IRS Form 990 (Schedule D)

IRS Form 990 (Schedule D) – In the world of nonprofit organizations, accurate financial reporting is essential for maintaining tax-exempt status and building trust with donors, stakeholders, and regulators. One key component of this reporting is IRS Form 990 Schedule D, which provides supplemental details on various financial aspects. This guide breaks down everything you need to know about Schedule D, including its purpose, filing requirements, and step-by-step overviews of its parts. Whether you’re a nonprofit executive, accountant, or board member, understanding this schedule can help ensure compliance and transparency.

What Is IRS Form 990 Schedule D?

IRS Form 990 Schedule D, titled “Supplemental Financial Statements,” is an attachment to Form 990, the annual information return filed by tax-exempt organizations under section 501(c) of the Internal Revenue Code. It requires organizations to report detailed information on specific financial arrangements and assets that aren’t fully captured in the main Form 990. This includes donor-advised funds, conservation easements, art collections, escrow accounts, endowment funds, and reconciliations between audited financial statements and Form 990 figures.

The schedule helps the IRS and the public gain deeper insights into an organization’s financial health, particularly in areas like restricted assets and liabilities. For instance, it reconciles differences between generally accepted accounting principles (GAAP) used in audited statements and IRS reporting rules. By requiring this supplemental data, Schedule D promotes accountability and prevents misuse of charitable resources.

Who Must File Schedule D with Form 990?

Not all organizations filing Form 990 need to attach Schedule D. Filing is triggered by responses to specific questions in Form 990, Part IV (Checklist of Required Schedules). Specifically:

• Answer “Yes” to any of lines 6 through 12a, and you must complete the relevant parts of Schedule D.
• For line 12b (“Yes” if the organization has audited financial statements but isn’t required to attach them), completing Parts XI and XII is optional but recommended for clarity.

Even if Form 990 isn’t mandatory, voluntary filers must include all required schedules if applicable. Section 501(c)(3) organizations, such as charities and educational institutions, are common filers, but other tax-exempt entities may also qualify based on their activities.

If your organization maintains donor-advised funds, holds conservation easements, or has endowment assets, reviewing Part IV of Form 990 is crucial to determine if Schedule D applies.

Key Parts of Schedule D: Breaking It Down

Schedule D consists of 13 parts, though not all may apply to every organization. Here’s a detailed overview of the main sections, based on the form’s structure.

Part I: Organizations Maintaining Donor-Advised Funds or Similar Accounts

This part is required if you answered “Yes” to Form 990, Part IV, line 6. It covers funds where donors retain advisory privileges over distributions or investments.

• Report the total number of funds at year-end, aggregate contributions, grants made, and year-end values in separate columns for donor-advised funds and other similar accounts.
• Confirm in writing that assets are under the organization’s exclusive control and grants serve charitable purposes only (lines 5 and 6).

Exceptions include funds distributing solely to one entity or those with objective grant-making procedures.

Part II: Conservation Easements

Triggered by a “Yes” on Form 990, Part IV, line 7, this section details easements held for conservation purposes, such as protecting natural habitats or historic sites.

• Check purposes like public recreation, habitat protection, or historic preservation.
• Provide totals for easements held, acreage restricted, and those on historic structures.
• Report changes (e.g., modifications or terminations) during the year, monitoring policies, staff hours devoted, and related expenses.
• For certain easements acquired after July 25, 2006, confirm compliance with IRC sections 170(h)(4)(B)(i) and (ii).

Describe reporting methods in Part XIII, including financial statement footnotes.

Part III: Collections of Art, Historical Treasures, or Similar Assets

If “Yes” on Form 990, Part IV, line 8, complete this for collections like art or artifacts.

• Indicate if collections are capitalized (reported as revenue and assets) or not (provide financial footnotes in Part XIII).
• For financial gain holdings, report revenues and asset values included in Form 990.
• Describe uses (e.g., exhibition, research) and how they advance exempt purposes.
• Disclose if donations were solicited for sale rather than collection maintenance.

Refer to FASB ASC 958 for accounting guidance.

Part IV: Escrow and Custodial Arrangements

Required for “Yes” on Form 990, Part IV, line 9, or if amounts are reported on Form 990, Part X, line 21.

• Report if acting as an agent or custodian for assets not on your balance sheet, including beginning/end balances, additions, and distributions.
• Explain arrangements in Part XIII, especially for credit counseling or debt management services.

Part V: Endowment Funds

For “Yes” on Form 990, Part IV, line 10, detail permanent, term, and quasi-endowments.

• Provide multi-year breakdowns: beginning balances, contributions, investment earnings, distributions (e.g., scholarships, programs), and administrative expenses.
• Estimate percentages held as board-designated, permanent, or term endowments (must total 100%).
• Note if funds are held by related or unrelated organizations and describe intended uses in Part XIII.

Parts VI–X: Assets and Liabilities

These parts expand on Form 990, Part X:

• Part VI: Land, buildings, and equipment (costs, depreciation, book values).
• Part VII: Other securities (e.g., derivatives, closely held equity; valuation methods).
• Part VIII: Program-related investments.
• Part IX: Other assets.
• Part X: Other liabilities, including federal taxes and uncertain tax positions (provide FASB ASC 740 footnote in Part XIII).

Totals must match corresponding lines on Form 990, Part X.

Parts XI–XII: Reconciliation of Financial Statements

Mandatory if “Yes” on Form 990, Part IV, line 12a (audited statements prepared).

• Reconcile total revenue/expenses from audited statements to Form 990 figures.
• Adjust for items like unrealized gains, donated services, or investment expenses.
• Describe “other” adjustments in Part XIII.

This helps bridge GAAP and IRS differences.

Part XIII: Supplemental Information

Use this narrative section to provide required descriptions, explanations, and footnotes for other parts. It’s essential for context on items like easement policies or endowment uses.

How to Complete and File Schedule D?

To fill out Schedule D:

1. Review Form 990, Part IV to identify required parts.
2. Gather data from financial records, audited statements, and board policies.
3. Use exact numbers (no estimates) for counts and values; ensure reconciliations match.
4. Attach to Form 990 and e-file via IRS-approved software.
5. Consult IRS instructions for detailed line-by-line guidance.

Common tips: Maintain accurate records year-round, involve accountants for complex areas like endowments, and double-check totals against Form 990.

Recent Updates to Schedule D

As of December 2024, Schedule D and its instructions have shifted to a continuous-use format, applicable for tax year 2024 and beyond until superseded. This change streamlines updates without annual revisions. Always check IRS.gov for the latest developments, such as post-publication legislation.

Where to Download IRS Form 990 Schedule D?

You can download the official PDF of Form 990 Schedule D directly from the IRS website: https://www.irs.gov/pub/irs-pdf/f990sd.pdf. For instructions, visit https://www.irs.gov/instructions/i990sd.

Mastering Schedule D ensures your nonprofit stays compliant while demonstrating fiscal responsibility. If you’re unsure about specifics, consult a tax professional familiar with exempt organizations.