IRS Instruction 990 (Schedule K) – Tax-exempt organizations that issue or hold outstanding tax-exempt bonds must provide detailed supplemental reporting on IRS Form 990 Schedule K. This guide explains the latest IRS Instructions for Schedule K (Form 990) (Rev. December 2024), who must file, and how to complete each part accurately.
Proper completion of Schedule K helps maintain the tax-exempt status of bonds, demonstrates post-issuance compliance, and avoids arbitrage rebate issues or private business use violations. The instructions are now in a continuous-use format, meaning they remain in effect until the IRS issues a superseding revision.
What Is Schedule K (Form 990)?
Schedule K reports information on an organization’s outstanding liabilities from tax-exempt bond issues, including qualified 501(c)(3) bonds and other tax-exempt bonds that benefit the filing organization. It covers bonds issued after December 31, 2002, with more than $100,000 in outstanding principal at the end of the tax year (or alternative period).
The schedule ensures compliance with IRC sections 141–150, covering private business use limits, arbitrage restrictions, and remedial actions. Organizations must report consistently with related entities (e.g., parent-subsidiary groups) and avoid double-reporting the same liability.
Who Must File Schedule K?
File Schedule K with Form 990 if you answered “Yes” on Form 990, Part IV, line 24a (outstanding tax-exempt bond issue with principal > $100,000 at year-end, issued after December 31, 2002).
- Up to four bond issues per Schedule K; duplicate the schedule for more.
- Applies to organizations required (or voluntarily filing) Form 990.
- Report only the organization’s allocated share for pooled financing or loans from related organizations.
- Legally defeased bonds are excluded (no longer a liability).
Use the organization’s tax year or a consistent alternative 12-month period (explain in Part VI).
Why Schedule K Matters for Tax-Exempt Bond Compliance?
Filing Schedule K is a key post-issuance compliance requirement. It discloses:
- Private business use percentages
- Arbitrage investment monitoring
- Rebate filing status
- Written procedures for corrective action
Failure to monitor these can jeopardize the tax-exempt status of the bonds and trigger IRS scrutiny. Many 501(c)(3) organizations (hospitals, universities, charities) rely on low-cost tax-exempt financing and must certify annual compliance under penalties of perjury.
Step-by-Step Instructions for Completing Schedule K (Form 990)
Complete one row (A–D) per bond issue in Parts I–IV (and V–VI as needed). Use the same labeling across all parts.
Part I: Bond Issues
Report each outstanding issue (including refundings) with > $100,000 principal.
- (a) Issuer name (governmental unit)
- (b) Issuer EIN
- (c) CUSIP number (latest maturity; zeros if none)
- (d) Issue date
- (e) Issue price (explain differences from proceeds in Part VI)
- (f) Purpose (e.g., “construct hospital” or “refund prior issue dated MM/DD/YYYY”)
- (g) Defeasance/refunding escrow (Yes/No)
- (h) “On behalf of” issuer (Yes if nonprofit acted as issuer)
- (i) Pooled financing issue (Yes/No)
Information must match the issuer’s Form 8038.
Part II: Proceeds
Track how bond proceeds were used and spent.
- Line 1: Cumulative principal retired
- Line 2: Cumulative principal legally defeased
- Line 3: Total proceeds (explain variances from Part I(e))
- Lines 4–12: Breakdown (sinking/reserve funds, capitalized interest, refunding escrow, issuance costs, credit enhancement, working capital, capital expenditures, other, unspent)
- Line 13: Year of substantial completion
- Lines 14–15: Refunding type (post-2017 rules)
- Lines 16–17: Final allocation made and supported by records
Part III: Private Business Use
Critical for qualified 501(c)(3) bonds (omit lines 1–9 for post-2002 refundings of pre-2003 issues).
- Line 1: Partnership/LLC with non-501(c)(3) partners?
- Line 2: Private leases?
- Lines 3a–3d: Management/service contracts or research agreements (report even if safe harbors under Rev. Proc. 2017-13 or 2007-47 are met; note bond counsel review)
- Line 4: Average % private business use by nongovernmental persons (to nearest 0.1%)
- Line 5: Average % unrelated trade or business use
- Line 7: Private security/payment test met?
- Lines 8a–8c: Sale/transfer of financed property and remedial actions
- Line 9: Written remedial action procedures in place?
Private use must generally stay ≤ 5% for 501(c)(3) bonds.
Part IV: Arbitrage
Monitor investment earnings and rebate obligations.
- Line 1: Form 8038-T filed for rebate?
- Lines 2a–2c: Reasons no rebate due (no rebate due, yield reduction, other)
- Line 3: Variable rate issue?
- Lines 4a–4e: Qualified hedges (provider, term, superintegration, early termination)
- Lines 5a–5d: Guaranteed investment contracts (GICs) and fair market value safe harbor
- Line 6: Proceeds invested beyond temporary periods?
- Line 7: Written arbitrage monitoring procedures?
Part V: Procedures To Undertake Corrective Action
Answer “Yes” if the organization has written procedures to identify and correct violations timely (including voluntary closing agreements under Notice 2008-31 when regulatory remedies are unavailable).
Part VI: Supplemental Information
Explain any “Yes” answers, discrepancies, related-organization reporting, assumptions for incomplete records, or additional details. Reference specific parts and lines.
Key Definitions and Special Rules (from IRS Instructions)
- Gross proceeds — Include investment earnings.
- Private business use — Use by nongovernmental persons or unrelated trades/businesses.
- Refunding issues — Special rules apply for pre- vs. post-2002 bonds.
- Pooled financing — Report only the allocated portion.
- Related organizations report consistently; only one entity reports the full liability unless proceeds are loaned/allocated.
Tips for Accurate Filing and Common Pitfalls
- Maintain excellent books and records supporting final allocations (due within 18 months or 60 days after project completion, per regs).
- Engage bond counsel for contract reviews (management, research agreements).
- Establish and follow written compliance procedures for arbitrage and remedial actions.
- Coordinate with related organizations to avoid duplicate reporting.
- Explain any differences between issue price and proceeds in Part VI.
- For incomplete records, document reasonable assumptions in Part VI.
Common errors include underreporting private use, missing hedge/GIC details, and failing to file Form 8038-T when required.
Recent Updates (2024–2025)
The December 2024 revision converted Schedule K and its instructions to continuous-use format. No major substantive changes occurred; updates are issued only as needed. Check IRS.gov/Form990 for any post-publication developments.
Download the Official IRS Instructions
- Latest PDF: Instructions for Schedule K (Form 990) (Rev. December 2024)
- HTML version: IRS Instructions Page
- Form itself: Schedule K (Form 990) (Rev. December 2024)
Final Advice
Schedule K is more than paperwork—it is an annual certification of compliance that protects the tax-exempt status of your bonds. Organizations should work with experienced tax counsel, bond counsel, and accountants familiar with sections 141–150 and arbitrage regulations.
Always refer to the official IRS instructions linked above for the most current details. This article is for informational purposes only and is not tax or legal advice. Consult a qualified professional for your specific situation.
Keywords for further reading: IRS Form 990 Schedule K instructions, tax-exempt bonds compliance, arbitrage rebate Form 8038-T, private business use limits 501(c)(3), post-issuance compliance nonprofit bonds.
Last updated based on IRS materials revised December 2024 / posted January 2025.