TaxNewsFlash-Exempt Organizations

March 4, 2008
No. 2008-16

IRS Releases 2007 Form 990-T and 990-PF Instructions

The IRS has released the final Forms 990-T and 990-PF and the instructions for each for 2007.

No substantive changes were made in the 2007 Form 990-PF or instructions to the Form 990-PF. No substantive changes were made to the Form 990-T, except that former line 44f (relating to the credit for federal telephone excise tax paid) has been deleted. See the explanation under Part IV of the Specific Instructions to the Form 990-T, below.

The instructions for Form 990-T contain certain changes that are described in further detail below.

These forms are available on the IRS website at http://www.irs.gov/formspubs/lists/0,,id=97817,00.html

Substantive Changes to the Instructions for Form 990-T

What’s New: The instructions note the following changes in the law and procedure that affect some or all 990-T filers:

Public Inspection. Amendments to section 6104(d)(2) by the Tax Technical Corrections Act of 2007 require section 501(c)(3) organizations to make available Form 990-T and related schedules for a period of three years from the date the Form 990-T is required to be filed, including extensions.

Employer-Owned Life Insurance Contracts. Certain organizations owning employer-owned life insurance contracts issued after August 17, 2006, are required to file Form 8925.

Some of the “Unrelated Business Activity” codes have been changed.

Extraterritorial Income Exclusion. The Extraterritorial Income Exclusion applicable to certain foreign-source receipts has been repealed for most transactions beginning after 2006, subject to certain transition rules. The instructions to Form 8873 provide details on transactions that may still qualify under the transition rules.

Charitable remainder trusts with unrelated business taxable income may use Form 990-T as an attachment to Form 4720 to show how the amount was computed. The instructions to Form 4720 provide more information.

General Instructions

Other Forms That May Be Required: The instructions now reference Form 8886-T, Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction, which was released in 2007 and which must be filed to disclose information with respect to each prohibited tax shelter transaction to which the organization is a party.

Specific Instructions

Part III—Tax Computation: Lines 35a and 35b. The instructions state that Lines 35a and 35b must agree with the amounts reported on Form 1120, Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group, filed by other members of a controlled group. The instructions to Schedule O (Form 1120) provide more information.

Part IV—Tax and Payments

Lines 40b and 40c. The instructions identify a number of additional tax credits that qualifying organizations may claim on line 40b (Other Credits) and line 40c (General Business Credits). The instructions also note that certain credits are not limited by the alternative minimum tax rules for tax years beginning after December 31, 2006. The instructions to Forms 5884 and 8846 provide more information.

Lines 44f and 44g. Former line 44f (Credit for Federal Telephone Excise Tax Paid), has been removed, as have the instructions for that line because the credit applied only for amounts billed after February 26, 2003, and before August 1, 2006. Former line 44g (Other Credits and Payments) is now line 44f.

Codes for Unrelated Business Activities

Certain Internet-related activities no longer have separate activity codes, but are classified under general telecommunications or other information services codes.

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

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