IRS Form 990-PF (2016): Return of Private Foundation
What IRS Form 990-PF (2016) Is For
Form 990-PF is the annual information return that all private foundations must file. It reports the foundation’s financial activities, governance, and compliance, and it calculates the federal excise tax on net investment income under section 4940. Unlike public charities (which may qualify to file 990-EZ or 990-N depending on size), all domestic private foundations, taxable private foundations, and certain section 4947(a)(1) charitable trusts must file Form 990-PF regardless of income or asset level (IRS Instructions for Form 990-PF (2016)).
When You’d Use Form 990-PF for 2016 (Late or Amended Filing)
You would file a late 2016 Form 990-PF if:
- You missed the original due date (May 15, 2017, for calendar-year filers).
- The IRS issued delinquency notices such as CP-215 or balance-due letters.
- You discovered the foundation never filed and risked automatic loss of exemption after three consecutive years.
You would file an amended 2016 return if:
- Errors in charitable distribution calculations were found.
- Excise tax on investment income was misreported.
- New information (e.g., corrected financials) needs to be reflected.
While there is generally no “refund statute” issue for most 990-PF returns, if excise taxes were overpaid, refund claims must be filed within 3 years of the return’s filing or 2 years of tax payment, whichever is later.
Key Rules Specific to 2016
- Excise tax rates: 2% standard rate on net investment income, or reduced 1% rate if qualifying distribution requirements were met under section 4940(e).
- Minimum distribution requirement: Roughly 5% of average fair market value of investment assets had to be distributed annually for charitable purposes.
- Estimated tax payments: Private foundations owing excise taxes had to make quarterly estimated payments or face underpayment penalties.
- Electronic filing: Required only for organizations filing 250+ returns in the year and with assets over $10M. Most smaller foundations still filed on paper in 2016.
Step-by-Step (High Level)
- Collect records: Financial statements, IRS transcripts (via Form 4506 or 4506-T), grant documentation, and prior filings.
- Prepare the correct-year form: Use the 2016 version of Form 990-PF, not later-year versions, since line numbers and rules may differ.
- Calculate excise tax: Complete Part VI to compute tax on net investment income at 2% or 1%.
- Check charitable distributions: Complete Part XII to confirm the 5% payout requirement.
- Attach required schedules: Include Schedule B (contributors), Part VII-B (self-dealing transactions), and any narrative explanations.
- File with the IRS: Mail to Ogden, UT, or e-file if required.
- Maintain compliance: Keep copies of all returns and attachments for at least 3 years and provide copies to state regulators if required.
Common Mistakes and How to Avoid Them
- Applying wrong excise tax rate: The reduced 1% rate applied only if the foundation met the prior five-year distribution test.
- Errors in distribution reporting: Misclassifying program-related investments or excluding administrative expenses from qualifying distributions.
- Missing state filing obligations: States often require copies of the 990-PF; amended returns must also be sent.
- Leaving lines blank: Enter “0” or “N/A” instead of leaving required items empty.
- Improper reporting of self-dealing: All transactions with disqualified persons must be disclosed in Part VII-B to avoid Form 4720 penalties.
- Unsigned returns: A missing officer’s signature renders the return incomplete.
What Happens After You File
- Processing time: Typically 6–12 weeks for paper filings; longer for amended or late returns.
- IRS notices: You may receive penalty or balance-due notices for excise tax.
- Penalties:
- Late filing: $20/day (up to $12,000 or 5% of gross receipts).
- Large foundations: $100/day (up to $50,000).
- Failure-to-pay: 0.5% per month on unpaid excise tax (up to 25%).
- Late filing: $20/day (up to $12,000 or 5% of gross receipts).
- Relief options: Penalties may be abated if you demonstrate reasonable cause.
- Appeal rights: You may challenge determinations through the IRS Appeals Office.
FAQs
Q: What penalties apply for late filing?
A: $20/day (max $12,000 or 5% of receipts). For large foundations, $100/day (max $50,000).
Q: Can penalty relief apply to a 2016 return?
A: Yes. Submit Form 843 or a written reasonable cause request, explaining circumstances beyond your control.
Q: How do I get transcripts for 2016?
A: Use Form 4506 (full copy) or 4506-T (account transcript). Some transcripts are also available via IRS Business Online Account.
Q: Do I need to file amended state returns?
A: Yes. Most states that received your 990-PF will require amended versions if you amend the federal return.
Q: What is the statute of limitations on 2016 excise tax?
A: Three years in most cases; six years if understated by 25% or more; unlimited for fraud or non-filing.
Q: Can I still adjust qualifying distributions for 2016?
A: No. Those had to be made by the end of 2017 to reduce the 2016 excise tax rate.
Q: Do I need to file Form 4720 with my late return?
A: Only if reporting excise taxes for prohibited acts (e.g., self-dealing, excess holdings, jeopardizing investments).
