2014 Form 990 Schedule B Instructions Clearly Address Use of the Special Rule

In January, 2014, we published an article addressing the use of the special rule for reporting contributions on Schedule B, Schedule of Contributors, of Form 990.  The special rule provides that organizations required to file Schedule B may limit the donor disclosure to contributions greater than 2% of total contribution revenue for the tax year rather than the lower $5,000 threshold.  Specifically, a change was made in the 2013 Form 990 instructions that requires exempt organizations that do not claim public charity status pursuant to Section 170(b)(1)(A)(vi) of the Internal Revenue Code (such as a college, university or hospital) but who wish to use the special rule to complete the public support test in Part II of Schedule A. 

Schedule B Disclosure Exclusion

The clarification as to when an organization can exclude from Schedule B disclosure those contributors that fall below the greater than $5,000/2% threshold was listed as a significant change in the 2013 Form 990 instructions.   However, the specific instructions to the 2013 Form 990 addressing this significant change was not included in the Schedule B instructions.   Rather, the instructions addressed this change in connection with Schedule B’s use of the special rule in the instructions to the trigger question as to whether an organization was required to file Schedule B.  The change in the 2013 instructions added the following sentence to Question 2, Part IV, page 12 of the instructions: 

An organization filing Schedule B can limit the contributors it reports on Schedule B using this greater than $5,000/2% threshold only if it checks the box on Schedule A (Form 990 or 990-EZ)), Part II, line 13, 16a, or 16b.

The 2014 Schedule B instructions have been changed to clearly reflect the required disclosure of public support by an organization other than a Section 170(b)(1)(A)(vi) that uses the special rule.  Specifically, the 2014 instructions for Schedule B have added the following guidance:

An organization that claims the benefit of this special rule must either (1) establish on Schedule A (Form 990 or 990-EZ) Part II that it met the 33-1/3% support test for the current year or prior year, or (2) check the box on Schedule A (Form 990 or 990-EZ), Part I, line 7 or 8, and the box on Schedule A, Part II, line 13, as a Section 170(b)(1)(A)(vi) organization in its first five years.

In addition, the instructions to the 2014 Schedule A, Public Charity Status and Public Support, clarify that an organization may complete Part II even if it checks a public charity box in Part I other than that for Section 170(b)(1)(A)(vi).

Accordingly, for public charities that do not claim public charity status under Section 170(b)(1)(A)(vi), such as colleges, universities and hospitals, the clarity provided in the 2014 instructions should resolve any confusion as to the requirement to disclose the public support information on Schedule A when using the special rule for Schedule B.