IRS Form 990 (Schedule K) – Tax-exempt organizations that issue or benefit from tax-exempt bonds must stay compliant with strict federal tax rules to preserve their bond interest exemption and overall tax-exempt status. IRS Form 990 Schedule K is the key reporting tool that provides the IRS with detailed supplemental information on these bonds.
This comprehensive guide explains exactly what Schedule K is, who must file it, how to complete every section, and why accurate reporting matters. All information is drawn directly from the latest official IRS documents (Schedule K revised December 2024 and its instructions).
What Is Schedule K (Form 990)?
Schedule K reports information on outstanding tax-exempt bond liabilities for organizations filing Form 990. It covers qualified 501(c)(3) bonds (the most common type for nonprofits) as well as other tax-exempt bonds that benefit the organization.
The IRS uses Schedule K to monitor compliance with sections 141–150 of the Internal Revenue Code, including limits on private business use, arbitrage restrictions, and remedial action requirements.
Key fact: You must attach Schedule K to Form 990 if you answered “Yes” on Form 990, Part IV, line 24a.
Who Must File Schedule K?
File Schedule K if both of these conditions are met:
- Your organization answered “Yes” on Form 990, Part IV, line 24a.
- You have one or more tax-exempt bond issues with an outstanding principal amount greater than $100,000 as of the last day of the tax year (or your chosen 12-month reporting period), issued after December 31, 2002.
Important rules:
- Report up to four bond issues per Schedule K (duplicate the schedule for more).
- Legally defeased bonds (fully paid via escrow) are generally not reported.
- Related organizations (parent/subsidiary) coordinate so the same bond is reported only once.
- Pooled financing issues are reported only for the portion allocated to your organization.
The form and instructions are now in continuous-use format (revised December 2024) and are updated only when needed.
When and How to File?
- File with your Form 990 for the tax year.
- You may use the same period as your Form 990 or a consistent 12-month period (describe any alternative period in Part VI).
- The schedule is open to public inspection.
Structure of Schedule K: Parts I–VI
Part I – Bond Issues
List each bond issue (up to four) in columns A–D.
Required information:
- Issuer name and EIN
- CUSIP number (or zeros if none)
- Date issued
- Issue price
- Purpose of the issue (be specific; explain refundings)
- Whether bonds are defeased
- Whether your organization was an “on behalf of issuer”
- Whether it was a pooled financing issue
Tip: Match data to the original Form 8038 filed by the issuer.
Part II – Proceeds
Track how bond proceeds were used and remain.
Key lines:
- Line 1: Bonds retired
- Line 2: Bonds legally defeased
- Line 3: Total proceeds of the issue
- Line 4: Gross proceeds in reserve/sinking funds
- Line 5: Capitalized interest
- Line 6: Proceeds in refunding escrows
- Line 7: Issuance costs
- Line 8: Credit enhancement
- Line 9: Working capital expenditures
- Line 10: Capital expenditures
- Line 11: Other spent proceeds
- Line 12: Other unspent proceeds
- Line 13: Year of substantial completion
- Lines 14–15: Refunding details (current vs. advance, tax-exempt vs. taxable)
- Line 16: Final allocation of proceeds made?
- Line 17: Adequate books and records maintained?
Note: Lines 3 and 5–12 use “proceeds”; Line 4 uses “gross proceeds.” Totals may not match—explain differences in Part VI.
Part III – Private Business Use
This is the most scrutinized section. It ensures the bonds continue to meet the 95% test for qualified 501(c)(3) bonds (no more than 5% private business use in most cases).
Questions cover:
- Partnership/LLC ownership of financed property
- Lease arrangements
- Management or service contracts (and whether bond counsel reviews them)
- Research agreements (and counsel review)
- Percentage of property used in private business use by nongovernmental persons (Line 4) and unrelated trade or business (Line 5)
- Private security or payment test (Line 7)
- Sales or dispositions of financed property (and remedial action taken)
Safe harbors: Management contracts meeting Rev. Proc. 2017-13 and research agreements meeting Rev. Proc. 2007-47 generally do not count as private business use if properly reviewed.
Tip: Engage bond counsel routinely and document reviews—the IRS looks for this.
Part IV – Arbitrage
Monitors compliance with arbitrage rebate rules (excess earnings on invested proceeds must generally be rebated to the IRS).
Key questions:
- Form 8038-T filed for rebate?
- Rebate exceptions (not due yet, exception applies, or no rebate due—provide computation date in Part VI)
- Variable rate issue?
- Qualified hedge (name of provider, term, superintegrated?, terminated?)
- Guaranteed Investment Contract (GIC) used?
- Gross proceeds invested beyond temporary period?
- Written procedures to monitor section 148 requirements?
Part V – Procedures To Undertake Corrective Action
A single yes/no question for each issue:
- Has the organization established written procedures to identify and correct federal tax violations through the Voluntary Closing Agreement Program (if self-remediation is unavailable)?
Best practice: Every organization with tax-exempt bonds should have these procedures in place.
Part VI – Supplemental Information
Use this section for:
- Explanations of differences in amounts
- Descriptions of alternative reporting periods
- Details on multiple purposes
- Identification of qualified private activity bonds other than 501(c)(3)
- Assumptions used when records are incomplete
- Additional schedules (if more than four issues)
Common Compliance Pitfalls to Avoid
- Failing to monitor private business use (especially leases, management contracts, and research agreements)
- Missing arbitrage rebate filings or calculations
- Inadequate record-keeping for final allocation of proceeds
- Not updating procedures after new bond issuances or changes in use
- Reporting the same bond on multiple related organizations’ returns
Consequence: Loss of tax-exempt status of the bonds, back taxes on interest, penalties, or IRS audits.
Recent Updates (2024–2025)
- Form and instructions revised December 2024 (continuous-use format)
- Minor clarifications on refunding issues and record-keeping
- Emphasis on written procedures for corrective action and section 148 monitoring
Download the latest versions directly from IRS.gov:
Best Practices for Filing Schedule K
- Work with bond counsel and your finance team early.
- Maintain centralized records of all bond documents, allocations, and counsel reviews.
- Review private business use annually (not just at filing time).
- Document everything— the IRS expects robust substantiation.
- Consider using tax software that supports Schedule K (many e-filing platforms now include it).
Conclusion
IRS Form 990 Schedule K is more than paperwork—it is a critical compliance and transparency tool that protects your organization’s ability to access low-cost tax-exempt financing. Accurate, timely filing demonstrates strong governance and helps avoid costly IRS enforcement actions.
If your organization has outstanding tax-exempt bonds, review Schedule K requirements now and consult your bond counsel or tax advisor to ensure full compliance for the current tax year.
Need the official forms?
Visit IRS.gov/Form990 for the latest Schedule K and instructions.
Stay compliant, protect your tax-exempt status, and continue serving your mission with the benefits of tax-exempt financing. For personalized guidance, always consult a qualified tax professional familiar with exempt organization bond rules.