February 10, 2021
EY-annotated Form 990 highlights changes to 2020 Forms 990 and 990-PF, schedules and instructions
EY has prepared annotated versions of the 2020 Form 990 (Return of Organization Exempt from Income Tax), schedules and instructions. Due to the limited changes from 2019 to 2020, EY has not included annotations for the Form 990-PF or instructions; however, a summary of the updates is included, highlighting the changes to the 2020 form and instructions.
The annotated forms and instructions (attached below as PDFs) show what changes the IRS has made for tax year 2020. These documents highlight and explain changes from tax year 2019. The annotated Form 990 includes a Table of Contents from which a reader can hyperlink to parts of the form and specific schedules and instructions.
Changes to the 2020 federal Form 990, schedules and instructions
Although most of the changes to the 2020 federal Form 990, schedules and instructions consist of minor clarifications and updates, changes of note include the following:
- For tax years beginning in 2020 and later, filers will need to report any amount of compensation listed in Form 1099-NEC, box 1, for persons required to be listed in Part VII, Section A and Schedule J, rather than reporting compensation from Form 1099-MISC. For tax year 2019, continue to report any amount of compensation reported on Form 1099-MISC boxes 6 and 7.
- Instructions to Form 990 were updated to remind filers of the Form 990-series electronic filing requirement for tax years beginning on or after July 2, 2019.
- Language allowing for duplication of certain sections of specific schedules that require more space to complete a response have been removed. This update reflects the new mandatory e-filing requirement.
- Accounting method: The instructions are expanded to define and explain the procedures for adopting a new accounting method, and to explain when an organization must require IRS consent for an accounting method change.
- Part VIII, line 1e: Loan amounts forgiven under the Paycheck Protection Program (PPP), established under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), should be reported as contributions from a governmental unit, rather than program service revenue or miscellaneous revenue, in the tax year when the amounts are forgiven.
- Schedule A: Consistent with the treatment of forgiven PPP loan amounts in the Part VIII, line 1e instructions, Schedule A instructions provide that forgiven PPP loans should be treated as contributions for public support purposes, under both IRC Section 170(b)(1)(A)(vi) and IRC Section 509(a)(2).
- Schedule A, Part IV, Section B, line 1: The form was revised to clarify which representatives of a supported organization, by having the power to remove and replace a majority of its supporting organization’s directors or trustees, thereby establish a Type I “operated, supervised, or controlled by” relationship between the supported and supporting organizations. In particular, “governing body, members of the governing body, officers acting in their official capacity or membership” replaces “directors, trustees, or membership.”
- Schedule B: The form and instructions are updated to reflect final regulations that exempt all filers other than IRC Section 501(c)(3) and 527 organizations from having to report contributors’ names, addresses and any other identifying information on Schedule B.
- Schedules C and M: The instructions omit the Paperwork Reduction Act Notice requiring filers to use forms subject to the Paperwork Reduction Act.
- Schedule H, Part V: Due to the COVID-19 pandemic, the IRS issued Notice 2020-56 extending the due date for hospital organizations to meet community health needs assessment (CHNA) requirements. The December 31, 2020 deadline applied to requirements for a tax-exempt hospital facility to both conduct a CHNA and adopt an implementation strategy to meet the community health needs it identifies in the CHNA. (See Tax Alert 2020-1818.) The Schedule H instructions clarify that the filer should treat its CHNA as having been completed by the original due date if the CHNA is completed by the extended due date.
- Schedule M, Part I, lines 6-8: The instructions were updated to explain that organizations must provide copies of Forms 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes) and 8899 (Notice of Income From Donated Intellectual Property) to the donors, as well as file these forms with the IRS.
Changes to the 2020 Form 990-PF, schedules and instructions
Although most of the changes to the 2020 Form 990-PF and instructions consist of minor clarifications and updates, significant changes include the following:
- Instructions for Form 990-PF were updated regarding guidance on the electronic filing requirement for tax years beginning on or after July 2, 2019.
- Instructions were updated to remind filers that, under the CARES Act, PPP loan amounts that are forgiven should be reported as contributions from a governmental unit in the tax year when the amounts are forgiven.
- The Taxpayer Certainty and Disaster Tax Relief Act reduced the 2% excise tax on net investment income of private foundations to 1.39% and repealed the reduced 1% tax on net investment income. Part VI and its instructions have been revised to reflect these changes, and all fields in Part V, “Qualification Under Section 4940(e) for Reduced Tax Based on Net Investment Income,” have been grayed out under the new subheading: “SECTION 4940(e) REPEALED ON DECEMBER 20, 2019 – DO NOT COMPLETE.” Accordingly, the instructions for Part X, line 4 (net value of noncharitable-use assets) indicate that the line should be blank; the instructions for Part XII, line 4 (qualifying distributions) state that no amount for reduced excise tax needs to be entered on Part V, line 8 or included in the amount reported on Part XII, line 4; and the instructions for Part XII, line 5 (deduction from qualifying distributions attributable to reduced rate of tax on net investment income) state that “zero” should be entered on this line.
In response to the COVID-19 pandemic, the IRS has included several informational instructions in both the Form 990 and Form 990-PF instructions. These instructions provide useful information on how to treat revenue received through government programs, as well as general IRS website resources that organizations can use to find pandemic-related information. Organizations should review these resources to ensure that they are properly reporting any COVID-19-related information on their Form 990-series returns.
The Taxpayer First Act, enacted July 1, 2019, requires tax-exempt organizations to electronically file information returns and related forms for tax years beginning on or after July 2, 2019. (See Tax Alert 2019-1255.) Tax-exempt organizations should evaluate what electronic filing tools and options are available.
The updates to the 2020 Forms 990 and 990-PF, schedules and instructions continue to reflect changes to federal tax laws affecting tax-exempt organizations, as the IRS Tax Exempt and Government Entities division continues to focus on and refine its data-driven approach to exam case selection. Thus, exempt organizations should continue to complete Form 990-series returns and their associated schedules accurately, under the instructions, and check that Form 990-series reporting reflects compliance with federal tax law, including recent changes to the tax law.
Please contact your Ernst & Young LLP professional for further information.
— For more information about EY's Exempt Organization Tax Services group, visit us here.
For additional information concerning this Alert, please contact:
Form 990 Annotated
Form 990 Instructions Annotated