EY has prepared annotated versions of the 2021 Form 990 (Return of Organization Exempt from Income Tax), schedules, and instructions and annotated versions of the 2021 Form 990-PF (Return of Private Foundation), schedules, and instructions.

The annotated forms and instructions show what changes the IRS has made for tax year 2021. These documents (attached to this Alert) highlight and explain changes from tax year 2020. The annotated Form 990 includes a Table of Contents from which a reader can hyperlink to the form and to specific schedules and instructions.

Changes to the 2021 Form 990, schedules and instructions

Although most of the changes to the 2021 Form 990, schedules and instructions consist of minor clarifications and updates, changes of note include the following:

1. Black lung trusts: IRC Section 501(c)(21) black lung trusts no longer file Form 990-BL. They must now file Form 990 or 990-N, if eligible. The Form 990 instructions have added notations specific to black lung trusts throughout the core form instructions. An additional line 17 was added to Part V specific to black lung trusts, asking whether the trust or any of its disqualified persons or mine operators engaged in any activities that would result in the imposition of any excise tax under IRC Section 4951, 4952 or 4953.
2. Part VII, Section A: The discrepancy in the 2020 instructions regarding the order in which to list persons required to be reported on Part VII, Section A has been corrected. Now, the instructions consistently require reporting of such persons in order from highest to lowest compensation.
3. Schedule A, Part II, line 9; Schedule A, Part III, line 10b; Schedule A, Part III, line 11: The instructions were updated to reflect the final IRC Section 512(a)(6) regulations on siloing unrelated business taxable income (UBTI), which allow public charities to include in the denominator of their public support calculation either UBTI calculated under IRC Section 512(a)(6) or calculated in the aggregate, without regard to IRC Section 512(a)(6).

Changes to the 2021 Form 990-PF, schedules and instructions

Although most of the changes to the 2021 Form 990-PF and instructions consist primarily of minor clarifications and updates, significant changes of note include the following:

1. Part V: IRC Section 4940(e), Reduced Tax on Net Investment Income, was repealed on December 20, 2019. Therefore, 2020 Form 990-PF, Part V was removed in the 2021 form, and "Part" references were renumbered accordingly throughout the Form 990-PF and the instructions. Similarly, Part XI, lines 5 and 6 were removed to reflect repeal of IRC Section 4940(e).
2. Part I, line 11 instructions and "Other Forms You May Need to File": The references to Forms 965 and 965-B were removed from the instructions, because an organization exempt from tax under IRC Section 501(a) must complete Form 965 only if the IRC Section 965 amounts are subject to tax under IRC Section 511 (unrelated business income) or IRC Section 4940 (private foundation investment income). IRC Section 965 required a one-time mandatory deemed repatriation of all foreign earnings of specified foreign corporations, and organizations have likely already made repatriations.
3. Accounting method: The instructions have been expanded to define and explain the procedures for adopting a new accounting method, and to explain when an organization must request IRS consent for an accounting method change (Form 3115, Application for Change in Accounting Method). This now matches the accounting method change explanation in the Form 990-T instructions.

Implications

The updates to the 2021 Forms 990 and 990-PF and their schedules and instructions continue to reflect changes to federal tax laws, regulations, and guidance 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. Some of these updates involve new or revised examples and explanations that reflect and promote uniformity among the IRS's tax-exempt returns and instructions. Tax-exempt organizations should continue to complete Form 990-series returns and their associated schedules accurately, following the instructions, ensure that Form 990-series reporting reflects compliance with federal tax law, and consult their software providers early to confirm their Form 990-series returns can be filed electronically.

Please contact your Ernst & Young LLP professional for further information.

———————————————

———————————————
ATTACHMENTS

Form 990 Annotated

Form 990 Instructions Annotated

Form 990-PF Annotated

Form 990-PF Instructions Annotated