Instructions for Schedule K (Form 990)

Transcription

1 2011 Instructions for Schedule K (Form 990) Supplemental Information on Tax-Exempt Bonds Department of the Treasury Internal Revenue Service Section references are to the Internal Revenue Code unless otherwise noted. General Instructions organization should report with respect to the amount of the issue that the organization is loaned or allocated. Specific Instructions Definitions Use Part VI to provide additional Tax-exempt bond. This is an Purpose of Schedule information or comments relating to the obligation issued by or on behalf of a Schedule K (Form 990) is used by an information provided on this schedule. For governmental issuer for which the organization that files Form 990 to example, use Part VI to provide additional interest paid is excluded from the holder s provide certain information on their information or comments about the gross income under section 103. For this outstanding liabilities associated with reporting of liabilities by related purpose, a bond can be in any form of tax-exempt bond issues. Usually, a bond organizations. In addition, an organization indebtedness under federal tax law, issue associated with an organization will can use Part VI to describe certain including a bond, note, loan, or be issued as qualified 501(c)(3) bonds, assumptions which are used to complete lease-purchase agreement. but all types of tax-exempt bond issues Schedule K (Form 990) when the Bond issue. This is an issue of two benefiting the organization are to be information provided is not fully supported or more bonds which are sold at reported. A qualified 501(c)(3) bond issue by existing records. substantially the same time; sold pursuant consists of bonds the proceeds of which to the same plan of financing; and are used by a section 501(c)(3) Who Must File payable from the same source of funds. organization in furtherance of its An organization that answered Yes to See Regulations section (c). charitable purpose. Requirements question 24a of Form 990, Part IV, Governmental issuer. A state or generally applicable to qualified 501(c)(3) Checklist of Required Schedules, must local governmental unit that issues bonds under section 145 include the complete and attach Schedule K to Form tax-exempt bonds. following: 990. This means the organization Gross proceeds. This generally All property financed by the bond issue reported an outstanding tax-exempt bond means any sale proceeds, investment is to be owned by a section 501(c)(3) issue that: proceeds, transferred proceeds, and organization or a state or local Had an outstanding principal amount in replacement proceeds of an issue. See governmental unit; and excess of $100,000 as of the last day of Regulations sections (b) and At least 95% of the net proceeds of the the tax year, and (c). bond issue are used by either a state or local governmental unit or a section Was issued after December 31, Pooled financing issue. This is a 501(c)(3) organization in activities which bond issue from which loans, leases, etc. do not constitute unrelated trades or will be made to two or more conduit Up to four separate outstanding businesses (determined by applying borrowers. tax-exempt liabilities can be reported on section 513). each Schedule K (Form 990). The Proceeds. This generally means the schedule can be duplicated, if needed to sale proceeds of an issue (other than If the organization has one or more those sale proceeds used to retire bonds related organizations (for example, report more than four tax-exempt of the issue that are not deposited in a parent and subsidiary relationship), it liabilities. If the organization is not reasonably required reserve or must complete Schedule K (Form 990) required to file Form 990 but chooses to replacement fund). Proceeds also include consistent with the filing(s) of its related do so, it must file a complete return and any investment proceeds from organization(s). The same liability should provide all of the information requested, investments that accrue during the project not be reported by more than one of the including the required schedules. period (net of rebate amounts attributable related organizations. For example, if a to the project period). See Regulations parent organization issues a tax-exempt section (b). bond issue and loans or allocates that Period Covered issue to a subsidiary organization, only Defeasance escrow. This is an The organization can complete this one organization (either the parent or irrevocable escrow established to redeem schedule for any tax-exempt liability using subsidiary) should report the liability on the bonds on their earliest call date in an the same period as the Form 990 with Form 990 and the Schedule K. Similarly, amount that, together with investment which it is filed. Alternatively, the if a parent organization loans or allocates earnings, is sufficient to pay all the organization can use any other 12-month the proceeds of a tax-exempt bond issue principal of, and interest and call premium period or periods selected by the to a group of subsidiary organizations, on, bonds from the date the escrow is organization and which, used consistently only one level (either the parent or the established to the earliest call date. See for a tax-exempt liability for purposes of group of subsidiaries) should report the Regulations section (d)(5). A this schedule and computations, is in liability on Form 990 and the Schedule K. defeasance escrow can be established accordance with the requirements under For this purpose, if the subsidiary for several purposes, including the sections 141 through 150. Under this organizations report the liability, each remediation of nonqualified bonds. subsidiary should only report the amount alternative, the organization can use However, for purposes of completing this it is loaned or allocated. different 12-month periods for each schedule, an escrow established with tax-exempt liability reported. The proceeds of a refunding issue to If the organization s bond liability alternative period(s) must be specifically defease a prior issue is referred to as a relates to a pooled financing issue, the described in Part VI. refunding escrow. Jan 10, 2012 Cat. No D

2 Refunding escrow. This is one or Example 2. Refunding of post , filed for the bond issue. If the bond more funds established as part of a single bonds. Bonds issued in 2003 were issue was not publicly offered and there transaction or a series of related advance refunded in As of is no assigned CUSIP number, write transactions, containing proceeds of a December 31, 2011, the last day of the None. refunding issue and any other amounts organization s tax year, the refunding Column (d). Enter the issue date of the to provide for payment of principal or issue had an outstanding principal obligation. The issue date should be interest on one or more prior issues. See amount exceeding $100,000. The identical to the issue date listed on Form Regulations section (b). organization must list the refunding issue 8038, Part I, line 6, filed for the bond in Part I for each year the outstanding Refunding issue. This is an issue of issue. The issue date generally is the principal amount exceeds $100,000 as of obligations the proceeds of which are date on which the issuer receives the the last day of the year, and must provide used to pay principal, interest, or purchase price in exchange for delivery of all Part I, Part II, Part III, and Part IV redemption price on another issue (a prior the evidence of indebtedness (for information for such refunding issue. If issue), including the issuance costs, example, a bond). In no event is the issue any outstanding bonds of the 2003 bond accrued interest, capitalized interest on date earlier than the first day on which issue were not legally defeased, the the refunding issue, a reserve or interest begins to accrue on the bond for organization also must list the 2003 bond replacement fund, or similar costs, if any, federal income tax purposes. See issue in Part I, and must provide all Part I, properly allocable to that refunding issue. Regulations section (b). Part II, Part III, and Part IV information for A current refunding issue is a refunding such bond issue. Column (e). Enter the issue price of the issue that is issued not more than 90 obligation. The issue price generally days before the last expenditure of any Part I. Bond Issues should be identical to the issue price proceeds of the refunding issue for the listed on Form 8038, Part III, line 21(b) payment of principal or interest on the In Part I, provide the requested filed for the bond issue. The issue price prior issue. An advance refunding issue is information for each outstanding generally is determined under a refunding issue that is not a current tax-exempt bond issue (including a Regulations section (b). If the refunding issue. See Regulations sections refunding issue) that: issue price is not identical to the issue (d)(1), (3), and (4). Had an outstanding principal amount in price listed on the filed Form 8038, use excess of $100,000 as of the last day of Private business use. Private Part VI to explain the difference. the tax year (or other selected 12-month business use means use of the period), and Column (f). Describe the purpose of the proceeds of an issue by the organization Was issued after December 31, bond issue, such as to construct a or another section 501(c)(3) organization For this purpose, bond issues that hospital or provide funds to refund a prior in an unrelated trade or business as have been legally defeased in whole, and issue. If any of the bond proceeds were defined by section 513. Private business as a result are no longer treated as a used to refund a prior issue, enter the use also generally includes any use by a liability of the organization, need not be date of issue for each of the refunded nongovernmental person other than a listed in Part I and are not subject to the issues. If the issue has multiple purposes, section 501(c)(3) organization unless generally applicable reporting enter each purpose. If the issue financed otherwise permitted through an exception requirements of Parts I, II, III and IV. various projects or activities or safe harbor provided under the Organizations are reminded, however, corresponding to a related purpose, only regulations or a revenue procedure. that continued compliance with Federal enter the purpose once. For example, if tax law requirements is required with proceeds are used to acquire various Special rules for refunding of pre-2003 respect to defeased bonds. items of office equipment, the amount of issues. Bonds issued after December such expenditures should be aggregated 31, 2002, to refund bonds issued before Use one row for each issue, and use and identified with the stated purpose of January 1, 2003, have special reporting the Part I row designation for a particular office equipment. Alternatively, if requirements. Such refunding bonds are issue (for example, A or B ) proceeds are used to construct and equip subject to the generally applicable consistently throughout Parts I through IV. a single facility, the expenditures should reporting requirements of Parts I, II, and The information provided in columns (a) be aggregated and identified with the IV. However, the organization need not through (d) should be consistent with the stated purpose of construct & equip complete lines 1 through line 6 of Part III corresponding information included on facility where the identification of the to report private business use information Form 8038, Information Return for facility is distinguishable from other for the issue for such refunding bonds. Tax-Exempt Private Activity Bond Issues, bond-financed facilities, if any. Use Part These special rules do not apply to bonds filed by the governmental issuer upon the VI if additional space is needed for this issued after December 31, 2002, to issuance of the bond issue. Complete purpose. refund directly or through a series of multiple schedules if necessary to refundings bonds that were also originally account for all outstanding Column (g). Check Yes or No to issued after post-december 31, 2002, tax-exempt indicate whether a defeasance escrow bond issues. In this case, describe in Part or refunding escrow has been Example 1. Refunding of pre-2003 VI of the first Schedule K that additional established to irrevocably defease any bonds. Bonds issued in 1999 to schedules are included. bonds of the bond issue. construct a facility were current refunded in In 2009, bonds were issued to Columns (a) and (b). Enter the name Column (h). Check Yes if the current refund the 2006 bonds. As of and employer identification number (EIN) organization acted as an on behalf of December 31, 2011, the last day of the of the issuer of the bond issue. The issuer in issuing the bond issue. Check organization s tax year, the 2009 issuer s name is the name of the entity No if the organization only acted as the refunding bonds had an outstanding which issued the bond issue (typically a borrower of the bond proceeds under the principal amount exceeding $100,000. state or local governmental unit). The terms of a conduit loan with the The organization must list the refunding issuer s name and EIN should be identical governmental issuer of the bond issue. bond issue in Part I for each year the to the name and EIN listed on Form 8038, An on behalf of issuer is a outstanding principal amount exceeds Part I, lines 1 and 2 filed for the bond corporation organized under the general $100,000 as of the last day of such year, issue. nonprofit corporation law of a state whose and must provide all Part I, Part II, and Column (c). Enter the Committee on obligations are considered obligations of Part IV information for such refunding Uniform Securities Identification a state or local governmental unit. See issue. Because the original bonds were Procedures (CUSIP) number on the bond Rev. Proc , C.B. 476, for a issued prior to 2003, the organization with the latest maturity. The CUSIP description of the circumstances under need not complete Part III for the number should be identical to the CUSIP which the IRS will ordinarily issue a letter refunding bond issue. number listed on Form 8038, Part I, line ruling that the obligations of a nonprofit -2-

3 corporation will be issued on behalf of a allocable to, the issuance of a bond been made. Proceeds of a bond issue state or local governmental unit. See also: issue. See Regulations section must be accounted for using any Rev. Rul , C.B. 24; Rev (b) for an example list of issuance reasonable, consistently applied Rul , C.B. 13; and Rev. Rul. costs. accounting method. Allocations must be , C.B. 59. An on behalf of Line 8. Enter the cumulative amount of made by certain applicable due dates and issuer also includes a constituted proceeds used to pay fees for credit are generally not considered final until the authority organized by a state or local enhancement that are taken into account expiration of such due dates. See governmental unit and empowered to in determining the yield on the issue for Regulations section issue debt obligations in order to further purposes of section 148(h) (for example, Line 17. Check Yes or No to indicate public purposes. See Rev. Rul , bond insurance premiums and certain if the organization maintains adequate C.B. 65. fees for letters of credit) as of the end of books and records to support the final Column (i). Check Yes or No to the 12-month period. allocation of proceeds. Answer this indicate if the bond issue was a pooled Line 9. Enter the cumulative amount of question only with respect to the tax year financing issue. proceeds used to finance working capital applicable to this schedule. expenditures as of the end of the Part II. Proceeds 12-month period. However, do not report Part III. Private Business Complete for each bond issue listed in expenditures reported in lines 4, 6, 7, or 8. A working capital expenditure is any Use rows A through D of Part I. Complete multiple schedules if necessary to cost that is not a capital expenditure (for Complete for bond issues listed in rows account for all outstanding tax-exempt example, current operating expenses). A through D of Part I, other than listed bond issues. Note that lines 3 and 5 See Regulations section (b). bond issues that are post-december 31, through 12 concern the amount of Line 10. Enter the cumulative amount of 2002 refunding issues which refund proceeds of the bond issue, but line 4 proceeds used to finance capital pre-january 1, 2003 bond issues directly concerns the amount of gross proceeds expenditures as of the end of the or through a series of refundings. For this of the bond issue. Because of this, the 12-month period. Capital expenditures purpose, a refunding bond issue also aggregate of the amounts entered on generally include costs incurred to includes allocation and treatment of lines 4 through 12 may not equal the acquire, construct, or improve land, bonds of a multipurpose issue as a amount entered on line 3. buildings, and equipment. See separate refunding issue under Regulations section (b). However, Regulations section (d). Line 1. Enter the cumulative principal do not report capitalized interest that was Complete multiple schedules if necessary amount of bonds of the issue that have reported on line 5. to account for all outstanding tax-exempt been retired as of the end of the bond issues. 12-month period used in completing this Line 11. Enter the cumulative amount of schedule. proceeds used for any item not reported Line 1. Check Yes or No to indicate if Line 2. Enter the cumulative principal on lines 4 through 10 as of the end of the the organization was at any time during amount of bonds of the issue that have 12-month period. Include any proceeds the year a partner in a partnership or a not been retired, but have been legally used or irrevocably held to redeem or member of a limited liability company defeased through the establishment of a legally defease bonds of the issue. which both owned property that was defeasance escrow or a refunding financed by the bond issue and included Line 12. Enter the amount of unspent escrow, as of the end of the 12-month as partner(s) or member(s) entities other proceeds as of the end of the 12-month period. than a section 501(c)(3) organization. period other than those amounts Line 3. Enter the total amount of identified in Part II, lines 4, 6 and 11. Line 2. Check Yes or No to indicate if proceeds of the bond issue as of the end any lease arrangements that may result in Line 13. Enter the year in which of the 12-month period. If the total private business use were effective at construction, acquisition, or rehabilitation proceeds are not identical to the issue any time during the year with respect to of the financed project was substantially price listed in Part I, column (e), use Part property financed by the bond issue. The completed. A project can be treated as VI to explain the difference (for example, lease of financed property to a substantially completed when, based investment earnings). nongovernmental person other than a upon all the facts and circumstances, the section 501(c)(3) organization is generally Line 4. Enter the amount of gross project has reached a degree of private business use. Lease proceeds held in a reasonably required completion which would permit its arrangements that constitute unrelated reserve or replacement fund, sinking operation at substantially its design level trade or business of the lessor, or that are fund, or pledged fund as of the end of the and it is, in fact, in operation at such level. for an unrelated trade or business of a 12-month period. See Regulations See Regulations section (c). If the section 501(c)(3) organization lessee, sections (c)(2), (c)(3), and bond issue financed multiple projects, may also result in private business use (f). enter the latest year in which See Regulations sections (b)(3) Line 5. Enter the cumulative amount of construction, acquisition, or rehabilitation and (b)(1). proceeds used, as of the end of the of each of the financed projects was substantially completed. For example, if a Line 3a. Check Yes or No to indicate 12-month period, to pay interest on the bond issue financed the construction of if any management or service contract applicable portion of the bond issue three projects which were substantially that may result in private business use during construction of a financed capital completed in 2008, 2009, and 2010, was effective at any time during the year project. respectively, then enter If the with respect to property financed by the Line 6. Enter the amount of proceeds bond issue financed working capital bond issue. For this purpose, answer held in a refunding escrow as of the end expenditures, provide the latest year in Yes even if the organization has of the 12-month period. For this purpose which the proceeds of the issue were determined that the management or only, include investment proceeds without allocated to those expenditures. service contract meets the safe harbor regard to the project period limitation under Rev. Proc , C.B. 632, found in the definition of proceeds. Line 14. Check Yes or No to indicate and will not result in actual private Line 7. Enter the cumulative amount of if the bond issue is a current refunding business use. A management or service proceeds used to pay bond issuance issue. contract for the financed property can costs, including (but not limited to) Line 15. Check Yes or No to indicate result in private business use of the underwriters spread as well as fees for if the bond issue is an advance refunding property, based on all facts and trustees and bond counsel as of the end issue. circumstances. A management or service of the 12-month period. Issuance costs Line 16. Check Yes or No to indicate contract for the financed property are costs incurred in connection with, and if the final allocation of proceeds has generally results in private business use -3-

4 of that property if the contract provides for organization, another section 501(c)(3) negotiations through requests for bids. It compensation for services rendered with organization, or a state or local also includes any agreement to supply compensation based, in whole or in part, governmental unit. See Regulations investments on two or more dates (for on a share of net profits from the section (g)(4). Enter the yearly example, a forward supply contract). If the operation of the facility. See Regulations average percentage rounded to the answer on line 4a is Yes : section (b)(4). nearest tenth of a percentage point (for Enter the name of the provider of the Line 3b. If Line 3a was checked Yes, example, 8.9%). GIC on line 4b, check Yes or No to indicate if, during Line 7. Check Yes or No to indicate Enter the term of the GIC rounded to the 12-month period used to report on the whether the organization has adopted the nearest tenth of a year on line 4c, and bond issue, the organization routinely management practices and procedures to Enter Yes or No on line 4d to engaged bond counsel or other outside ensure post-issuance compliance of its indicate if the regulatory safe harbor for counsel to review any management or tax-exempt bond liabilities. For this establishing fair market value provided in service contracts relating to the financed purpose, post-issuance compliance Regulations section (d)(6)(iii) was property. includes restrictions on private use, satisfied. Line 3c. Check Yes or No to indicate arbitrage compliance and other applicable if any research agreement that may result tax law. Answer this question only with Line 5. Check Yes or No to indicate if in private business use was effective at respect to the 12-month period used to any gross proceeds were invested any time during the year for property report on the bond issue. beyond a temporary period (for example, financed by the bond issue. For this the 3-year temporary period applicable to purpose, answer Yes even if the Part IV. Arbitrage. proceeds spent on expenditures for organization has determined that the capital projects, or the 13-month Complete for each bond issue listed in research agreement meets the safe temporary period applicable to proceeds rows A through D of Part I. Complete harbor under Rev. Proc , spent on working capital expenditures), or multiple schedules if necessary to C.B. 108, and will not result in actual if any gross proceeds were invested in a account for all outstanding tax-exempt private business use. An agreement by reserve or replacement fund in an amount bond issues. a nongovernmental person to sponsor exceeding applicable limits. See research performed by the organization Line 1. Check Yes or No to indicate if Regulations sections (e) and (f). can result in private business use of the Form 8038-T, Arbitrage Rebate, Yield property used for the research, based on Reduction and Penalty in Lieu of Line 6. Check Yes or No to indicate if all the facts and circumstances. A Arbitrage Rebate, has been filed for the the bond issue qualified for an exception research agreement for the financed bond issue. to rebate set forth in Regulations sections property will generally result in private Line 2. Check Yes or No to indicate if or (for example, the business use of that property if the the bond issue is a variable rate issue. A 2-year spending exception described sponsor is treated as the lessee or owner variable rate issue is an issue containing under section (e)). For this of financed property for federal income a bond with a yield not fixed and purpose, check Yes when the tax purposes. See Regulations section determinable on the issue date. organization reasonably expects to meet (b)(6). an available exception but has not yet Lines 3a through 3e. In general, satisfied all applicable requirements. Line 3d. If line 3c was checked Yes, payments made or received by a check Yes or No to indicate if, during governmental issuer or borrower of the 12-month period used to report on the bond proceeds under a qualified hedge Part V. Procedures To bond issue, the organization routinely are taken into account to determine the Undertake Corrective engaged bond counsel or other outside yield on the bond issue. A qualified counsel to review any research hedge can be entered into before, at the Action agreements relating to the financed same time as, or after the date of issue. Regulations section and other property. Check Yes or No on line 3a to indicate available remedies for non-compliance Line 4. Enter the average percentage if the organization or the governmental may not cover all violations of the during the year of the property financed issuer has entered into a qualified hedge requirements of section 145 and other by the bond issue that was used in a and identified it on the government applicable requirements for tax-exempt private business use by a issuer s books and records. See bonds benefiting the organization. Certain nongovernmental person other than a Regulations section (h). If the remedial provisions also require that the section 501(c)(3) organization. See answer to line 3a is Yes : non-compliance be identified and Regulations section (g)(4). Do not Enter the name of the provider of the remedial action taken within a limited time include costs of issuance reported in Part hedge on line 3b; after the deliberate action or other cause II. Enter the yearly average percentage to Enter the term of the hedge rounded to of the violation. In instances where the nearest tenth of a percentage point the nearest tenth of a year (for example, applicable remedial provisions are not (for example, 8.9%). For this purpose, do 2.4 years) on line 3c; available under the regulations, an issuer not include any use relating to either a Enter Yes or No on line 3d to of bonds may request a voluntary closing management or service contract identified indicate if, as a result of the hedge, agreement to address the violation under on line 3a that the organization has variable yield bonds will be treated as the Tax Exempt Bonds Voluntary Closing determined meets the safe harbor under fixed yield bonds (superintegration of the Agreement Program described under Rev. Proc , C.B. 632, or hedge). See Regulations section Notice Check the box if the otherwise does not result in private (h)(4); and organization has established written business use. Similarly, do not include Enter Yes or No on line 3e to procedures to ensure timely identification any use relating to a research agreement indicate if the hedge was terminated prior of violations of Federal tax requirements identified on line 3b that the organization to its scheduled termination date. and timely correction of any identified has determined meets the safe harbor Lines 4a through 4d. Check Yes or violation(s) through use of the voluntary under Rev. Proc , C.B. No on line 4a to indicate if any gross closing agreement program if 108, or otherwise does not result in proceeds of the bond issue were self-remediation is not available under private business use. invested in a guaranteed investment applicable regulations. Check the box Line 5. Enter the average percentage contract (GIC). A GIC includes any only if the procedures applied to the during the year of the property financed nonpurpose investment that has organization during the 12-month periods by the bond issue that was used in an specifically negotiated withdrawal or used to report on the bond issues. If the unrelated trade or business activity (a reinvestment provisions and a specifically answer differs for different reported bond private business use) by the negotiated interest rate, including issues, please explain in Part VI. -4-

5 Part VI. Supplemental comments relating to the reporting of questions on Schedule K (Form 990). Information liabilities by related organizations; and to Identify the specific part and line number describe certain assumptions which are that the response supports, in the order in Use Part VI to provide the narrative used to complete Schedule K (Form 990) which the responses appear on Schedule explanations required, if applicable, to when the information provided is not fully K (Form 990). Part VI can be duplicated if supplement Part I, columns (e) and (f); to supported by existing records. Also use more space is needed. provide additional information or Part VI to supplement responses to -5-