How to File a Schedule F for Foreign Activities

Any exempt organization with activities conducted outside the United States need to report information about those international actions on their IRS Form 990.

Activities can include grants and other assistance, program-related investments, fundraising activities, program services, and more.

Reporting this type of information is done using Schedule F and is for various geographic locations like Antarctica, Central America and the Caribbean, East Asia and the Pacific, Europe, and much more.

Here are some helpful guidelines to follow from the IRS when filing a Schedule F:

Part I - General Information on Activities Outside the United States
The first section of Schedule F is for organizations with aggregate revenues or expenses greater than $10,000 from grantmaking, fundraising, business, investment, or program services outside of the United States. The IRS doesn't require any expenditure from services provided in U.S. for recipients inside and outside the U.S.

For Line 1, indicate whether the organization maintains records to substantiate the following:

• The monetary value of its grants and other assistance
• The recipients’ eligibility for grants or assistance
• The selection criteria used to award grants or assistance

Responses to Line 2 will go on Part V of the Schedule F. You should describe the organization’s procedures for monitoring the use of grants and assistance outside of the U.S. - this can include details from periodic reports and accountings, field investigations, or third-party audits.

Line 3 requires you to enter details for each type of activity conducted any time during the filling year for each region. If the organization has many activities per area, list each one separately for the same location name. Report any investments by regions as well; however, they should be separate from other activities listed in the same area. And you can list all investments from a particular region as a single entry.

It is not necessary to report any foreign investments indirectly held through a pass-through entity in the U.S. because the entity is not physically in a foreign location. You also won’t need to list any investments from entities located overseas that trade on a U.S. stock exchange.

Important: Listing funds transferred to a non-interest bearing account outside of the United States for program services is not necessary for Line 3; however, once those funds are used, the IRS requires you to list them on Line 3, Column F.

Complete the chart for Line 3 as follows

• Column A - List each region in which your organization conducts its foreign activity
• Column B - List the number of offices in each region
• Column C - List the number of employees, agents, and independent contractors in each region
• Column D - List the type of activity conducted in the region (i.e. fundraising, program services, etc.)
• Column E - Give a description of the particular type of service for any program services listed in Column D
• Column F - List total expenditures and investments in each region

With Lines 3a through 3c for Column B, report the total number of offices in foreign locations maintained by the organization during the tax year - don’t count any one office more than once. You’ll also enter the total number of employees and the overall sum of expenditures and investments on Lines 3a through 3c for their respective columns.

Part II - Grants and Other Assistance to Organizations or Entities Outside the United States
Exempt organizations with any recipients outside of the U.S. that have received grants or assistance of at least $5,000 need to be reported in this section. On Line 1, you need to list those recipients in the chart provided. Enter each organization or entity on separate lines. If you require more space for additional beneficiaries, you can attach duplicate copies as needed.

In this section, list cash or noncash grants and assistance based on the accounting method from your organization’s financial statements - you’ll need to describe this process later on in Part V. You should also report grants no matter the source of the funds or whether the organization chose the recipient.

Important: Completing Columns A or B in the chart isn’t necessary.

Finish the rest of the chart for Line 1 as follows

• Column C - Enter the region where the principal foreign office of the recipient organization is or where grant funds are getting used
• Column D - Describe the purpose of grant funds with specific terms like general support, school, construction, or medical supplies rather than broad words like educational or religious
• Column E - Enter the total dollar amount of cash grants, in U.S. dollars, for each recipient
• Column F - Describe how your organization disburses cash for each recipient (i.e. cash payment, check, money transfer, etc.)
• Column G - Enter the Fair Market Value of noncash properties in U.S. dollars
• Column H - Enter a description for any noncash goods or assistance listed
• Column I - Describe the method of valuation for noncash properties

On Line 2, report the total number of recipients from your list on Line 1 that is either recognized as a charity by the foreign country, recognized as tax-exempt by the IRS, or has provided a section 501(c)(3) equivalency letter. With Line 3, enter the total number recipients that are not classified as described in Line 2.

Part III - Grants and Other Assistance to Individuals Outside the United States
Similar to Part II, this section is for exempt organizations who have given at least $5,000 in grants and assistance directly to foreign individuals or foreign groups for the benefit of a particular foreign individual.

You need to complete the chart in Part III the same way you did for Part II, Line 1. Be aware that for Part III, Column A, you’re going to use the same terms that you used for Part II, Line 1, Column D. The IRS also needs an explanation in Part V for any estimated numbers you come up with for Part III, Column C.

Part IV - Foreign Forms
Any exempt organization filing a Schedule F must complete Part IV by answering each question from Line 1 to Line 6. It could be possible to answer each question as “No,” if applicable. But for any question answered “Yes,” the IRS requires you to the file the additional form listed with the question.

Part V - Supplemental Information
The final section within Schedule F is for you to provide detailed explanations for the following parts you answered earlier:

• Part I, Line 2 - Methods for monitoring the use of your organization’s grants and assistance outside the U.S.
• Part I, Line 3, Column F - Methods used for accounting expenditures on the organization’s financial statements
• Part II, Line 1 and Part III - Methods used for accounting cash grants and noncash assistance on the organization’s financial statements
• Part III, Column C - Methods used to estimate the number of recipients

You can also supply any other explanations or descriptions as needed, but for anything written in Part V, you should write out the corresponding part and line of the schedule. For any tax-intensive questions regarding your organization’s activities outside of the U.S., we recommend speaking with a certified professional or contacting the IRS directly at 877.829.5500.

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Foreign Charities Filing 990 Forms

In the nonprofit sector, it’s common knowledge that your tax-exempt organization must file an annual return with the IRS - this form reports your organization’s total revenue, expenses, and activities. But if your exempt organization is considered foreign, then filing may be different than your domestic counterparts.

What is Considered a Foreign Charity?
A foreign charity or nonprofit is an organization created outside of the United States, or any of its territories and possessions, which claims tax-exempt status on revenue earned within the United States. A big difference between domestic and foreign charities is that US contributions to foreign organizations are not tax deductible.

Why Should a Foreign Charity Have to File?
Foreign organizations are required to file an annual 990 return if the IRS recognizes it as tax-exempt, it receives more than $50,000 in gross receipts from U.S. sources, and it engages in significant activity within the U.S. other than investment activities.

If your foreign charity makes less than $50,000 in the U.S. or doesn’t participate in important US activities, you may be relieved from filing or choose to submit an IRS Form 990-N (e-Postcard).

For those who want or are required to file, you must report values in U.S. currency along with the conversion rate your organization uses. Combine amounts that come from both outside and inside the United States and give the total for each - your information must also be submitted in English.

Which 990 Forms Should Foreign Charities File?
Based on your gross receipts from U.S. sources, you are required to file the same types of forms as domestic exempt organizations:

• IRS Form 990 - U.S. gross receipts are over $200,000
• IRS Form 990-EZ - U.S. gross receipts are between $50,000 and $200,000
• IRS Form 990-N (e-Postcard) - U.S. gross receipts are less than $50,000

Important: Like many other domestic organizations, if your foreign group is a private foundation or subject to unrelated business income tax, you’ll file IRS Form 990-PF or Form 990-T respectively.

With ExpressTaxExempt.com, complete and transmit your foreign organization’s 990 return in a secure and accurate way that is quicker than paper filing. Our cloud-based service even supports physical addresses located outside the United States. We also scan your entire form for any errors so can send a proper filing the first time around.

Feel free to contact our U.S. - based, e-file professionals at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST, with any questions or help with your 990 tax return. We also offer 24/7 email support with support@ExpressTaxExempt.com.

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