What IRS Form 990-T (2016) is for
Form 990-T is used to report Unrelated Business Income Tax for tax-exempt organizations that earned unrelated business income during the fiscal year. Most organizations must file when unrelated business taxable income reaches $1,000 or more. The form ensures the Internal Revenue Service receives income tax on business activity not substantially related to an exempt purpose. In most cases, the form helps determine deductions, credits, and proper tax treatment under federal rules.
When you’d use Form 990-T for 2016
Organizations use this form when filing a late or amended return involving unrelated business income for the 2016 tax year. Filing is often required when a tax-exempt organization discovers unreported revenue, receives an IRS notice, or needs to correct errors in income or deductions. Most exempt organizations must still report unrelated business income (UBIT) even when exempt from income tax, because UBIT applies under the Internal Revenue Code section governing these rules.
Key rules or details for 2016
- Hospital facility excise tax: This rule applied to income from certain non-compliant facility operations that did not further an exempt purpose. Organizations were liable once activity produced taxable revenue.
- Section 179D deduction: This deduction applied to qualified energy-efficient improvements placed in service during 2016. Documentation for acquisition dates and property treatment was required.
- American Samoa credit: This credit applied only to fiscal years beginning in 2016. Organizations claimed it needed to meet defined production and research standards.
- NOL rules: Net operating losses could be carried back two years or forward twenty years. Silo rules did not apply, so unrelated trades were combined.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-step (High Level)
Step 1: Gather IRS transcripts and records
Collect Internal Revenue Service transcripts, bank statements, receipts, and all documents showing income, deductions, rental revenue, and advertising income. These records help determine unrelated business income accurately, confirm account information, and prevent errors that could affect the organization’s exemption.
Step 2: Download the correct 2016 Form 990-T
Use the official 2016 version and avoid newer editions, as line numbers, requirements, and instructions have changed in later years. The correct form ensures the organization’s exemption is recognized properly and prevents issues created by mismatched schedules.
Step 3: Complete schedules and statements
Include schedules for property use, services, acquisitions, and regularly carried out activities. Each schedule must clearly explain how income was generated, how deductions were determined, and why certain business activities were not substantially related to exempt purposes.
Step 4: Mark the return as late or amended
Write “Filed Late” or “Amended Return” at the top so the Internal Revenue Service understands the intention of the filing. This reduces processing delays and helps ensure the organization properly addresses prior-year reporting requirements.
Step 5: Mail the return to the correct address
Mail the completed form to the Ogden Processing Center using certified mail for proof of submission. This protects the organization if questions arise about receipt, page accuracy, or account posting during IRS review.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Using the wrong form year: Many filers submit a current form instead of the required 2016 version. You can avoid this error by downloading archived forms directly from the IRS website.
- Misreporting unrelated income: Some organizations classify regularly carried trade activities as exempt when they do not support the exempt purpose. Avoid this by reviewing Internal Revenue Code section rules before reporting income.
- Missing schedules or statements: Incomplete filings often prompt the IRS to request clarification. You can prevent this by attaching all schedules related to rental activities, research operations, and property use.
- Ignoring NOL rules: Some filers overlook available carrybacks or carryforwards under 2016 rules. You can avoid this by calculating losses across all applicable years and confirming available offsets.
- Incorrect mailing address: Submitting the form to the incorrect IRS location can cause processing delays. You can avoid this by verifying the Ogden address listed in the official 2016 instructions.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What happens after you file
Once submitted, the Internal Revenue Service updates the organization’s account and typically completes initial processing within several weeks. Most outcomes include acceptance, a balance due notice, or a clarification request involving unrelated business income or deductions. If taxes are owed, payment options include full payment or an installment agreement. Filing now also supports good compliance and protects the organization’s exemption.
FAQs
How does IRS Form 990 T 2016 affect unrelated business income tax for an exempt organization?
Form 990-T reports income from activities not tied to an exempt purpose, and the IRS uses it to determine how much UBIT tax is owed for the year.
Why does unrelated business income require filing even when the organization is tax-exempt?
Unrelated business income is taxed because Congress determined that business activity not related to an exempt purpose should be taxed to prevent unfair competition.
How is unrelated business taxable income calculated for income tax purposes?
Unrelated business taxable income is calculated by subtracting allowable deductions from revenue earned through a regularly carried trade or business unrelated to exempt purposes.
How does a tax-exempt organization report business income from a trade or business?
The organization reports income, expenses, dividends, and interest on Form 990-T. These details determine liability under Section 511 of the Internal Revenue Code for UBIT.
Can an S corporation owned by an exempt organization generate unrelated business income?
Yes, when an exempt organization owns shares in an S corporation, certain income may be taxed as unrelated business income depending on the type of activity producing the revenue.
How does Form 990 identify whether a business activity is regularly carried out or substantially related?
Form 990-T requires explanations that show the intention, operation, and purpose of each activity, including information about services, employees, and property used to generate revenue.
How are business activity rules applied when an organization operates Individual Retirement Accounts, or IRAs?
IRAs follow special federal requirements, and certain types of income may still be recognized as unrelated business income, depending on the transaction and its purpose.
For more resources on filing or understanding prior-year IRS forms, visit our guide on Nonprofit & Exempt Organization Forms.
