedule D requires detailed reporting of endowment fund information, including the total value of the endowment at the end of the tax year, the amount of contributions received during the year, and the amount of distributions made from the endowment. This information is critical for understanding the financial health of the organization and its ability to meet its long-term goals. The organization must also provide information about the endowment’s investment strategy, including the types of assets held and the investment performance. The IRS uses this information to ensure that the endowment is managed appropriately and that the funds are used for their intended purpose, which is typically to provide long-term support for the organization’s mission.

Completing Schedule D

Completing Schedule D requires careful attention to detail and accuracy. The instructions for Schedule D provide specific guidance on how to report each item, including the required format and supporting documentation. Organizations should carefully review the instructions and ensure that all information is accurate and complete. The IRS provides a variety of resources to help organizations complete Schedule D, including online instructions, publications, and videos. Organizations should also consult with a qualified tax professional if they have any questions or need assistance in completing the form. It is crucial to maintain proper records and documentation to support the information reported on Schedule D. The IRS may request additional documentation to verify the accuracy of the information provided. Organizations should also keep in mind that the information reported on Schedule D is subject to public disclosure, so it is important to ensure that the information is accurate and presented in a clear and understandable manner. This transparency builds trust with donors and stakeholders, demonstrating the organization’s commitment to accountability and responsible financial management.

Submitting Schedule D

Schedule D must be submitted along with Form 990 to the IRS. Organizations have the option to file their Form 990 electronically or by mail. If filing electronically, organizations must use IRS-approved tax preparation software that supports Schedule D. For paper filing, organizations can download the forms and instructions from the IRS website and mail them to the address provided on the form. The IRS offers various resources to help organizations file their Form 990, including online tools, publications, and videos. Organizations should carefully review the filing instructions and deadlines to ensure timely and accurate submission; The IRS also provides guidance on how to correct errors on Schedule D. If an organization discovers an error after filing, they must file an amended return using Form 990-X; Organizations should retain copies of their filed Form 990 and Schedule D for their records. The IRS may require these documents for audits or other purposes. It is important to note that failure to file Schedule D or filing inaccurate information can result in penalties from the IRS. Organizations should seek professional guidance if they have any questions or concerns about filing Schedule D.

Resources and Assistance

The IRS provides various resources to help organizations understand and complete Schedule D (Form 990). These resources include⁚

• IRS website⁚ The IRS website offers detailed instructions, forms, and publications related to Schedule D. You can access these resources by searching for “Schedule D (Form 990)” on the IRS website.
• Tax preparation software⁚ Many tax preparation software programs support Schedule D and can guide you through the filing process. Look for software that is IRS-approved and specifically designed for non-profit organizations.
• Tax professionals⁚ If you need assistance with completing Schedule D, you can consult with a tax professional. Tax professionals have expertise in tax law and can help you ensure accuracy and compliance.

The IRS also offers guidance on how to correct errors on Schedule D. If an organization discovers an error after filing, they must file an amended return using Form 990-X. Organizations should retain copies of their filed Form 990 and Schedule D for their records. The IRS may require these documents for audits or other purposes.