What is Form 990-PF?

Hear ye, hear ye!

Presenting to ExpressTaxExempt: Form 990-PF!

That’s right, private foundations, it’s your time to shine! You can now e-file Form 990-PF through your ExpressTaxExempt account.

What is Form 990-PF?
Form 990-PF is a member of the 990 Series, which are filed by certain tax-exempt organizations. The “PF” stands for “Private Foundation,” and the form is used to figure the tax of private foundations based on investment income as well as report their charitable distributions and activities to the IRS. Form 990-PF can also be used in place of the section 4947(a)(1) nonexempt charitable trust’s income tax return, Form 1041, when the trust has no taxable income.

Who Needs to File Form 990-PF?
Things with the IRS are rarely as straightforward as they seem, and that means the private foundations required to report income and charitable information on Form 990-PF are:

• -Exempt private foundations (section 6033(a), (b), and (c)),
• -Taxable private foundations (section 6033(d)),
• -Organizations with private foundation status whose applications for exempt status are pending and who haven’t yet applied for exempt status,
• -Organizations that made an election under section 41(e)(6)(D)(iv),
• -Private foundations making a section 507(b) termination, and
• -Section 4947(a)(1) nonexempt charitable trusts treated as private foundations (section 6033(d)).

Schedule B
Much like the regular Form 990, Form 990-PF may require the filing of additional schedules to complete the return. For Form 990-PF, the most used schedule is Schedule B, which is used to report additional information about any donations of money, securities, and other property worth at least $5,000. And, don’t worry, you can also e-file it with ExpressTaxFilings!

Form 8868
Luckily for all, Form 8868 doesn’t discriminate; the 990 extension form can be used to extend your Form 990-PF deadline too! Like other 990 forms, Form 990-PF is due the 15th day of the fifth month after your tax year end date. For those of you with calendar tax years, that due date is May 15th, which you may have noticed is quickly approaching.

Luckily (again!), you can e-file Form 8868 with ExpressTaxExempt before diving into your 990-PF Form if you feel you’ll need more time to get everything just right. Just e-file Form 8868 by your original deadline and you’ll receive an automatic 6-month extension of time to file your Form 990-PF. Easy as pie!

More Questions?
If you have any other questions about Form 990-PF or e-filing with ExpressTaxFilings, don’t hesitate to give us a call! We’re always happy to help and we’re available by phone (704-839-2321), live chat, and email at support@ExpressTaxFilings.com!

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Private Foundations

In the recent blog, “Public Charity Test,” we mentioned briefly how Private Foundations have more regulations than Public Charities along with paying a tax on investment income. But that was just a small tidbit about the differences between private foundations and public charities. All exempt organizations listed under section 501(c)(3) are considered private foundations until they can prove they qualify for public charity status.

What is a Private Foundation?
The main difference between a private foundation and a public charity is donor control, that’s it. If your organization operates as a private foundation, then you receive all of your funding from a single donor or a limited group of donors. These donors are usually just one person, a family, or a corporation, but not the general public.

Generally, private foundations have about four sub-categories:

• Traditional - This is your most common type of private foundation. It may be fully funded by an endowment, or receive funding annually by its donor. The main function of a traditional private foundation is typically to produce grants.
• Pass-Throughs or Conduits - These types of private foundations keep their donor’s contribution under lock for a short amount of time. The contribution from the donor, and any acquired income with it, is dispersed after the end the tax year in which the contribution was made - usually within two months.
• Operating - An operating, private foundation works like a public charity in which it has its own charitable activities such as a museum or library; however, that doesn’t make it a public charity - remember about donor control. The only difference with an operating, private foundation is that engages more in working programs than grants.
• Pooled Common Funds - Both the donor and donor’s spouse can annually choose the recipients of their funds. Generally, the recipients are public charities and even after the end of the donors’ lives, the funds still go to the charity that they have chosen.

Even if your organization has the word “foundation” in its name, that doesn’t mean that you operate as a foundation; it’s all about how you receive your donations. Usually, private foundations are privately created, funded, and managed by either a single person, a family, or a corporation.

Because of the donor control of private foundations, they do not rely on public donors for support; therefore, they are not under the same close, public examination as public charities are. One thing you can bet that private foundations and public charities have in common is both of their tax returns are due on the 15th day of the 5th month after the end of the tax period.

Select your organization status in Schedule A and complete the rest of your tax return form with Express990. We support Form 990, 990-EZ, and 990-N (e-Postcard), and we offer a safe, secure, and accurate e-filing process that will save you time and money.

For any assistance with e-filing our available 990 forms, you can contact our live professionals by phone (704-839-2321, Monday through Friday from 9am to 6pm, Eastern Standard Time), by email (support@expresstaxexempt.com), or by live chat (www.expresstaxexempt.com).

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Public Charity Test

When you’re filling out a Form 990 or a Form 990-EZ, you’re going to come across Schedule A, which asks if your tax-exempt organization is considered a Public Charity or Private Foundation. According to experts, there’s a default rule that all 501(c)(3) organizations are labelled private foundations until they can prove public charity. 

Private Foundations are exposed to more regulations than Public Charities, and they have to pay a tax on investment income. But that’s information for another blog. To prove that your tax-exempt organization is a Public Charity, you have to pass one of two tests administered by the IRS.

Test 1
The first test states that your organization receives a substantial support in contributions from publicly supported organization, governmental units, or from the general public.

Example: Your organization’s revenue is made through widespread public fundraising campaigns, federated fundraising drives, or government grants.

Experts may explain this as the Donate Charity Test in which your organization normally receives at least one-third its total income from government grants, grants from other public charities, and from members of the public. However, there is a limit.

Only two percent of your funding can come from any one donor, foundation, or corporate fund that’s counted as the numerator, while the entire amount of the gift is counted as the denominator.

Test 2
The second test states that your organization receives no more than one-third of its support from gross investment income, and more than one-third from contributions, membership fees, and gross receipts from exempt-related activities.

Example: You have a membership-free organization like a parent-teacher group, or an art group with box office revenue.

This is also explained as the Gross Receipts Charity Test, which includes receiving at least one-third of your support from government grants, grants from other public charities, and from members of the public. But also by receiving your support from revenues generated by activities within the organization’s exempt purpose.

The second test has a different limit on the amount that can be counted as the numerator. Receipts only up to the greater of one percent of the charity’s total support during the year, or $5,000, is counted as the numerator. The total amount of the gift is the denominator.

These are only glimpses of the complexity of these two test. Of course, there are exceptions, like the Unusual Grant Exception, exclusions, and even exceptions from exceptions. For a careful analysis of your organization’s Schedule A classification, you would want to consult with an accountant or tax professional.
E-file your Schedule A, along with the rest of your Form 990 or 990-EZ, with Express990. We offer a safe, secure, and accurate e-filing process that will save you time and money. We are also backed by expert help with technical and support teams that are the most experienced in the industry, knowing the in’s and out’s of the filing process better than anyone else.

For any assistance with e-filing our available 990 forms, you can contact our live professionals by phone (704-839-2321, Monday through Friday from 9am to 6pm, Eastern Standard Time), by email (support@expresstaxexempt.com), or by live chat (www.expresstaxexempt.com).

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Public Charities vs. Private Foundations

Do you like to compare particular subjects to see how they differ? I know I do. Quick story: It was an ordinary Tuesday at Express990, nothing exciting was happening in the wonderful world of nonprofit tax filings. To continue on the path of Nonprofit Tax Knowledge, I was reviewing some very informative Form 990 series literature. Then suddenly, a question popped in my head; how do public charities differ greatly from private foundations? What types of 990 forms would they file? I quickly jumped on the research train to answer these pressing questions...

What is the relationship between public charities & private foundations?
Public charities and private foundations are often separated by who they benefit. Public charities benefit the public at large or a specific group of people. They also typically receive donations from many donors of varying amounts. Private foundations are founded for the benefit of one person or few people, such as a scholarship fund. Likewise, private foundations are often funded by a few donors with consistent amounts.

What 990 form would need to be filed for a public charity vs. a private foundation?
Public charities, like section 501(c)(3) and other 501(c) organizations, file one of three forms: 990-N, 990-EZ, or 990. These three forms are dependent on the amount of gross receipts or total assets. Organizations with $50,000 or less in gross receipts may file the 990-N (e-Postcard) while organizations with less than $200,000 in gross receipts, and less than $500,000 in total assets, may file the 990-EZ. Any organization that goes over these amounts must file the entire Form 990.
Private foundations, unlike the previously mentioned public charities, have their own 990 Series form: Form 990-PF. This form does, however share the same "15th day of the 5th month after the end of the tax period" rule with the rest of the Forms 990.

Extra tidbits about Public Support
The IRS determines the exempt categorization of exempt organizations based on what it calls "Public Support Tests." There are two public support tests: the first one is for organizations described in Sections 509(a)(1) and 170(b)(1)(A)(vi) of the Internal Revenue Code. The second is for organizations described in Section 509(a)(2). Both of these tests measure public support over a 5 year period and hinge on 1/3 of support from contributions rule, meaning that the organization must receive at least a third of its support from public contributions. Section 509(2)(a) organizations can receive no more than 1/3 of their support from gross investment income and unrelated business taxable income.

There is a notable difference between public charities and private foundations. If you are looking at them definition wise, remember public charities receive donations from many donors of varying amounts and private foundations  are funded by a few donors with more consistent amounts. Another difference is the type of 990 forms they file. The only thing they have in common is the "15th day of the 5th month after the end of the tax period" rule for filing.

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