Exempt Organization Business Income Tax Return

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2005Instructions for Form 990-T

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2005

Department of the Treasury
Internal Revenue Service

Instructions for Form 990-T
Exempt Organization Business Income Tax Return
Section references are to the Internal Revenue Code unless otherwise noted.
Contents
General Instructions
Purpose of Form . . . . . . . . . . . .
Who Must File . . . . . . . . . . . . . .
Definitions . . . . . . . . . . . . . . . . .
When To File . . . . . . . . . . . . . . .
Where To File . . . . . . . . . . . . . .
Estimated Tax Payments . . . . . .
Depository Method of Tax
Payment . . . . . . . . . . . . . . . .
Interest and Penalties . . . . . . . . .
Which Parts To Complete . . . . . .
Consolidated Returns . . . . . . . . .
Other Forms That May Be
Required . . . . . . . . . . . . . . . .
Accounting Methods . . . . . . . . . .
Accounting Period and Tax Year
Reporting Form 990-T
Information on Other Returns . .
Rounding Off to Whole Dollars . .
Attachments . . . . . . . . . . . . . . .
Specific Instructions
Period Covered . . . . . . . . . . . . .
Name and Address . . . . . . . . . .
Blocks A through J . . . . . . . . . . .
Part l — Unrelated Trade or
Business Income . . . . . . . . . .
Part ll — Deductions Not Taken
Elsewhere . . . . . . . . . . . . . . .
Part Ill — Tax Computation . . . . .
Part IV — Tax and Payments . . . .
Part V — Statements Regarding
Certain Activities and Other
Information . . . . . . . . . . . . . . .
Signature . . . . . . . . . . . . . . . . .
Schedule A — Cost of Goods
Sold . . . . . . . . . . . . . . . . . . . .
Schedule C — Rent Income . . . . .
Schedule E — Unrelated DebtFinanced Income . . . . . . . . . .
Schedule F — Interest, Annuities,
Royalties, and Rents From
Controlled Organizations . . . . .
Schedule G — Investment
Income of a Section 501(c)(7),
(9), or (17) Organization . . . . .
Schedule I — Exploited Exempt
Activity Income, Other Than
Advertising Income . . . . . . . . .
Schedule J — Advertising Income
Schedule K — Compensation of
Officers, Directors, and
Trustees . . . . . . . . . . . . . . . . .
Codes for Unrelated Business
Activity . . . . . . . . . . . . . . . . . .

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What’s New

• The organization may be able to deduct

a portion of income from certain qualified
production activities. See section 199 and
Form 8903, Domestic Activities
Production Deduction. Report the
deduction on Form 990-T, line 28.
• For property leased to a government or
another tax-exempt entity, or in the case
of property acquired after March 12,
2004, that is treated as tax-exempt use
property other than by reason of a lease,
an organization may not claim deductions
related to the property to the extent they
exceed the organization’s income from
the lease payments. See section 470.
• An employee retention credit is
available to employer organizations
affected by Hurricanes Katrina, Rita, or
Wilma. The credit is equal to 40 percent
of qualified wages of employees. See
section 38(b).
• Organizations are not subject to the
contribution limitations for qualified cash
contributions made beginning on August
28, 2005, and ending on December 31,
2005, for relief efforts related to Hurricane
Katrina, Rita, or Wilma. See section
1400S(a).
• An enhanced charitable deduction for
contributions of qualified food inventory is
allowed from any taxpayer engaged in a
trade or business to a charitable
organization for the benefit of the ill,
needy, or infants during the period
beginning on August 28, 2005, and
ending on December 31, 2005. A special
limitation applies to certain entities. See
section 170(e)(3)(C).
• The organization is allowed a deduction
for donations of educational books made
to a public school that provides
elementary or secondary education. See
section 170(e)(3)(D).
• Organizations may elect on a timely
filed return, including extensions, to be
taxed on income from qualifying shipping
activities using an alternative tax method.
Use Form 8902, Alternative Tax on
Qualified Shipping Activities.
• The Gulf Opportunity Zone Act of 2005
provides certain tax relief benefits for
organizations. For details, see Pub. 4492,
Information for Taxpayers Affected by
Hurricanes Katrina, Rita and Wilma.

. . . 20

Photographs of Missing
Children

. . . 21

The Internal Revenue Service is a proud
partner with the National Center for
Cat. No. 11292U

Missing and Exploited Children.
Photographs of missing children selected
by the Center may appear in instructions
on pages that would otherwise be blank.
You can help bring these children home
by looking at the photographs and calling
1-800-THE-LOST (1-800-843-5678) if you
recognize a child.

Unresolved Tax Issues
If the organization has attempted to deal
with an IRS problem unsuccessfully, it
should contact the Taxpayer Advocate.
The Taxpayer Advocate independently
represents the organization’s interest and
concerns within the IRS by protecting the
rights and resolving problems that have
not been fixed through normal channels.
While Taxpayer Advocates cannot
change the tax law or make a technical
tax decision, they can clear up problems
that resulted from previous contacts and
ensure that the organization’s case is
given a complete and impartial review.
The organization’s assigned personal
advocate will listen to its point of view and
will work with the organization to address
its concerns. The organization can expect
the advocate to provide:
• A “fresh look” at a new or ongoing
problem.
• Timely acknowledgement.
• The name and telephone number of the
individual assigned to its case.
• Updates on progress.
• Timeframes for action.
• Speedy resolution.
• Courteous service.
When contacting the Taxpayer
Advocate, the organization should be
prepared to provide the following
information:
• The organization’s name, address, and
employer identification number (EIN).
• The name and telephone number of an
authorized contact person and the hours
he or she can be reached.
• The type of tax return and years
involved.
• A detailed description of the problem.
• Previous attempts to solve the problem
and the office that was contacted.
• A description of the hardship the
organization is facing and supporting
documentation (if applicable).
The organization may contact a
Taxpayer Advocate by calling a toll-free
number, 1-877-777-4778. Persons who
have access to TTY/TTD equipment may
call 1-800-829-4059 and ask for Taxpayer
Advocate assistance. If the organization
prefers, it may call, write, or fax to the

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Taxpayer Advocate office in its area. See
Publication 1546, The Taxpayer Advocate
Service of the IRS, for a list of addresses
and fax numbers.

Phone Help
If you have questions and/or need help
completing this form, please call
1-800-829-4933. This toll-free telephone
service is available Monday through
Friday.

How To Get Forms and
Publications
Internet
You can access the IRS website 24 hours
a day, 7 days a week, at www.irs.gov to:
• Order IRS products online.
• Download forms, instructions, and
publications.
• See answers to frequently asked tax
questions.
• Search publications online by topic or
keyword.
• Send us comments or request help by
email.
• Sign up to receive local and national
tax news by email. To subscribe, visit
www.irs.gov/eo.

CD-ROM
You can order Publication 1796, IRS Tax
Products on CD, and obtain:
• A CD that is released twice so you
have the latest products. The first release
ships late December and the final release
ships in late February.
• Current year forms, instructions, and
publications.
• Prior year forms, instructions, and
publications.
• Tax Map: an electronic research tool
and finding aid.
• Tax law and frequently asked questions
(FAQs).
• Tax topics from the IRS telephone
response system.
• Fill-in, print and save features for most
tax forms.
• Internal Revenue Bulletins
• Toll-free and email technical support.
Buy the CD-ROM from National
Technical Information Service (NTIS) at
www.irs.gov/cdorders for $25 (no
handling fee) or call 1-877-233-6767 toll
free to buy the CD-ROM for $25 (plus a
$5 handling fee).

By Phone and In Person
You can order forms and publications by
calling 1-800-TAX-FORM
(1-800-829-3676). You can also get most
forms and publications at your local IRS
office.

General Instructions
Purpose of Form
Use Form 990-T, Exempt Organization
Business Income Tax Return, to:
• Report unrelated business income;
• Figure and report unrelated business
income tax liability;

• Report proxy tax liability;
• Claim a refund of income tax paid by a

regulated investment company (RIC) or a
real estate investment trust (REIT) on
undistributed long-term capital gain.

Who Must File
• Any domestic or foreign organization

exempt under section 501(a) or section
529(a) must file Form 990-T if it has gross
income from an unrelated trade or
business of $1,000 or more. See
Regulations section 1.6012-2(e). Gross
income is gross receipts minus the cost of
goods sold. (See Regulations section
1.61-3.)
A disregarded entity, as described
in Regulations sections
CAUTION 301.7701-1 through 301.7701-3, is
treated as a branch or division of its
parent organization for federal tax
purposes. Therefore, financial information
applicable to a disregarded entity must be
reported as the parent organization’s
financial information.
• Organizations liable for the proxy tax
on lobbying and political expenditures
must file Form 990-T. See the Line 37 —
Proxy Tax on page 14 for a discussion of
the proxy tax. If your organization is only
required to file Form 990-T because of
the proxy tax, see Proxy Tax Only under
Which Parts To Complete, on page 4.
• Colleges and universities of states and
other governmental units, as well as
subsidiary corporations wholly owned by
such colleges and universities, are also
subject to the Form 990-T filing
requirements. However, a section
501(c)(1) corporation that is an
instrumentality of the United States and
both organized and exempted from tax by
an Act of Congress does not have to file.
• Organizations that are liable for other
taxes (such as the section 1291 tax (line
35c or 36 of Form 990-T) or recapture
taxes (line 42 of Form 990-T)) must file
Form 990-T. See pages 13 and 15 of the
instructions for a discussion of these
items. If your organization is only required
to file Form 990-T because of these
taxes, see Other Taxes under Which
Parts To Complete, on page 4.
• Fiduciaries for the following trusts that
have $1,000 or more of unrelated trade or
business gross income must file Form
990-T:
1. Individual Retirement Accounts
(IRAs) described under section 408(a),
2. Simplified Employee Pensions
(SEPs) described under section
408(k),
3. Simple Retirement Accounts
(SIMPLE) described under section
408(p),
4. Roth IRAs described under section
408A(b),
5. Coverdell education savings
accounts (ESAs) described under
section 530(b),
6. Archer Medical Savings Accounts
(Archer MSAs) described under
section 220(d), and
7. Qualified tuition programs described
under section 529.

!

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IRAs and other tax-exempt

TIP shareholders in a RIC or REIT
filing Form 990-T only to obtain a
refund of income tax paid on undistributed
long-term capital gains should complete
Form 990-T as explained in IRAs and
other tax exempt shareholders in a RIC or
REIT under Which Parts To Complete, on
page 4.

Definitions
Unrelated trade or business income.
Unrelated trade or business income is the
gross income derived from any trade or
business (defined on page 3) that is
regularly carried on, and not substantially
related to (defined on page 3), the
organization’s exempt purpose or function
(aside from the organization’s need for
income or funds or the use it makes of the
profits).
Generally, for section 501(c)(7), (9), or
(17) organizations, unrelated trade or
business income is derived from
nonmembers with certain modifications
(see section 512(a)(3)(A)).
For a section 511(a)(2)(B) state
college or university, unrelated trade or
business income is derived from activities
not substantially related to exercising or
performing any purpose or function
described in section 501(c)(3).
An unrelated trade or business does
not include a trade or business:
1. In which substantially all the work is
performed for the organization without
compensation; or
2. That is carried on by a section
501(c)(3) or 511(a)(2)(B) organization
mainly for the convenience of its
members, students, patients, officers, or
employees; or
3. That sells items of work-related
equipment and clothes, and items
normally sold through vending machines,
food dispensing facilities or by snack
bars, by a local association of employees
described in section 501(c)(4), organized
before May 27, 1969, if the sales are for
the convenience of its members at their
usual place of employment; or
4. That sells merchandise
substantially all of which was received by
the organization as gifts or contributions;
or
5. That consists of qualified public
entertainment activities regularly carried
on by a section 501(c)(3), (4), or (5)
organization as one of its substantial
exempt purposes (see section 513(d)(2)
for the meaning of qualified public
entertainment activities); or
6. That consists of qualified
convention or trade show activities
regularly conducted by a section
501(c)(3), (4), (5), or (6) organization as
one of its substantial exempt purposes
(see section 513(d)(3) for the meaning of
qualified convention and trade show
activities); or
7. That furnishes one or more
services described in section 501(e)(1)(A)
by a hospital to one or more hospitals
subject to conditions in section 513(e); or

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8. That consists of qualified pole
rentals (as defined in section
501(c)(12)(D)), by a mutual or
cooperative telephone or electric
company; or
9. That includes activities relating to
the distribution of low-cost articles, each
costing $8.30 or less for 2005 ($8.60 or
less for 2006), by an organization
described in section 501 and
contributions to which are deductible
under section 170(c)(2) or (3) if the
distribution is incidental to the solicitation
of charitable contributions; or
10. That includes the exchange or
rental of donor or membership lists
between organizations described in
section 501 and contributions to which
are deductible under section 170(c)(2) or
(3); or
11. That consists of bingo games as
defined in section 513(f). Generally, a
bingo game is not included in any
unrelated trade or business if:
a. Wagers are placed, winners
determined, and prizes distributed in the
presence of all persons wagering in that
game, and
b. The game does not compete with
bingo games conducted by for-profit
businesses in the same jurisdiction, and
c. The game does not violate state or
local law; or
12. That consists of conducting any
game of chance by a nonprofit
organization in the state of North Dakota,
and the conducting of the game does not
violate any state or local law; or
13. That consists of soliciting and
receiving qualified sponsorship payments
that are solicited or received after
December 31, 1997. Generally, qualified
sponsorship payment means any
payment to a tax-exempt organization by
a person engaged in a trade or business
in which there is no arrangement or
expectation of any substantial return
benefit by that person — other than the
use or acknowledgement of that person’s
name, logo, or product lines in connection
with the activities of the tax-exempt
organization. See section 513(i) for more
information.
Trade or business. A trade or business
is any activity carried on for the
production of income from selling goods
or performing services. An activity does
not lose its identity as a trade or business
merely because it is carried on within a
larger group of similar activities that may
or may not be related to the exempt
purpose of the organization. If, however,
an activity carried on for profit is an
unrelated trade or business, no part of it
can be excluded from this classification
merely because it does not result in profit.
Not substantially related to. Not
substantially related to means that the
activity that produces the income does
not contribute importantly to the exempt
purposes of the organization, other than
the need for funds, etc. Whether an
activity contributes importantly depends in
each case on the facts involved.

For details, see Pub. 598, Tax on
Unrelated Business Income of Exempt
Organizations.
Directly connected expenses. To be
deductible in computing unrelated
business taxable income, expenses,
depreciation, and similar items must
qualify as deductions allowed by section
162, 167, or other relevant provisions of
the Code, and must be directly connected
with the carrying on of an unrelated trade
or business activity.
To be directly connected with the
carrying on of a trade or business activity,
expenses, depreciation, and similar items
must bear a proximate and primary
relationship to the conduct of the activity.
For example, where facilities and/or
personnel are used both to carry on
exempt activities and to conduct
unrelated trade or business activities,
expenses and similar items attributable to
such facilities and/or personnel must be
allocated between the two uses on a
reasonable basis. The portion of any such
item allocated to the unrelated trade or
business activity must bear a proximate
and primary relationship to that business
activity.

When To File
An employees’ trust defined in section
401(a), an IRA (including SEPs and
SIMPLEs), a Roth IRA, a Coverdell ESA,
and an Archer MSA must file Form 990-T
by the 15th day of the 4th month after the
end of its tax year. All other organizations
must file Form 990-T by the 15th day of
the 5th month after the end of their tax
year. If the regular due date falls on a
Saturday, Sunday, or legal holiday, file on
the next business day. If the return is filed
late, see the discussion of Interest and
Penalties on page 4.
Extension. Corporations may request an
automatic 6-month extension of time to
file Form 990-T by using Form 8868,
Application for Extension of Time To File
an Exempt Organization Return.
Trusts may request an automatic
3-month extension of time to file by using
Form 8868. Also, if more than the initial
automatic 3 months is needed, trusts may
file a second Form 8868 to request that
an additional, but not automatic, 3-month
extension be granted by the IRS.
Amended return. To correct errors or
change a previously filed return, write
“Amended Return” at the top of the return.
Also, include a statement that indicates
the line number(s) on the original return
that was changed and give the reason for
each change. Generally, the amended
return must be filed within 3 years after
the date the original return was due or 3
years after the date the organization filed
it, whichever is later.

Where To File
To file Form 990-T, mail or deliver it to:
Internal Revenue Service Center
Ogden, UT 84201-0027
Private delivery services (PDSs). In
addition to the United States mail, exempt

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organizations can use certain PDSs
designated by the IRS to meet the “timely
mailing as timely filing/paying” rule for tax
returns and payments. These private
delivery services include only the
following:
• DHL Express (DHL): DHL Same Day
Service, DHL Next Day 10:30 am, DHL
Next Day 12:00 pm, DHL Next Day 3:00
pm, and DHL 2nd Day Service.
• Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, and FedEx
International First.
• United Parcel Service (UPS): UPS Next
Day Air, UPS Next Day Air Saver, UPS
2nd Day Air, UPS 2nd Day Air A.M., UPS
Worldwide Express Plus, and UPS
Worldwide Express.
The private delivery service can tell
you how to get written proof of the
mailing date.
Private delivery services cannot
deliver items to P.O. boxes. You
CAUTION must use the U.S. Postal Service
to mail any item to an IRS P.O. box
address.

!

Estimated Tax Payments
Generally, an organization filing Form
990-T must make installment payments of
estimated tax if its estimated tax (tax
minus allowable credits) is expected to be
$500 or more. Both corporate and trust
organizations use Form 990-W,
Estimated Tax on Unrelated Business
Taxable Income for Tax-Exempt
Organizations, to figure their estimated
tax liability. Do not include the proxy tax
when computing your estimated tax
liability for 2006.
To figure estimated tax, trusts and
corporations must take the alternative
minimum tax (if applicable) into account.
See Form 990-W for more information.

Depository Method of Tax
Payment
The organization must pay any tax due in
full by the due date of the return without
extensions. Some organizations
(described below) are required to
electronically deposit all depository taxes,
including their unrelated business income
tax payments.

Electronic Deposit Requirement
The organization must make electronic
deposits of all depository tax (such as
employment tax, excise tax, unrelated
business income tax) using the Electronic
Federal Tax Payment System (EFTPS) in
2006 if:
• The total deposits in 2004 were more
than $200,000 or
• The organization was required to use
EFTPS in 2005.
If an organization is required to use
EFTPS and fails to do so, it may be
subject to a 10% penalty. If an

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organization is not required to use
EFTPS, it may participate voluntarily. To
enroll in or get more information about
EFTPS, call 1-800-555-4477. To enroll
online, visit www.eftps.gov.
Depositing on time. For EFTPS
deposits to be made timely, the
organization must initiate the transaction
at least 1 business day before the date
the deposit is due.

Deposits With Form 8109
If the organization does not use EFTPS,
deposit unrelated business income tax
payments (and estimated tax payments)
with Form 8109, Federal Tax Deposit
Coupon. If you do not have a preprinted
Form 8109, you may use Form 8109-B to
make deposits. You can get this form only
by calling 1-800-829-4933. Be sure to
have your EIN ready when you call.
Do not send deposits directly to an IRS
office; otherwise, the organization may
have to pay a penalty. Mail or deliver the
completed Form 8109 with the payment
to an authorized depositary (such as a
commercial bank or other financial
institution authorized to accept federal tax
deposits).
Make checks or money orders payable
to the depositary. To help ensure proper
crediting, write the organization’s EIN, the
tax period to which the deposit applies,
and “Form 990-T” on the check or money
order. Be sure to darken the “990-T” box
under “Type of Tax” and the appropriate
“Quarter” box under “Tax Period” on the
coupon. Records of these deposits will be
sent to the IRS. For more information, see
“Marking the Proper Tax Period” in the
instructions for Form 8109.
If the organization prefers, it may mail
the coupon and payment to: Financial
Agent, Federal Tax Deposit Processing,
P.O. Box 970030, St. Louis, MO 63197.
Make the check or money order payable
to “Financial Agent.”
For more information on deposits, see
the instructions in the coupon booklet
(Form 8109) and Pub. 583, Starting a
Business and Keeping Records.
If the organization owes tax when
it files Form 990-T, do not include
CAUTION the payment with the tax return.
Instead, mail or deliver the payment with
Form 8109 to an authorized depositary, or
use the EFTPS, if applicable.

!

Interest and Penalties
Your organization may be subject to
interest and penalty charges if it files a
late return or fails to pay tax when due.
Generally, the organization is not required
to include the interest and penalty
charges on Form 990-T because the IRS
can figure the amount and bill the
organization for it.
Interest. Interest is charged on taxes not
paid by the due date even if an extension
of time to file is granted. Interest is also
charged on penalties imposed for failure
to file, negligence, fraud, substantial
valuation misstatements, and substantial
understatements of tax from the due date
(including extensions) to the date of

payment. The interest charge is figured at
the underpayment rate determined under
section 6621.
Late filing of return. An organization
that fails to file its return when due
(including extensions of time for filing) is
subject to a penalty of 5% of the unpaid
tax for each month or part of a month the
return is late, up to a maximum of 25% of
the unpaid tax. The minimum penalty for
a return that is more than 60 days late is
the smaller of the tax due or $100. The
penalty will not be imposed if the
organization can show that the failure to
file on time was due to reasonable cause.
Organizations that file late should attach a
statement explaining the reasonable
cause.
Late payment of tax. The penalty for
late payment of taxes is usually 1/2 of 1%
of the unpaid tax for each month or part of
a month the tax is unpaid. The penalty
cannot exceed 25% of the unpaid tax.
The penalty will not be imposed if the
organization can show that the failure to
pay on time was due to reasonable
cause.
Estimated tax penalty. An organization
that fails to make estimated tax payments
when due may be subject to an
underpayment penalty for the period of
underpayment. Generally, an organization
is subject to this penalty if its tax liability is
$500 or more and it did not make
estimated tax payments of at least the
smaller of its tax liability for 2005, or
100% of the prior year’s tax. See section
6655 for details and exceptions.
Form 2220, Underpayment of
Estimated Tax by Corporations, is used
by corporations and trusts filing Form
990-T to see if the organization owes a
penalty and to figure the amount of the
penalty. Generally, the organization is not
required to file this form because the IRS
can figure the amount of any penalty and
bill the organization for it. However, even
if the organization does not owe the
penalty, you must complete and attach
Form 2220 if either of the following
applies:
• The annualized income or adjusted
seasonal installment method is used.
• The organization is a “large
organization” computing its first required
installment based on the prior year’s tax.
If you attach Form 2220, be sure to
check the box on line 46, page 2, Form
990-T, and enter the amount of any
penalty on this line.
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
taxes that must be collected or withheld
are not paid to the United States
Treasury. These taxes are generally
reported on:
• Form 720, Quarterly Federal Excise
Tax Return;
• Form 941, Employer’s Quarterly
Federal Tax Return;
• Form 943, Employer’s Annual Federal
Tax Return for Agricultural Employees; or
• Form 945, Annual Return of Withheld
Federal Income Tax.

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The trust fund recovery penalty may
be imposed on all persons who are
determined by the IRS to have been
responsible for collecting, accounting for,
and paying over these taxes, and who
acted willfully in not doing so. The penalty
is equal to the unpaid trust fund tax. See
the instructions for Form 720, Pub. 15
(Circular E), Employer’s Tax Guide, or
Pub. 51 (Circular A), Agricultural
Employer’s Tax Guide, for details,
including the definition of responsible
persons.
Other penalties. There are also
penalties that can be imposed for
negligence, substantial understatement of
tax, reportable transactions
understatements, and fraud. See sections
6662, 6662A, and 6663.

Which Parts To Complete
If you are filing Form 990-T only

TIP because of the proxy tax, other
taxes, or only to claim a refund, go
directly to Proxy Tax Only, Other Taxes,
or Claim for Refund (see below).

Is Gross Income More Than
$10,000?
If the amount on line 13, column (A), Part
I, is more than $10,000, complete all lines
and schedules that apply.

Is Gross Income $10,000 or Less?
If Part I, line 13, column (A) is $10,000 or
less, then complete:
• The heading (the area above Part I).
• Part I, column (A) lines 1 – 13.
• Part I, line 13, for columns (B) and (C).
• Part II, lines 29 – 34.
• Parts III – V.
• Signature area.
Filers with $10,000 or less on line 13,
column (A) do not have to complete
Schedules A through K (however, refer to
applicable schedules when completing
column (A) and in determining the
deductible expenses to include on line 13
of column (B)).

Proxy Tax Only
Organizations that are required to file
Form 990-T only because they are liable
for the proxy tax on lobbying and political
expenditures must:
• Fill-in the heading (the area above
Part I) except items E, H, and I.
• Enter the proxy tax on lines 37 and 39.
• Complete Part IV and the Signature
area.
• Attach a schedule showing the proxy
tax computation.

Other Taxes
Organizations that are required to file
Form 990-T only because they are liable
for recapture taxes, the section 1291 tax,
or other items listed in the instructions for
line 42 must:
• Fill-in the heading (the area above
Part I) except items E, H, and I.
• Complete the appropriate lines of Parts
III and IV.
• Complete the Signature area.

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• Attach all appropriate forms and or
schedules showing the computation of the
applicable tax or taxes.
Claim For Refund
If your only reason for filing a Form 990-T
is to claim a refund, complete the
following steps:
1. Fill-in the heading (the area above
Part I) except items E, H, and I.
2. Enter -0- on line 13, column (A),
line 34, and line 43.
3. Enter the credit or payment on the
appropriate line (44a-44f).
4. Complete lines 45, 48, and 49 and
the Signature area.
5. For claims described below, follow
the additional instructions for that claim.
IRAs and other tax-exempt
shareholders in a RIC or REIT. If you
are an IRA or other tax-exempt
shareholder that is invested in a RIC or a
REIT and file Form 990-T only to obtain a
refund of income tax paid on undistributed
long-term capital gains, follow steps 1-4
above; write “Claim for Refund Shown on
Form 2439” at the top of the Form 990-T;
and attach to the return Copy B of Form
2439, Notice to Shareholder of
Undistributed Long-Term Capital Gains.
Composite Form 990-T. If you are a
trustee of more than one IRA invested in
a RIC, you may be able to file a
composite Form 990-T to claim a refund
of tax under section 852(b) instead of
filing a separate Form 990-T for each
IRA. See Notice 90-18, 1990-1 C.B. 327,
for information on who can file a
composite return. Complete steps 1-4
above and follow the additional
requirements of the notice.
Backup withholding. If your only
reason for filing Form 990-T is to claim a
refund of backup withholding, complete
the parts discussed above in steps 1-4
and attach a copy of the Form 1099
showing the withholding.

Consolidated Returns
The consolidated return provisions of
section 1501 do not apply to exempt
organizations, except for organizations
having title holding companies. If a title
holding corporation described in section
501(c)(2) pays any amount of its net
income for a tax year to an organization
exempt from tax under section 501(a) (or
would, except that the expenses of
collecting its income exceeded that
income), and the corporation and
organization file a consolidated return as
described below, then treat the title
holding corporation as being organized
and operated for the same purposes as
the other exempt organization (in addition
to the purposes described in section
501(c)(2)).
Two organizations exempt from tax
under section 501(a), one a title holding
company, and the other earning income
from the first, will be includible
corporations for purposes of section
1504(a). If the organizations meet the
definition of an affiliated group, and the
other relevant provisions of Chapter 6 of

the Code, then these organizations may
file a consolidated return. The parent
organization must attach Form 851,
Affiliations Schedule, to the consolidated
return. For the first year a consolidated
return is filed, the title holding company
must attach Form 1122, Authorization and
Consent of Subsidiary Corporation To Be
Included in a Consolidated Income Tax
Return. See Regulations section
1.1502-100 for more information on
consolidated returns.

Other Forms That May Be
Required
Forms W-2 and W-3. Form W-2, Wage
and Tax Statement, and Form W-3,
Transmittal of Wage and Tax Statements.
Use these forms to report wages, tips,
other compensation, withheld income
taxes, and withheld social security/
Medicare taxes for employees.
Form 720. Use this Form 720, Quarterly
Federal Excise Tax Return, to report
environmental excise taxes,
communications and air transportation
taxes, fuel taxes, manufacturers taxes,
ship passenger tax, and certain other
excise taxes.

!

See Trust fund recovery penalty
on page 4.

CAUTION

Form 926. File Form 926, Return by a
U.S. Transferor of Property to a Foreign
Corporation, if the organization is required
to report certain transfers to foreign
corporations under section 6038B.
Form 940 or Form 940-EZ. The
organization must file Form 940 or Form
940-EZ, Employer’s Annual Federal
Unemployment (FUTA) Tax Return, if it is
liable for FUTA tax.
Form 941 and Form 943. The
organization must file Form 941,
Employer’s Quarterly Federal Tax Return,
or Form 943, Employer’s Annual Federal
Tax Return for Agricultural Employees, to
report income tax withheld, and employer
and employee social security and
Medicare taxes. Also, see Trust fund
recovery penalty on page 4.
Form 945. Use Form 945, Annual Return
of Withheld Federal Income Tax, to report
income tax withheld from nonpayroll
distributions or payments, including
pensions, annuities, IRAs, gambling
winnings, and backup withholding.
Form 1098. Use Form 1098, Mortgage
Interest Statement, to report the receipt
from any individual of $600 or more of
mortgage interest (including points) in the
course of the organization’s trade or
business and reimbursements of overpaid
interest.
Forms 1099-A, B, DIV, INT, LTC, MISC,
MSA, OID, R, and S. Organizations
engaged in an unrelated trade or
business may be required to:
• File an information return on Forms
1099-A, B, DIV, INT, LTC, MISC, MSA,
OID, R, and S;
• Report acquisitions or abandonments
of secured property through foreclosure;

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• Report proceeds from broker and
barter exchange transactions;

• Report certain dividends and
distributions;

• Report interest income;
• Report certain payments made on a

per diem basis under a long-term care
insurance contract, and certain
accelerated death benefits;
• Report miscellaneous income (such as,
payments to providers of health and
medical services, miscellaneous income
payments, and nonemployee
compensation);
• Report distributions from an Archer
MSA;
• Report original issue discount;
• Report distributions from retirement or
profit-sharing plans, IRAs, SEPs, or
SIMPLEs, and insurance contracts; and
• Proceeds from real estate transactions.
When filing the above noted
information returns the
CAUTION organization must also file Form
1096, Annual Summary and Transmittal
of U.S. Information Returns.
Form 4466. Use Form 4466, Corporation
Application for Quick Refund of
Overpayment of Estimated Tax, to apply
for a quick refund, if the organization over
paid its estimated tax for the year by at
least 10% of its expected income tax
liability and at least $500.
Form 5498. Use Form 5498, IRA
Contribution Information, to report
contributions (including rollover
contributions) to any IRA, including a
SEP, SIMPLE, Roth IRA, and to report
Roth IRA conversions, IRA
recharacterizations, and the fair market
value of the account.
Form 5498-ESA. Use Form 5498-ESA,
Coverdell ESA Contribution Information,
to report contributions (including rollover
contributions) to and the fair market value
of a Coverdell education savings account
(ESA).
Form 5498-SA. Use Form 5498-SA,
HSA, Archer MSA or Medicare Advantage
MSA Information, to report contributions
to an HSA or Archer MSA and the fair
market value of an HSA, Archer MSA or
Medicare Advantage MSA. For more
information see the general and specific
Instructions for Forms 1099-SA and
5498-SA.
Form 5713. File Form 5713, International
Boycott Report, if the organization had
operations in, or related to, certain
“boycotting” countries.
Form 6198. File Form 6198, At-Risk
Limitations, if the organization has a loss
from an at-risk activity carried on as a
trade or business or for the production of
income.
Form 8275 and 8275-R. Taxpayers and
income tax return preparers use Form
8275, Disclosure Statement, and Form
8275-R, Regulation Disclosure
Statement, to disclose items or positions
taken on a tax return or that are contrary
to Treasury regulations (to avoid parts of
the accuracy-related penalty or certain
preparer penalties).

!

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Form 8300. File Form 8300, Report of
Cash Payments Over $10,000 Received
in a Trade or Business, if the organization
received more than $10,000 in cash or
foreign currency in one transaction or in a
series of related transactions. For more
information, see Form 8300 and
Regulations section 1.6050I-1(c).
Form 8697. Use Form 8697, Interest
Computation Under the Look-Back
Method for Completed Long-Term
Contracts, to figure the interest due or to
be refunded under the look-back method
of section 460(b)(2). The look-back
method applies to certain long-term
contracts that are accounted for under
either the percentage method or the
completion-capitalized cost method.
Form 8865, Return of U.S. Person With
Respect To Certain Foreign Partnerships.
An organization may have to file Form
8865 if it:
1. Controlled a foreign partnership
(that is, owned more than a 50% direct or
indirect interest in the partnership).
2. Owned at least a 10% direct or
indirect interest in a foreign partnership
while U.S. persons controlled that
partnership.
3. Had an acquisition, disposition, or
change in proportional interest in a
foreign partnership that:
a. Increased its direct interest to at
least 10% or reduced its direct interest of
at least 10% to less than 10%.
b. Changed its direct interest by at
least a 10% interest.
4. Contributed property to a foreign
partnership in exchange for a partnership
interest if:
a. Immediately after the contribution,
the organization directly or indirectly,
owned, at least a 10% interest in the
foreign partnership; or
b. The FMV of the property the
organization contributed to the foreign
partnership in exchange for a partnership
interest, when added to other
contributions of property made to the
foreign partnership by the organization or
a related person during the preceding
12-month period, exceeds $100,000.
Also, the organization may have to file
Form 8865 to report certain dispositions
by a foreign partnership of property it
previously contributed to that foreign
partnership if it was a partner at the time
of the disposition. For more details,
including penalties that may apply, see
Form 8865 and its separate instructions.
Form 8886. Use Form 8886, Reportable
Transaction Disclosure Statement, to
disclose information for each reportable
transaction in which the organization
participated. Form 8886 must be filed for
each tax year that the federal income tax
liability of the organization is affected by
its participation in the transaction. The
organization may have to pay a penalty if
it is required to file Form 8886 but does
not do so. The following are reportable
transactions.
• Any listed transaction that is the same
as or substantially similar to tax

avoidance transactions identified by the
IRS.
• Any transaction offered under
conditions of confidentiality for which the
organization paid an advisor a fee of at
least $250,000.
• Certain transactions for which the
organization has contractual protection
against disallowance of the tax benefits.
• Any transaction resulting in a loss of at
least $10 million in any single year or $20
million in any combination of years.
• Any transaction resulting in a book-tax
difference of more than $10 million on a
gross basis.
• Any transaction resulting in a tax credit
of more than $250,000, if the organization
held the asset generating the credit for 45
days or less.
Form 8873. Use Form 8873,
Extraterritorial Income Exclusion, to report
the amount of extraterritorial income from
line 54 that is excluded from the
organization’s gross income for the tax
year.
Form 8899. Use Form 8899, Notice of
Income from Donated Intellectual
Property, to report income from qualified
intellectual property.

Accounting Methods
An accounting method is a set of rules
used to determine when and how income
and expenses are reported. Figure
taxable income using the method of
accounting regularly used in keeping the
organization’s books and records.
Generally, permissible methods
include:
• Cash,
• Accrual, or
• Any other method authorized by the
Internal Revenue Code.
In all cases, the method used must
clearly show taxable income.
See Pub. 538, Accounting Periods and
Methods, for more information.
Change in accounting method. To
change its method of accounting used to
report taxable income (for income as a
whole or for the treatment of any material
item), the organization must file with the
IRS either an (a) advanced consent
request for a ruling or (b) automatic
change request for certain specific
changes in accounting method.
In either case, the organization must
file Form 3115, Application for Change in
Accounting Method. For more
information, see Form 3115 and Pub.
538, Accounting Periods and Methods.
Section 481(a) adjustment. The
organization may have to make an
adjustment under section 481(a) to
prevent amounts of income or expense
from being duplicated or omitted. The
section 481(a) adjustment period is
generally 1 year for a net negative
adjustment and 4 years for a net positive
adjustment. However, an organization
may elect to use a 1-year adjustment
period if the net section 481(a)
adjustment for the change is less than
$25,000. The organization must complete

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the appropriate lines of Form 3115 to
make the election.
Include any net positive section 481(a)
adjustment on Form 990-T, page 1, line
12. If the net section 481(a) adjustment is
negative, report it on Form 990-T, page 1,
line 28.

Accounting Period and Tax
Year
The return must be filed using the
organization’s established annual
accounting period. If the organization has
no established accounting period, file the
return on the calendar-year basis.
To change an accounting period, some
organizations may make a notation on a
timely filed Form 990, 990-EZ, 990-PF, or
990-T. Others may be required to file
Form 1128, Application To Adopt,
Change, or Retain a Tax Year. For details
on which procedure applies to your
organization, see Rev. Proc. 85-58,
1985-2 C.B. 740, and the instructions for
Form 1128.
If the organization changes its
accounting period, file Form 990-T for the
short period that begins with the first day
after the end of the old tax year and ends
on the day before the first day of the new
tax year. For the short period return,
figure the tax by placing the
organization’s taxable income on an
annual basis. For details, see Pub. 538
and section 443.

Reporting Form 990-T Information
on Other Returns
Your organization may be required to file
an annual information return on:
• Form 990, Return of Organization
Exempt From Income Tax;
• Form 990-EZ, Short Form Return of
Organization Exempt From Income Tax;
• Form 990-PF, Return of Private
Foundation or Section 4947(a)(1)
Nonexempt Charitable Trust Treated as a
Private Foundation; or
• Form 5500, Annual Return/Report of
Employee Benefit Plan.
If so, include on that information return
the unrelated business gross income and
expenses (but not including the specific
deduction claimed on line 33, page 1, or
any expense carryovers from prior years)
reported on Form 990-T for the same tax
year.

Rounding Off to Whole Dollars
The organization may round off cents to
whole dollars on Form 990-T and its
schedules. If the organization does round
to whole dollars, it must round all
amounts. To round, drop amounts under
50 cents and increase amount from 50 to
99 cents to the next dollar. For example,
$1.39 becomes $1 and $2.50
becomes $3.
If two or more amounts must be added
to figure the amount to enter on a line,
include cents when adding the amounts
and round off only the total.

Attachments
If you need more space on the form or
schedules, attach separate sheets. On

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the attachment, write the corresponding
form or schedule number or letter and
follow the same format. Show totals on
the printed form. Also, include the
organization’s name and EIN. The
separate sheets should be the same size
as the printed form and should be
attached after the printed form.

Specific Instructions
Period Covered
File the 2005 return for calendar year
2005 or a fiscal year beginning in 2005
and ending 2006. For a fiscal year, fill in
the tax year information at the top of the
form.
The 2005 Form 990-T may also be
used if:
• The organization has a tax year of less
than 12 months that begins and ends in
2006, and
• The 2006 Form 990-T is not available
at the time the organization is required to
file its return. The organization must show
its 2006 tax year on the 2005 Form 990-T
and take into account any tax law
changes that are effective for tax years
beginning after December 31, 2005.

Name and Address
The name and address on Form 990-T
should be the same as the name and
address shown on other Forms 990. If
you received a mailing label and any
information is incorrect or missing, cross
out any errors, print the correct
information, and add any missing
information.
Include the suite, room, or other unit
number after the street address. If the
Post Office does not deliver mail to the
street address and the organization has a
P.O. box, show the box number instead of
the street address.
If the organization receives its mail in
care of a third party (such as an
accountant or an attorney), enter on the
street address line “C/O ” followed by the
third party’s name and street address or
P.O. box.
Change of name. If the
organization has changed its
CAUTION name, it must check the box next
to “Name of organization” and also
provide the following when filing this
return, if it is:

!

• A corporation or is incorporated with
the state, an amendment to the articles of
incorporation along with proof of filing with
the state is required.
• A trust, an amendment to the trust
agreement is required along with the
trustee(s) signature.
• An association or an unincorporated
association, an amendment to the articles
of association, constitution, by-laws or
other organizing document is required
along with signatures of at least two
officers/members.

Blocks A through J
Block A. If the organization has changed
its address since it last filed a return,
check Block A.
If a change in address occurs after

TIP the return is filed, use Form 8822,
Change of Address, to notify the
IRS of the new address.
Block B. Check the box under which the
organization receives its tax exemption.
Qualified pension, profit-sharing, and
stock bonus plans should check the 501
box and enter “a” between the first set of
parentheses.
For other organizations exempt under
section 501, check the box for 501 and
enter the section that describes their tax
exempt status, for example, 501(c)(3).
For tax exempts that do not receive
their exemption under section 501, use
the following guide.
If you are a . . . . . .

Then check this box

IRA, SEP, or SIMPLE

408(e)

Roth IRA

408A

Archer MSA

220(e)

Coverdell ESA

530(a)

Qualified State Tuition
Program

529(a)

Block C. Enter the total of the
end-of-year assets from the
organization’s books of account.
Block D. An employees’ trust described
in section 401(a) and exempt under
section 501(a) should enter its own trust
identification number in this block.
An IRA trust enters its own EIN in this
block. An IRA trust never uses a social
security number or the trustee’s EIN.
An EIN may be applied for:
• Online — Click on the Employer ID
Numbers (EINs) link at www.irs.gov/
businesses/small. The EIN is issued
immediately once the application
information is validated.
• By telephone at 1-800-829-4933.
• By mailing or faxing Form SS-4,
Application for Employer Identification
Number.
If the organization has not received its
EIN by the time the return is due, write
“Applied for” in the space for the EIN. For
more details, see Publication 583,
Starting a Business and Keeping
Records.
Note. The online application process is
not yet available for organizations with
addresses in foreign countries or Puerto
Rico.
Block E. Enter the applicable unrelated
business activity code(s) that specifically
describes the organization’s unrelated
business activity. If a specific activity code
does not accurately describe the
organization’s activities, then choose a
general code that best describes its
activity. These codes are listed on
page 21.

-7-

Block F. If the organization is covered by
a group exemption, enter the group
exemption number.
Block G. Check the box that describes
your organization.
“Other trust” includes IRAs, SEPs,
SIMPLEs, Roth IRAs, Coverdell IRAs,
and Archer MSAs.
Section 529 organizations check the
501(c) corporation or 501(c) trust box
depending on whether the organization is
a corporation or a trust. Also, be sure the
box for 529(a) in Block B is checked.
If you check “501(c) corporation,”
leave line 36 blank. If you check “501(c)
trust,” “401(a) trust,” or “Other trust” leave
lines 35a, b, and c blank.
Block H. Describe the primary unrelated
business activity of your organization
based on unrelated income. Attach a
schedule if more space is needed.
Block I. Check the “Yes” box if your
organization is a corporation and either 1
or 2 below applies:
1. The corporation is a subsidiary in
an affiliated group (defined in section
1504) but is not filing a consolidated
return for the tax year with that group.
2. The corporation is a subsidiary in a
parent-subsidiary controlled group
(defined in section 1563).
Excluded member. If the corporation
is an “excluded member” of a controlled
group (see section 1563(b)(2)), it is still
considered a member of a controlled
group for purposes of Block I.
Block J. Enter the name of the person
who has the organization’s books and
records and the telephone number at
which he or she can be reached.

Part I—Unrelated Trade or
Business Income
Complete column (A), lines 1 through 13.
If the amount on line 13 is $10,000 or
less, you may complete only line 13 for
columns (B) and (C). These filers do not
have to complete Schedules A through K
(however, refer to applicable schedules
when completing column (A)). If the
amount on line 13, column (A), is more
than $10,000, complete all lines and
schedules that apply.
Member income of mutual or
cooperative electric companies.
Income of a mutual or cooperative electric
company described in section 501(c)(12)
which is treated as member income under
subparagraph (H) of that section is
excluded from unrelated business taxable
income.
Extraterritorial income. Except as
otherwise provided in the Internal
Revenue Code, gross income includes all
income from whatever source derived.
Gross income generally does not include
extraterritorial income that is qualifying
foreign trade income. However, the
extraterritorial income exclusion is
reduced by 20% for transactions in 2005
(40% for transactions in 2006), unless
made under a binding contract with an
unrelated person in effect on September

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17, 2003, and at all times thereafter. Use
Form 8873, Extraterritorial Income
Exclusion, to figure the exclusion. Include
the exclusion in the total for Other
deductions on line 28, Form 990-T.
Income from qualifying shipping
activities. The organization’s gross
income does not include income from
qualifying shipping activities (as defined in
section 1356) if the organization makes
an election under section 1354 on a
timely filed return (including extensions)
to be taxed on its notional shipping
income (as defined in section 1353) at the
highest corporate rate (35%). If the
election is made, the organization
generally may not claim any loss,
deduction, or credit with respect to
qualifying shipping activities. An
organization making this election also
may elect to defer gain on the disposition
of a qualifying vessel under section 1359.
Use Form 8902, Alternative Tax on
Qualifying Shipping Activities, to figure
the tax. Include the alternative tax on
Form 990-T, Part IV, line 42.

Line 1a—Gross Receipts or
Sales
Enter the gross income from any
unrelated trade or business regularly
carried on that involves the sale of goods
or performance of services.
A section 501(c)(7) social club
TIP would report its restaurant and bar
receipts from nonmembers on line
1, but would report its investment income
on line 9 and in Schedule G.
Advance payments. In general,
advanced payments are reported in the
year of receipt. To report income from
long-term contracts, see section 460. For
special rules for reporting certain
advanced payments for goods and
long-term contracts, see Regulations
section 1.451-5. For permissible methods
for reporting advanced payments for
services by an accrual method
organization, see Rev. Proc. 2004-34,
2004-22 I.R.B. 991.
Installment sales. Generally, the
installment method cannot be used for
dealer dispositions of property. A “dealer
disposition” is (a) any disposition of
personal property by a person who
regularly sells or otherwise disposes of
personal property of the same type on the
installment plan or (b) any disposition of
real property held for sale to customers in
the ordinary course of the taxpayer’s
trade or business.
These restrictions on using the
installment method do not apply to
dispositions of property used or produced
in a farming business or sales of
timeshares and residential lots for which
the organization elects to pay interest
under section 453(l)(3).
For sales of timeshares and residential
lots reported under the installment
method, the organization’s income tax is
increased by the interest payable under
section 453(l)(3). To report this addition to
the tax, see the instructions for line 42.

Enter on line 1a (and carry to line 3),
the gross profit on collections from
installment sales for any of the following:
• Dealer dispositions of property before
March 1, 1986.
• Dispositions of property used or
produced in the trade or business of
farming.
• Certain dispositions of timeshares and
residential lots reported under the
installment method.
Attach a schedule showing the
following information for the current and
the 3 preceding years:
1. Gross sales,
2. Cost of goods sold,
3. Gross profits,
4. Percentage of gross profits to gross
sales,
5. Amount collected, and
6. Gross profit on amount collected.
Nonaccrual experience method.
Accrual method organizations are not
required to accrue certain amounts to be
received from the performance of
services that, on the basis of their
experience, will not be collected, if:
• The services are in the fields of health,
law, engineering, architecture,
accounting, actuarial science, performing
arts, or consulting, or
• The organization’s average annual
gross receipts for the 3 prior tax years
does not exceed $5 million.
This provision does not apply to any
amount if interest is required to be paid
on the amount or if there is any penalty
for failure to timely pay the amount. For
more information, see section 448(d)(5)
and Temporary Regulations section
1.488-2T. Organizations that qualify to
use the nonaccrual experience method,
should attach a schedule showing total
gross receipts, amounts not accrued as a
result of the application of section
448(d)(5), and the net amount accrued.
Enter the net amount on line 1a.
Certain cooperatives that have gross
receipts of $10 million or more and have
patronage and nonpatronage source
income and deductions must complete
and attach Form 8817, Allocation of
Patronage and Nonptronage Income and
Deductions, to their return.
Gain or loss on disposition of certain
brownfield property. Gain or loss from
the qualifying sale, exchange, or other
disposition of a qualifying brownfield
property (as defined in section
512(b)(18)(C)), which was acquired by
the organization after December 31,
2004, is excluded from unrelated
business taxable income and is excepted
from the debt-financed rules for such
property. See section 512(b)(19) and
514(b)(1)(E).

Line 4a—Capital Gain Net
Income
Generally, organizations required to file
Form 990-T (except organizations
described in sections 501(c)(7), (9), and
(17)) are not taxed on the net gains from
the sale, exchange, or other disposition of
property. However, net capital gains on

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debt-financed property, capital gains on
cutting timber, and ordinary gains on
sections 1245, 1250, 1252, 1254, and
1255 property are taxed. See Form 4797,
Sales of Business Property, and its
instructions for additional information.
Also, any capital gain or loss passed
through from an S corporation or any gain
or loss on the disposition of S corporation
stock by a qualified tax exempt (see S
Corporations under the line 5 instructions)
is taxed as a capital gain or loss.
Capital gains and losses should be
reported by a trust on Schedule D (Form
1041), Capital Gains and Losses, and by
a corporation on Schedule D (Form
1120), Capital Gains and Losses.
An organization that transfers
securities it owns for the contractual
obligation of the borrower to return
identical securities recognizes no gain or
loss. To qualify for this treatment, the
organization must lend the securities
under an agreement that requires:
1. The return of identical securities;
2. The payment of amounts
equivalent to the interest, dividends, and
other distributions that the owner of the
securities would normally receive; and
3. The risk of loss or opportunity for
gain not be lessened.
See section 512(a)(5) for details.
Debt-financed property disposition.
The amount of gain or loss to be reported
on the sale, exchange, or other
disposition of debt-financed property is
the same percentage as the highest
acquisition indebtedness for the property
for the 12-month period before the date of
disposition is to the average adjusted
basis of the property. The percentage
may not be more than 100%. See the
instructions for Schedule E, column 5, to
determine adjusted basis and average
adjusted basis.
If debt-financed property is depreciable
or depletable property, the provisions of
sections 1245, 1250, 1252, 1254, and
1255 must be considered first.
Example. On January 1, 2004, an
exempt educational corporation, using
$288,000 of borrowed funds, purchased
an office building for $608,000. The only
adjustment to basis was $29,902 for
depreciation (straight line method under
MACRS over the 39-year recovery period
for nonresidential real property). The
corporation sold the building on
December 31, 2005, for $640,000. At the
date of sale, the adjusted basis of the
building was $578,098 ($608,000 −
$29,902) and the indebtedness remained
at $288,000. The adjusted basis of the
property on the first day of the year of
disposition was $593,037. The average
adjusted basis is $585,568 (($593,037 +
$578,098) ÷ 2). The debt/basis
percentage is 49% ($288,000 ÷
$585,568).
The taxable gain is $30,332 (49% ×
($640,000 − $578,098)). This is a
long-term capital gain. A corporation
should enter the gain on line 6, Part II,
Schedule D (Form 1120). A trust should

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enter the gain on Schedule D (Form
1041). Both should attach a statement to
the return showing how the gain was
figured.

Line 4b—Net Gain or (Loss)
Show gains and losses on other than
capital assets on Form 4797. Enter on
this line the net gain or (loss) from Part II,
line 17, Form 4797.
An exempt organization using Form
4797 to report ordinary gain on sections
1245, 1250, 1252, 1254, and 1255
property will include only depreciation,
amortization, or depletion allowed or
allowable in figuring unrelated business
taxable income or taxable income of the
organization (or a predecessor
organization) for a period when it was not
exempt.

Line 4c—Capital Loss
Deduction for Trusts
If a trust has a net capital loss, it is
subject to the limitations of Schedule D
(Form 1041). Enter on this line the loss
figured on Schedule D (Form 1041).

Line 5—Income or (Loss) From
Partnerships and S
Corporations
Combine all partnership income or loss
(determined below) with all S corporation
income or loss and enter it on line 5.
However, for limitations on losses for
certain activities, see Form 6198 and, for
trusts, Form 8582, Passive Activity Loss
Limitations, or, for corporations, Form
8810, Corporate Passive Activity Loss
and Credit Limitations, and sections 465
and 469.

Partnerships
If the organization is a partner in a
partnership carrying on an unrelated trade
or business, enter the organization’s
share (whether or not distributed) of the
partnership’s income or loss from the
unrelated trade or business.
Figure the gross income and
deductions of the partnership in the same
way you figure unrelated trade or
business income the organization earns
directly.
Attachment. Attach a statement to this
return showing the organization’s share of
the partnership’s gross income from the
unrelated trade or business, and its share
of the partnership deductions directly
connected with the unrelated gross
income. Also, see Attachments on page 6
for other information you need to include.

S Corporations
For tax years beginning after December
31, 1997, qualified tax exempts can be
shareholders in an S corporation without
the S corporation losing its status as an S
corporation. Qualified tax exempts that
hold stock in an S corporation treat their
stock interest as an unrelated trade or
business. All items of income, loss, or
deduction are taken into account in
figuring unrelated business taxable
income. Report on line 4 any gain or loss
on the disposition of S corporation stock.

Qualified tax exempts. A qualified tax
exempt is an organization that is
described in section 401(a) (qualified
stock bonus, pension, and profit-sharing
plans) or 501(c)(3) and exempt from tax
under section 501(a).
Exception. Employer stock ownership
plans (ESOPs) do not follow these S
corporation rules if the S corporation
stock is an employer security as defined
in section 409(l).
Attachment. Attach a statement to this
return showing the qualified tax exempt’s
share of all items of income, loss, or
deduction. Show capital gains and losses
separately and include them on line 4a.
Combine the income, loss, and
deductions (except for the capital gains
and losses) on the statement. If you hold
stock in more than one S corporation,
total the combined amounts. Also, see
Attachments on page 6 for other
information you need to include.

Line 12—Other Income
Enter on line 12 any item of unrelated
business income that is not reportable
elsewhere on the return. Include:
• Recoveries of bad debts deducted in
earlier years under the specific charge-off
method. Attach a separate schedule of
any items of other income to your return;
• The amount from Form 6478, Credit for
Alcohol Used as Fuel; and
• The amount from Form 8864, Biodiesel
and Renewable Diesel Fuels Credit.
Organizations described in section
501(c)(19). Enter the net income from
insurance business that was not properly
set aside. These organizations may set
aside income from payments received for
life, sick, accident, or health insurance for
members of the organization or their
dependents:
1. To provide for the payment of
insurance benefits;
2. For a purpose specified in section
170(c)(4) (religious, charitable, scientific,
literary, educational, etc.); or
3. For administrative costs directly
connected with benefits described in 1
and 2 above.
Amounts set aside and used for
purposes other than those 1, 2, or 3
above, must be included in unrelated
business taxable income for the tax year
if they were previously excluded from
taxable income.
Any amount spent for a purpose
described in section 170(c)(4) is first
considered paid from funds earned by the
organization from insurance activities if
the income is not used for the insurance
activities.
Expenditures for lobbying are not
considered section 170(c)(4) expenses.
Income from property financed with
qualified 501(c)(3) bonds. If any part of
the property is used in a trade or business
of any person other than a section
501(c)(3) organization or a governmental
unit, your section 501(c)(3) organization is
considered to have received unrelated
business income in the amount of the

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greater of the actual rental income or the
fair rental value of the property for the
period it is used. No deduction is allowed
for interest on the private activity bond.
Report the greater of the actual rent or
the fair rental value on line 12. Report
allowable deductions in Part II. See
section 150(b)(3) for more information.
Passive foreign investment company
(PFIC) shareholders. If your
organization is a direct or indirect
shareholder of a PFIC within the meaning
of section 1296, it may have income tax
consequences under section 1291 on the
disposition of the PFIC stock or on receipt
of an excess distribution from the PFIC,
described in section 1291(a). Your
organization may have current income
under section 1293 if the PFIC is a
qualified electing fund (QEF) with respect
to the organization.
Include on line 12 the portion of an
excess distribution or section 1293
inclusion that is taxable as unrelated
business taxable income. See Form
8621, Return by a Shareholder of a
Passive Foreign Investment Company or
Qualified Electing Fund, for more
information on reporting excess
distributions and current income
inclusions.
See the instructions for lines 35c and
36 in Part III for reporting the deferred tax
amount that may be owed by your
organization with respect to an excess
distribution.

Part II—Deductions Not
Taken Elsewhere
If the amount on Part I, line 13, column
(A), is $10,000 or less, you do not have to
complete lines 14 through 28 of Part II.
However, you must complete lines 29
through 34 of Part II.
Directly connected expenses. Only
expenses directly connected with
unrelated trade or business income
(except contributions) may be deducted
on these lines (see Directly connected
expenses on page 3). Contributions may
be deducted, whether or not directly
connected. Do not separately include in
Part II any expenses that are reported in
Schedules A through J, other than excess
exempt expenses entered on line 26 and
excess readership costs entered on line
27. For example, officers’ compensation
allocable to advertising income is
reported on Schedule J only, and should
not be included on Schedule K or line 14
of Part II.

Limitations on Deductions
The following items discuss certain areas
in which the amount of the deduction may
to some extent be limited.

Activities Lacking a Profit Motive
If income is attributable to an activity
lacking a profit motive, a loss from the
activity cannot be claimed on Form 990-T.
Therefore, in Part I, column (B) and Part
II, the total of deductions for expenses
directly connected with income from an
activity lacking a profit motive is limited to

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the amount of that income. Generally, an
activity lacking a profit motive is one that
is not conducted for the purpose of
producing a profit or one that has
consistently produced losses when both
direct and indirect expenses are taken
into account.

Transactions Between Related
Taxpayers
Generally, an accrual basis taxpayer may
only deduct business expenses and
interest owed to a related party in the
year the payment is included in the
income of the related party. See sections
163(e)(3), 163(j), and 267 for limitations
on deductions for unpaid interest and
expenses.

Preference Items
Corporations may be required to adjust
deductions for depletion of iron ore and
coal, intangible drilling and exploration
and development costs, and the
amortizable basis of pollution control
facilities. See section 291 to determine
the amount of the adjustment.

Section 263A Uniform
Capitalization Rules
These rules require organizations to
capitalize or include as inventory cost
certain costs incurred in connection with:
• The production of real property and
tangible personal property held in
inventory or held for sale in the ordinary
course of business.
• Real property or personal property held
in inventory (tangible and intangible)
acquired for resale.
• The production of real property and
tangible personal property produced by
the organization for use in its trade or
business or in an activity engaged in for
profit.
Tangible personal property produced
by an organization includes a film, sound
recording, videotape, book, or similar
property.
Indirect expenses. Organizations
subject to the section 263A uniform
capitalization rules are required to
capitalize direct costs and an allocable
part of most indirect costs (including
taxes) that benefit the assets produced or
acquired for resale or are incurred by
reason of the performance of production
or resale activities.
For inventory, some of the indirect
expenses that must be capitalized are:
• Administration expenses,
• Taxes,
• Depreciation,
• Insurance,
• Compensation paid to officers
attributable to services,
• Rework labor, and
• Contributions to pension, stock bonus,
and certain profit-sharing, annuity, or
deferred compensation plans.
Regulations section 1.263A-1(e)(3)
specifies other indirect costs that relate to
production or resale activities that must
be capitalized and those that may be
currently deductible.

Interest expense. Interest expense paid
or incurred during the production period of
designated property must be capitalized
and is governed by special rules. For
more details, see Regulations section
1.263A-8 through 1.263A-15.
When are section 263A capitalized
costs deductible? The costs required to
be capitalized under section 263A are not
deductible until the property (to which the
costs relate) is sold, used, or otherwise
disposed of by the organization.
Exceptions. Section 263A does not
apply to:
• Personal property acquired for resale if
the organization’s average annual gross
receipts for the 3 prior tax years were $10
million or less.
• Timber.
• Most property produced under
long-term contract.
• Certain property produced in a farming
business.
• Research and experimental costs
under section 174.
• Geological and geophysical costs
amortized under section 167(h).
• Intangible drilling costs for oil, gas, and
geothermal property.
• Mining exploration and development
costs.
• Inventory of an organization that
accounts for inventories in the same
manner as materials and supplies that are
not incidental. See Schedule A — Cost of
Goods Sold on page 16 for details.
Additional information. For more
details on the uniform capitalization rules,
see Regulations sections 1.263A-1
through 1.263A-3.

Travel, Meals, and Entertainment
Subject to limitations and restrictions
discussed below, an organization can
deduct ordinary and necessary travel,
meals, and entertainment expenses paid
or incurred in its trade or business. Also,
special rules apply to deductions for gifts,
skybox rentals, luxury water travel,
convention expenses, and entertainment
tickets. See section 274 and Pub. 463,
Travel, Entertainment, Gift, and Car
Expenses, for more details.
Travel. The organization cannot deduct
travel expenses of any individual
accompanying an organization’s officer or
employee, including a spouse or
dependent of the officer or employee,
unless:
• That individual is an employee of the
organization and
• His or her travel is for a bona fide
business purpose and would otherwise be
deductible by that individual.
Meals and entertainment. Generally,
the organization can deduct only 50% of
the amount otherwise allowable for meals
and entertainment expenses paid or
incurred in its trade or business. In
addition (subject to exceptions under
section 274(k)(2)):
• Meals must not be lavish or
extravagant;
• A bona fide business discussion must
occur during, immediately before, or
immediately after the meal; and

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• An employee of the organization must

be present at the meal.
Membership dues. The organization
may deduct amounts paid or incurred for
membership dues in civic or public
service organizations, professional
organizations (such as bar and medical
associations), business leagues, trade
associations, chambers of commerce,
boards of trade, and real estate boards.
However, no deduction is allowed if a
principal purpose of the organization is to
entertain, or provide entertainment
facilities for members or their guests. In
addition, organizations may not deduct
membership dues in any club organized
for business, pleasure, recreation, or
other social purpose. This includes
country clubs, golf and athletic clubs,
airline and hotel clubs, and clubs
operated to provide meals under
conditions favorable to business
discussion.
Entertainment facilities. The
organization cannot deduct an expense
paid or incurred for use of a facility (such
as a yacht or hunting lodge) for an activity
usually considered entertainment,
amusement, or recreation.
Amounts treated as compensation.
The organization generally may be able to
deduct otherwise nondeductible travel,
meals, and entertainment expenses if the
amounts are treated as compensation
and reported on Form W-2 for an
employee or Form 1099-MISC for an
independent contractor.
However, if the recipient is an officer or
director, the deduction for otherwise
nondeductible meals, travel and
entertainment expenses, is limited to the
amount treated as compensation. See
section 274(e)(2) and Notice 2005-45,
2005-24 I.R.B. 1228.

Certain Expenses For Which
Credits Are Allowable
For each of the credits listed below, the
organization must reduce the otherwise
allowable deductions for expenses used
to figure the credit by the amount of the
current year credit:
1. The credit for increasing research
activities,
2. The enhanced oil recovery credit,
3. The disabled access credit,
4. The employer credit for social
security and Medicare taxes paid on
certain employee tips,
5. The credit for employer-provided
child care,
6. The orphan drug credit,
7. The credit for small employer
pension plan startup, and
8. The low sulfur diesel fuel
production credit.
If the organization has any of these
credits, be sure to figure each current
year credit before figuring the deduction
for expenses on which the credit is based.

Business Startup Expenses
Business startup and organizational costs
must be capitalized unless an election is
made to amortize them. For cost paid or

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incurred before October 23, 2004, the
organization must capitalize them unless
it elects to amortize these cost over a
period of 60 months or more. For cost
paid or incurred after October 23, 2004,
the following rules apply separately to
each category of cost.
• The organization can elect to deduct up
to $5,000 of such cost for the year the
organization begins business operations.
• The $5,000 deduction is reduced (but
not below zero) by the amount the total
costs exceed $50,000. If the total costs
are $55,000 or more, the deduction is
reduced to zero.
• If the election is made, any costs that
are not deducted must be amortized
ratably over a 180-month period.
In all cases, the amortization period
begins the month the corporation begins
operations. For more details on the
election for business start-up and
organizational costs, see Pub. 535.
For more details on the election for
business start-up costs, see section 195
and attach the statement required by
Regulations section 1.195-1(b). For more
details on the election for organizational
costs, see section 248 and attach the
statement required by Regulation section
1.248-1(c). Report the deductible amount
of these costs and any amortization on
line 28 (line 16, Form 990-EZ). For
amortization that begins during the 2005
tax year, complete and attach Form 4562.

Enter the cost of incidental repairs and
maintenance not claimed elsewhere on
the return, such as labor and supplies,
that do not add to the value or
appreciably prolong the life of the
property.

interest that was for the use of the loan
before January 1, 2006.
• Straddle interest. Generally, the
interest and carrying charges on straddles
cannot be deducted and must be
capitalized. See section 263(g).
• Original issue discount. See section
163(e)(5) for special rules for the
disqualified portion of original issue
discount on a high yield discount
obligation.
• Related party interest. Certain interest
paid or accrued by the organization
(directly or indirectly) to a related person
may be limited if no tax is imposed on
such interest. See section 163(j) for more
details.
• Interest on certain underpayments
of tax. Interest paid or incurred on any
portion of an underpayment of tax that is
attributable to an understatement arising
from an undisclosed listed transaction or
an undisclosed reportable avoidance
transaction (other than a listed
transaction) entered into in tax years
beginning after October 22, 2004.
• Interest allocable to the production
of designated property. Do not deduct
interest on debt allocable to the
production of designated property.
Interest that is allocable to such property
produced by an organization for its own
use or for sale must be capitalized. An
organization must also capitalize any
interest on debt allocable to an asset
used to produce the above property. See
section 263A(f) and Regulations sections
1.263A-8 through 1.263A-15 for
definitions and more information.
• Interest on below-market loans. See
section 7872 for special rules regarding
the deductibility of foregone interest on
certain below-market-rate loans.

Line 17—Bad Debts

Line 19—Taxes and Licenses

Enter the total receivables from unrelated
business activities that were previously
included in taxable income and that
became worthless in whole or in part
during the tax year.

Enter taxes and license fees paid or
accrued during the year, but do not
include the following:
• Federal income taxes.
• Foreign or U.S. possession income
taxes if a tax credit is claimed. For special
rules on possession income taxes, see
the Instructions for Form 5735,
Possessions Corporation Tax Credit
(Under Sections 936 and 30A).
• Taxes not imposed on your
organization.
• Taxes, including state or local sales
taxes, paid or incurred in connection with
an acquisition or disposition of property
(these taxes must be treated as part of
the cost of the acquired property or, in the
case of a disposition, as a reduction in the
amount realized on the disposition).
• Taxes assessed against local benefits
that increase the value of the property
assessed (such as for paving, etc.).
• Taxes deducted elsewhere on the
return, such as those reflected in cost of
good sold.

Line 16—Repairs and
Maintenance

Line 18—Interest
Attach a separate schedule listing the
interest being claimed on this line.
• Interest allocation. If the proceeds of
a loan were used for more than one
purpose (for example, to purchase a
portfolio investment and to acquire an
interest in a passive activity), an interest
allocation must be made. See Temporary
Regulations section 1.163-8T for the
interest allocation rules.
• Tax-exempt interest. Do not include
interest on indebtedness incurred or
continued to purchase or carry
obligations, on which the interest income
is totally exempt from income tax. For
exceptions, see section 265(b).
• Prepaid interest. Generally, a cash
basis taxpayer cannot deduct prepaid
interest allocable to years following the
current tax year. For example, in 2005 a
cash basis calendar year taxpayer
prepaid interest on a loan. The taxpayer
can deduct only that part of the prepaid

See section 164(d) for apportionment
of taxes on real property between the
buyer and seller.

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Line 20—Charitable
Contributions
Enter contributions or gifts actually paid
within the tax year to or for the use of
charitable and governmental
organizations described in section 170(c).
Also, enter any unused contributions
carried over from earlier years. The
deduction for contributions will be allowed
whether or not directly connected with the
carrying on of a trade or business.
Contributions made in January 2005
for the Indian Ocean Tsunami Relief are
not deductible if a deduction was taken on
the 2004 tax return.
Corporations. The total amount claimed
normally cannot be more than 10% of
unrelated business taxable income
figured without regard to the deduction for
charitable contributions. The limitation
however, on charitable contributions is
suspended temporarily. The suspension
applies only to cash contributions made
during the period beginning on August 28,
2005, and ending on December 31, 2005.
Organizations must make an

TIP election and are required to
substantiate that qualified cash
contributions are for relief efforts related
to Hurricanes Katrina, Rita, or Wilma. If
the organization’s contribution will exceed
the 10% limitation, attach a statement to
the organization’s tax return indicating the
amount of contributions subject to the
10% limitation and the amount of qualified
contributions for relief efforts related to
Hurricanes Katrina, Rita, or Wilma. See
section 1400S.
Contributions of food inventory. An
enhanced deduction for contributions of
food inventory is available to any trade or
business of any taxpayer providing food
to the ill, needy, or infants.
Donations of educational books. An
enhanced deduction is available to certain
corporations contributing qualified
educational books to a public school
providing elementary or secondary
education.
A school providing elementary or
secondary education is an educational
organization that normally maintains a
regular faculty and curriculum and
normally has a regularly enrolled body of
students in attendance at the place where
its educational activities are regularly
carried on. The enhanced deduction is
not allowed unless the donee
organization certifies in writing that the
contributed books are suitable, in terms of
currency, content, and quantity, for use in
the donee’s educational programs and
that the donee will use the books in such
educational programs. See section
170(e)(3)(D).
Charitable contributions over the 10%
limitation cannot be deducted for the tax
year, but may be carried over to the next
5 tax years.
In figuring the charitable contributions
deduction, if the corporation has an NOL
carryover to the tax year, the 10% limit is
applied using the taxable income after

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taking into account any deduction for the
NOL.
To figure the amount of any remaining
NOL carryover to later years, taxable
income must be modified. See section
172(b). To the extent charitable
contributions are used to reduce taxable
income for this purpose and increase a
net operating loss carryover, a
contributions carryover is not allowed.
See section 170(d)(2)(B).
Corporations on the accrual basis can
elect to deduct contributions paid by the
15th day of the 3rd month after the end of
the tax year if the contributions are
authorized by the board of directors
during the tax year. Attach a declaration
to the return stating that the resolution
authorizing the contributions was adopted
by the board of directors during the tax
year. The declaration must also include
the date the resolution was adopted.
Trusts. In general:
1. For contributions to organizations
described in section 170(b)(1)(A), the
amount claimed may not be more than
50% of the unrelated business taxable
income figured without this deduction;
and
2. For contributions to other
organizations, the amount claimed may
not be more than the smaller of:
a. 30% of unrelated business taxable
income figured without this deduction; or
b. The amount by which 50% of the
unrelated business taxable income is
more than the contributions allowed in 1
above.
Contributions not allowable in

TIP whole or in part because of the
limitations may not be deducted
as a business expense, but may be
carried over to the next 5 tax years.
Substantiation requirements.
Generally, no deduction is allowed for any
contribution of $250 or more, unless the
organization gets a written
acknowledgement from the donee
organization that shows the amount of
cash contributed, describes any property
contributed, and either gives a description
and a good faith estimate of the value of
any goods or services provided in return
for the contribution or states that no
goods or services were provided in return
for the contribution. The
acknowledgement must be obtained by
the due date (including extensions) of the
organization’s return, or, if earlier, the
date the return is filed. However, see
section 170(f)(8) and the related
regulations for exceptions to this rule. Do
not attach the acknowledgement to the
return, but keep it with the organization’s
records.
These rules apply in addition to the
filing requirements for Form 8283,
Noncash Charitable Contributions,
discussed below. Special rules and limits
apply to contributions:
• To organizations conducting lobbying
activities, see section 170(f)(9).
• Of property other than cash, see
Regulations section 1.170A-13(c).

• Of inventory and other property to

certain organizations for use in the care of
the ill, needy, or infants, see section
170(e) and Regulations section
1.170A-4A.
• Of scientific equipment used for
research to institutions of higher learning
or to certain scientific research
organizations (other than by personal
holding companies and service
organizations), see section 170(e)(4).
• Of computer technology and equipment
for educational purposes, see section
170(e)(6).
For more information on charitable
contributions, including substantiation and
recordkeeping requirements, see section
170, the related regulations, and Pub.
526, Charitable Contributions.

Line 21—Depreciation
Besides depreciation, include on line 21
the part of the cost, under section 179,
that the organization elected to expense
for certain tangible property placed in
service during tax year 2005 or carried
over from 2004. See Form 4562,
Depreciation and Amortization, and its
instructions.

Line 23—Depletion
See sections 613 and 613A for
percentage depletion rates for natural
deposits. Attach Form T, Forest Activities
Schedules, if a deduction is taken for
depletion of timber.

Line 24—Contributions to
Deferred Compensation Plans
Employers who maintain pension,
profit-sharing, or other funded deferred
compensation plans are generally
required to file Form 5500. This
requirement applies whether or not the
plan is qualified under the Internal
Revenue Code and whether or not a
deduction is claimed for the current tax
year. Section 6652(e) imposes a penalty
for late filing of these forms. In addition,
there is a penalty for overstating the
pension plan deduction. See section
6662(f).

Line 25—Employee Benefit
Programs
Enter the amount of contributions to
employee benefit programs (such as,
insurance, health and welfare programs)
that are not an incidental part of a
deferred compensation plan included on
line 24.

Line 28—Other Deductions
Enter on this line the deduction taken for
amortization (see Form 4562) as well as
other authorized deductions for which no
space is provided on the return. Attach a
separate schedule listing the deductions
claimed on this line. Deduct only items
directly connected with the unrelated
trade or business for which income is
reported in Part I.
Domestic production activities.
Complete Form 8903 and enter the
deduction on this line.

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Deductions related to property leased
to tax-exempt entities. For property
leased to a governmental or other
tax-exempt entity, or in the case of
property acquired after March 12, 2004,
that is treated as tax-exempt use property
other than by reason of a lease, the
organization may not claim deductions
related to the property to the extent that
they exceed the organization’s income
from the lease payments. Amounts
disallowed may be carried over to the
next year and treated as a deduction with
respect to the property. See section 470
for more information.
Energy Efficient Commercial
Buildings. You may deduct expenses for
energy efficient commercial buildings
placed in service after December 31,
2005. See section 179D.
Do not deduct fines or penalties paid
to a government for violating any law.

Line 31—Net Operating Loss
(NOL) Deduction
The NOL deduction is the total of the net
operating loss carryovers and carrybacks
that can be deducted in the tax year. To
be deductible, an NOL must have been
incurred in an unrelated trade or business
activity. See section 172(a).
Certain electric utility companies may
elect a carryback period of five years for
NOLs arising in tax years 2003, 2004,
and 2005. The election may be made
during any tax year ending after
December 31, 2005, and before January
1, 2009. See section 172(b)(1)(l).
If any portion of any NOL is a qualified
Gulf Opportunity Zone loss that was paid
or incurred after August 27, 2005, and
before January 1, 2008, the amount of the
NOL may be eligible for a five-year
carryback. See section 1400N(k) and
Pub. 4492 for more information.
Enter on line 31, the total NOL
carryover from other tax years, but do not
enter more than the amount shown on
line 30. Attach a schedule showing the
computation of the NOL deduction. The
amount of an NOL carryback or carryover
is determined under section 172. See
Regulations section 1.512(b)-1(e). For
more information about NOLs, see Pub.
536, Net Operating Losses.

Line 33—Specific Deduction
A specific deduction of $1,000 is allowed
except for computing the net operating
loss and the net operating loss deduction
under section 172.
Only one specific deduction may be
taken, regardless of the number of
unrelated businesses conducted.
However, a diocese, province of a
religious order, or convention or
association of churches is allowed one
specific deduction for each parish,
individual church, district, or other local
unit that regularly conducts an unrelated
trade or business. This applies only to
those parishes, districts, or other local
units that are not separate legal entities,
but are components of a larger entity
(diocese, province, convention, or

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association). Each specific deduction will
be the smaller of $1,000 or the gross
income from any unrelated trade or
business the local unit conducts. If you
claim a total specific deduction larger than
$1,000, attach a schedule showing how
you figured the amount.
The diocese, province of a religious
order, or convention or association of
churches must file a return reporting the
gross income and deductions of all its
units that are not separate legal entities.
These local units cannot file separate
returns because they are not separately
incorporated. Local units that are
separately incorporated must file their
own returns and cannot be included with
any other entity except for a title holding
company. See the instructions under
Consolidated Returns on page 5.
For details on the specific deduction,
see section 512(b)(12) and the related
regulations.

directly or indirectly own stock
possessing:
• At least 80% of the total combined
voting power of all classes of stock
entitled to vote or at least 80% of the total
value of shares of all classes of the stock
of each corporation, and
• More than 50% of the total combined
voting power of all classes of stock
entitled to vote or more than 50% of the
total value of shares of all classes of
stock of each corporation, taking into
account the stock ownership of each such
person only to the extent such stock
ownership is identical with respect to
each such corporation.
The definition of brother-sister group
does not include the first bullet above, but
only for purposes of the taxable income
brackets, alternative minimum tax
exemption amounts, and accumulated
earnings credit.

Lines 35a and 35b

Combined group. A combined group
is three or more corporations each of
which is a member of a parent-subsidiary
group or a brother-sister group, and one
of which is:
• A common parent corporation included
in a group of corporations in a
parent-subsidiary group, and also
• Included in a group of corporations in a
brother-sister group.
For more details on controlled groups,
see section 1563.

Corporate members of a controlled
group, as defined in section 1563, must
check the box on line 35 and complete
lines 35a and 35b.

Members of a controlled group are
entitled to one $50,000, one $25,000, and
one $9,925,000 taxable income bracket
amount (in that order) on line 35a.

Part III—Tax Computation
If the organization is making a
section 965 election, see the
CAUTION instructions for Parts III and IV of
Form 8895, One-Time Dividends
Received Deduction for Certain Cash
Dividends from Controlled Foreign
Corporations, before computing its tax.

!

The term “controlled group” means any
parent-subsidiary group, brother-sister
group, or combined group. See the
definitions below.
Parent-subsidiary group.
Parent-subsidiary group parent-subsidiary
group is one or more chains of
corporations connected through stock
ownership with a common parent
corporation if:
• Stock possessing at least 80% of the
total combined voting power of all classes
of stock entitled to vote or at least 80% of
the total value of shares of all classes of
stock of each of the corporations, except
the common parent corporation, is directly
or indirectly owned by one or more of the
other corporations; and
• The common parent corporation
directly or indirectly owns stock
possessing at least 80% of the total
combined voting power of all classes of
stock entitled to vote or at least 80% of
the total value of shares of all classes of
stock of at least one of the other
corporations, excluding, in computing
such voting power or value, stock owned
directly by such other corporation.
Brother-sister group. A
brother-sister group is two or more
corporations of 5 or fewer persons who
are individuals, estates, or trusts who

When a controlled group adopts or
later amends an apportionment plan,
each member must attach to its tax return
a copy of its consent to this plan. The
copy (or an attached statement) must
show the part of the amount in each
taxable income bracket apportioned to
that member. See Regulations section
1.1561-3(b) for other requirements and
for the time and manner of making the
consent.
Equal apportionment plan. If no
apportionment plan is adopted, members
of a controlled group must divide the
amount in each taxable income bracket
equally among themselves. For example,
Controlled Group AB consists of
Corporation A and Corporation B. They
do not elect an apportionment plan.
Therefore, Corporation A and Corporation
B are each entitled to $25,000 (one-half
of $50,000) in the $50,000 taxable
income bracket on line 35a(1), $12,500
(one-half of $25,000) in the $25,000
taxable income bracket on line 35a(2),
and $4,962,500 (one-half of $9,925,000)
in the $9,925,000 taxable income bracket
on line 35a(3).
Unequal apportionment plan.
Members of a controlled group may elect
an unequal apportionment plan and divide

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the taxable income brackets as they want.
There is no need for consistency among
taxable income brackets. Any member of
the controlled group may be entitled to all,
some, or none of the taxable income
bracket. However, the total amount for all
members cannot be more than the total
amount in each taxable income bracket.
Additional 5% tax and additional 3%
tax. Members of a controlled group are
treated as one corporation to figure the
applicability of the additional 5% tax that
must be paid by corporations with taxable
income over $100,000 and the additional
3% tax that must be paid by corporations
with taxable income over $15 million. If
either additional tax applies, each
member of the controlled group will pay
that tax based on the part of the amount
that is used in each taxable income
bracket to reduce that member’s tax. See
section 1561(a). Each member must
enter its share of the additional 5% tax on
line 35b(1) and its share of the additional
3% tax on line 35b(2) and attach to its tax
return a schedule that shows the taxable
income of the entire group, as well as
how its share of the additional tax was
figured.

Lines 35c and 36
Deferred tax amount under section
1291. If your organization has an excess
distribution from a passive foreign
investment company (PFIC) that is
taxable as unrelated business taxable
income, the organization may owe the
deferred tax amount defined in section
1291(c)(1). The portion of the deferred tax
amount that is the aggregate increases in
taxes (described in section 1291(c)(2))
must be included in the amount entered
on line 35c or 36. Write to the left of line
35c or 36, “Sec. 1291” and the amount.
Do not include on line 35c or 36 the
portion of the deferred tax amount that is
the aggregate amount of interest
determined under section 1291(c)(3).
Instead, write “Sec. 1291 interest” and the
amount in the bottom right margin of page
2, Form 990-T. See Part IV of Form 8621,
Return by a Shareholder of a Passive
Foreign Investment Company or Qualified
Electing Fund.

Line 35c —Corporations
Use the Tax Rate Schedule for
Corporations shown on page 14 to figure
the tax.
Members of a controlled group
use the Tax Computation
CAUTION Worksheet for Members of a
Controlled Group on page 14 to figure the
tax. Members of a controlled group
should see the instructions above for
lines 35a and 35b. Members of a
controlled group must attach a statement
showing the computation of the tax
entered on line 35c.

!

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Tax Rate Schedule for Corporations
(Internal Revenue Code – Section 11)

Tax Rate Schedule Trust
(Internal Revenue Code – Section 1(e))

If the amount on line 34, page 1 is:
If the amount on line 34, page 1 is:

Over —

But not
over —

Tax is:

Of the
amount
over —

$0
$50,000
15%
$0
50,000
75,000
$ 7,500 + 25%
50,000
75,000
100,000
13,750 + 34%
75,000
100,000
335,000
22,250 + 39% 100,000
335,000 10,000,000
113,900 + 34% 335,000
10,000,000 15,000,000 3,400,000 + 35% 10,000,000
15,000,000 18,333,333 5,150,000 + 38% 15,000,000
18,333,333
----35%
0

Tax Computation Worksheet for
Members of a Controlled Group
(Keep for your records)
Each member of a controlled group must compute the tax
using the computation below:

1. Enter unrelated business taxable
income (line 34, page 1, Form 990-T)
2. Enter line 1 or corporation’s share of
the $50,000 taxable income bracket,
whichever is less . . . . . . . . . . . . .
3. Subtract line 2 from line 1 . . . . . . . .
4. Enter line 3 or corporation’s share of
the $25,000 taxable income bracket,
whichever is less . . . . . . . . . . . . .
5. Subtract line 4 from line 3 . . . . . . . .
6. Enter line 5 or corporation’s share of
the $9,925,000 taxable income bracket,
whichever is less . . . . . . . . . . . . .
7. Subtract line 6 from line 5 . . . . . . . .
8. Enter 15% of line 2 . . . . . . . . . . . .
9. Enter 25% of line 4 . . . . . . . . . . . .
10. Enter 34% of line 6 . . . . . . . . . . . .
11. Enter 35% of line 7 . . . . . . . . . . . .
12. If the taxable income of the controlled
group exceeds $100,000, enter this
member’s share of the smaller of: (a)
5% of the excess over $100,000, or (b)
$11,750 (see instructions for additional
5% and additional 3% tax). . . . . . . .
13. If the taxable income of the controlled
group exceeds $15 million, enter this
member’s share of the smaller of: (a)
3% of the excess over $15 million, or
(b) $100,000 (see instructions for
additional 5% and additional 3% tax).
14. Add lines 8 through 13. Enter here and
on line 35c, page 2, Form 990-T . . . .

Line 36 —Trusts
Trusts exempt under section 501(a),
which otherwise would be subject to
subchapter J (estates, trusts, etc.), are
taxed at trust rates. This rule also applies
to employees’ trusts that qualify under
section 401(a). Most trusts figure the tax
on the amount on line 34 using the Tax
Rate Schedule for Trusts, below. If the tax
rate schedule is used, enter the tax on
line 36 and check the “tax rate schedule”
box on line 36. If the trust is eligible for
the rates on net capital gains, complete
Schedule D (Form 1041) and enter the
tax from Schedule D (Form 1041) on
page 2, line 36. Check the “Schedule D”
box on line 36 and attach Schedule D
(Form 1041) to Form 990-T.

Over —

But not
over —

Tax is:

$0
2,000
4,700
7,150
9,750

$2,000
4,700
7,150
9,750
-----

15%
$ 300 + 25%
975 + 28%
1,661 + 33%
2,519 + 35%

Of the
amount
over —
$0
2,000
4,700
7,150
9,750

Line 37—Proxy Tax
To pay the section 6033(e)(2) proxy tax
on nondeductible lobbying and political
expenditures, enter the proxy tax on line
37 and attach a schedule showing the
computation.
Exempt organizations, except section
501(c)(3) and certain other organizations,
must include certain information regarding
lobbying expenditures on Form 990. In
addition, organizations may have to
provide notices to members regarding
their share of dues to which the
expenditures are allocable. See Form 990
instructions and Rev. Proc. 98-19, 1998-1
C.B. 547 for exceptions and other details.
If the organization elects not to provide
the notices described above, it must pay
the proxy tax described in section
6033(e)(2). If the organization does not
include the entire amount of allocable
dues in the notices, it may have to pay
the proxy tax. This tax is not applicable to
section 501(c)(3) organizations. Figure
the proxy tax by multiplying the aggregate
amount not included in the notices
described above by 35%. No deductions
are allowed.

Line 38—Alternative Minimum
Tax
Organizations liable for tax on unrelated
business taxable income may be liable for
alternative minimum tax on certain
adjustments and tax preference items.
Trusts attach Schedule I, Alternative
Minimum Tax, of Form 1041 and enter
any tax from Schedule I on this line. A
corporation, unless it is treated as a
“small corporation” exempt from the
alternative minimum tax, may have to
attach Form 4626, Alternative Minimum
Tax — Corporations, and enter any tax
from Form 4626 on this line. See the
Instructions for Form 4626 for the
definition of a small corporation.

Part IV—Tax and
Payments
Line 40a—Foreign Tax Credit
• Corporations. See Form 1118,

Foreign Tax Credit — Corporations, for an
explanation of when a corporation can
take this credit for payment of income tax
to a foreign country or U.S. possession.
• Trusts. See Form 1116, Foreign Tax
Credit (Individual, Estate, Trust, or
Nonresident Alien Individual), for rules on

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how the trust computes the foreign tax
credit.
Complete the form that applies to the
organization and attach the form to its
Form 990-T. Enter the credit on this line.

Line 40b—Other Credits
• Possessions tax credit. The Small

Business Job Protection Act of 1996
repealed the possessions credit.
However, existing claimants may qualify
for a credit under the transitional rules.
See the Instructions for Form 5735.
• Nonconventional source fuel credit
(calendar year filers only). For tax
years ending on December 31, 2005, use
Form 8907, Nonconventional Source Fuel
Credit, to figure the credit for the sale of
qualified fuels produced from a
nonconventional source. Include the
amount from line 23 in the total for line
40b, Form 990-T.
Note. For tax years ending after
December 31, 2005, the nonconventional
source fuel credit is a general business
credit included on Form 3800.
• Qualified electric vehicle credit.
Include on line 40b any credit from Form
8834, Qualified Electric Vehicle Credit.
Vehicles that qualify for this credit are not
eligible for the deduction for clean-fuel
vehicles under section 179A.
• Clean renewable energy bond credit
and gulf bond credit. Complete and
attach Form 8912.

Line 40c—General Business
Credit
Enter on line 40c the organization’s total
general business credit.
If the organization is filing Form 6478,
Credit for Alcohol Used as Fuel; or Form
8835 (see list below) with a credit from
Section B; check the “Form(s)” box, enter
the form number in the space provided,
and include the allowable credit on line
40c.
Complete Form 3800, General
Business Credit, if the organization has:
1. Two or more of the credits listed
below;
2. A credit carryforward or carryback
(including one from an ESOP credit);
3. A passive activity credit (other than
the low-income housing credit); or
4. General credits from an electing
large partnership.
Enter the amount of the general
business credit on line 40c and check the
Form 3800 box on that line. Attach Form
3800 and the other applicable credit
forms to Form 990-T.
Form 3800 is not required if the
organization has only one of the general
business credits (and items 2-4 above do
not apply). Instead, attach the applicable
credit form(s) to the return; check the
“Form(s)” box; specify the form number(s)
in the space provided, and include the
amount of the credit(s) on line 40c.

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For Form 990-T filers, the general
business credit includes:
• Form 3468, Investment Credit,
including the following new credits.
1. Credit for qualifying gasification
project.
2. Credit for qualifying advanced coal
project.
• Form 6765, Credit for Increasing
Research Activities.
• Form 8586, Low-Income Housing
Credit.
• Form 8830, Enhanced Oil Recovery
Credit.
• Form 8826, Disabled Access Credit.
• Form 8835, Renewable Electricity and
Refined Coal, and Indian Coal Production
Credit.
• Form 8846, Credit for Employer Social
Security and Medicare Taxes Paid on
Certain Employee Tips.
• Form 8820, Orphan Drug Credit.
• Form 8881,Credit for Small Employer
Pension Startup Costs.
• Form 8882, Credit for
Employer-Provided Child Care Facilities
and Services.
• Form 8900, Qualified Railroad Track
Maintenance Credit.
• Form 8864, Biodiesel and Renewable
Diesel Fuels Credit.
• Form 8896, Low Sulfur Diesel Fuel
Production Credit.
• Form 8847, Credit for Contributions to
Selected Community Development
Corporations.
• 5884-A, Credits for Employers Affected
by Hurricanes Katrina, Rita, or Wilma.

Line 40d—Credit for Prior Year
Minimum Tax
Use Form 8801 to figure the minimum tax
credit and any carryforward of that credit
for trusts. For corporations, use
Form 8827.

Line 42—Other Taxes
Recapture of investment credit. If
property is disposed of, or ceases to be
qualified property, before the end of the
recapture period or the useful life
applicable to the property, there may be a
recapture of the credit. See Form 4255,
Recapture of Investment Credit.
Recapture of low-income housing
credit. If the organization disposed of
property (or there was a reduction in the
qualified basis of the property) for which it
took the low-income housing credit, it may
owe a tax. See Form 8611, Recapture of
Low-Income Housing Credit, and section
42(j) for details.
Interest due under the look-back
method. If the organization used the
look-back method for certain long-term
contracts, see Form 8697 for information
on figuring the interest the organization
may have to include. The organization
may also have to include interest due
under the look-back method for property
depreciated under the income forecast
method. See Form 8866, Interest
Computation Under the Look-Back
Method for Property Depreciated Under
the Income Forecast Method.

Other. Additional taxes and interest
amounts may be included in the total
entered on line 42. Check the box for
“Other” if the organization includes any of
the taxes and interest discussed below.
See How to report, below, for details on
reporting these amounts on an attached
schedule.
• Recapture of qualified electric vehicle
(QEV) credit. The organization must
recapture part of the QEV credit it claimed
in a prior year if within 3 years of the date
the vehicle was placed in service, it
ceases to qualify for the credit. See
Regulations section 1.30-1 for details on
how to figure the recapture.
• Tax and interest on a nonqualified
withdrawal from a capital construction
fund (section 7518).
• Interest on deferred tax attributable to
(a) installment sales of certain timeshares
and residential lots (section 453(l)(3)) and
(b) certain nondealer installment
obligations (section 453A(c)).
• Interest due on deferred gain
(section 1260(b)).
• If the organization makes the election
to be taxed on its income from qualifying
shipping activities, complete and attach
Form 8902 to Form 990-T. See Income
from qualifying shipping activities
on page 8.
How to report. If the organization
checked the “Other” box, attach a
schedule showing the computation of
each item included in the total for line 42.
In addition, identify (a) the applicable
Code section, (b) the type of tax or
interest, and (c) enter the amount of tax
or interest. For example, if the
organization is reporting $100 of tax due
from the recapture of the QEV credit,
write “Section 30-QEV recapture
tax-$100” on the attached schedule.

Line 43—Total Tax
Include any deferred tax on the
termination of a section 1294 election
applicable to shareholders in a qualified
electing fund in the amount entered on
line 43. See Form 8621, Part V, and How
to report, below.
Subtract from the total entered on line
43 any deferred tax on the corporation’s
share of undistributed earnings of a
qualified electing fund (see Form 8621,
Part II).
How to report. Attach a schedule
showing the computation of each item
included in, or subtracted from, the total
on line 43. On the dotted line next to line
43, specify (a) the applicable Code
section, (b) the type of tax, and (c) enter
the amount of tax.

Line 44d—Foreign
Organizations
Enter the tax withheld on unrelated
business taxable income from U.S.
sources that is not effectively connected
with the conduct of a trade or business
within the United States. Attach Form
1042-S, Foreign Person’s U.S. Source
Income Subject to Withholding, or other
form which verifies the withheld tax
reported on line 44d.

Line 44e—Backup Withholding
Recipients of dividend or interest
payments must generally certify their
correct tax identification number to the
bank or other payer on Form W-9. If the
payer does not get this information, it
must withhold part of the payments as
“backup withholding.” If your organization
was subject to erroneous backup
withholding because the payer did not
realize you were an exempt organization
and not subject to this withholding, you
can claim credit for the amount withheld
by including it on line 44e. See Backup
withholding under Which Parts To
Complete on page 5.

Line 44f—Other Credits and
Payments
Check the appropriate box(es) and enter:
• From Form 2439, the credit from
regulated investment company (RIC) or
real estate investment trust (REIT). Also,
attach Form 2439, Notice to Shareholder
of Undistributed Long-Term Capital
Gains. If you are filing a composite Form
990-T, see Composite Form 990-T under
Which Parts To Complete on page 5 of
these instructions.
• From Form 4136, the credit for federal
tax paid on fuels. Also, attach Form 4136,
Credit for Federal Tax Paid on Fuels, if
the organization qualifies to take this
credit.
• The credit for ozone-depleting
chemicals. Include any credit the
organization is claiming under section
4682(g) for taxes paid on chemicals used
as propellants in metered-dose inhalers.
After entering these amounts in the
appropriate spaces, add them all together
and enter the total on line 44f.
Form 8849, Claim for Refund of

TIP Excise Taxes, may be used to
claim a periodic refund of excise
taxes instead of waiting to claim a credit
on Form 4136. See the instructions for
Form 8849 and Pub. 378, Fuel Tax
Credits and Refunds, for more
information.

Line 44b—Estimated Tax

Line 47—Tax Due

Enter the total estimated tax payments
made for the tax year.
If an organization is the beneficiary of
a trust, and the trust makes a section
643(g) election to credit its estimated tax
payments to its beneficiaries, include the
organization’s share of the estimated tax
payment in the total amount entered here.
In the entry space to the left of line 44b,
write “T” and the amount attributable to it.

Domestic organizations owing less than
$500 and foreign organizations that do
not have an office or place of business in
the United States should enclose a check
or money order (in U.S. funds), made
payable to the “United States Treasury,”
with Form 990-T.

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Domestic organizations owing $500 or
more and foreign organizations with an
office or place of business in the United

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States should see Depository Method of
Tax Payment on page 3.

Part V—Statements
Regarding Certain
Activities and Other
Information
Complete all items in Part V.
Line 1. Check “Yes” if either 1 or 2 below
applies:
1. At any time during the year the
organization had an interest in or
signature or other authority over a
financial account in a foreign country
(such as a bank account, securities
account, or other financial account); and
a. The combined value of the
accounts was more than $10,000 at any
time during the year; and
b. The accounts were not with a U.S.
military banking facility operated by a U.S.
financial institution.
2. The organization owns more than
50% of the stock in any corporation that
would answer “Yes” to item 1 above.
If the “Yes” box is checked, write the
name of the foreign country or countries.
Attach a separate sheet if more space is
needed.
Get Form TD F 90-22.1, Report of
Foreign Bank and Financial Accounts, to
see if the organization is considered to
have an interest in or signature or other
authority over a financial account in a
foreign country (such as a bank account,
securities account, or other financial
account). The organization can obtain
Form TD F 90-22.1 from the IRS Forms
Distribution Center or by calling
1-800-TAX-FORM (1-800-829-3676) or
by downloading it from the IRS website at
www.irs.gov. If the organization is
required to file this form, file it by June 30,
2006, with the Department of the
Treasury at the address shown on the
form. Do not file it with the IRS or attach it
to Form 990-T.
Line 2. The organization may be required
to file Form 3520, Annual Return To
Report Transactions With Foreign Trusts
and Receipt of Certain Foreign Gifts, if:
• It directly or indirectly transferred
money or property to a foreign trust. For
this purpose, any U.S. person who
created a foreign trust is considered a
transferor.
• It is treated as the owner of any part of
the assets of a foreign trust under the
grantor trust rules.
• It received a distribution from a foreign
trust.
For more information, see the
instructions for Form 3520.
An owner of a foreign trust must
ensure that the trust files an
CAUTION annual information return on Form
3520-A, Annual Information Return of
Foreign Trust With a U.S. Owner. For
details, see the Instructions for Form
3520-A.
Line 3. Report any tax-exempt interest
received or accrued in the space

!

provided. Include any exempt-interest
dividends received as a shareholder in a
mutual fund or other regulated investment
company.

Signature
Corporations. The return must be
signed and dated by the president, vice
president, treasurer, assistant treasurer,
chief accounting officer, or by any other
corporate officer (such as tax officer)
authorized to sign. Receivers, trustees, or
assignees must also sign and date any
return filed on behalf of the organization.
Trusts. The return must be signed and
dated by the individual fiduciary, or by the
authorized officer of the trust receiving or
having custody or control and
management of the income of the trust. If
two or more individuals act jointly as
fiduciaries, any one of them may sign.
Special rule for IRA trusts. A
trustee of IRA trusts may use a facsimile
signature if all of the following conditions
are met:
• Each group of returns sent to the IRS
must be accompanied by a letter signed
by the person authorized to sign the
returns declaring, under penalties of
perjury, that the facsimile signature
appearing on the returns is the signature
adopted by that person to sign the returns
filed and that the signature was affixed to
the returns by that person or at that
person’s direction.
• The letter must also list each return by
the name and EIN of the IRA trust.
• After the facsimile signature is affixed,
no entries on the return may be altered
other than to correct discernible arithmetic
errors.
• A manually signed copy (of the letter
submitted to the IRS with the returns and
a record of any arithmetic errors
corrected) must be retained on behalf of
the IRA trusts listed in the letter and it
must be available for inspection by the
IRS.
Paid preparer. If an officer of the
organization filled in its return, the paid
preparer’s space should remain blank.
Anyone who prepares the return but does
not charge the organization should not
sign the return. Certain others who
prepare the return should not sign. For
example, a regular, full-time employee of
the organization, such as a clerk,
secretary, etc., should not sign.
Generally, anyone who is paid to
prepare the organization’s tax return must
sign it and fill in the “Paid Preparer’s Use
Only” area.
The paid preparer must complete the
required preparer information:
• Sign the return in the space provided
for the preparer’s signature.
• Give a copy of the return to the
organization.
Note. A paid preparer may sign original
returns, amended returns or requests for
filing extensions by rubber stamp,
mechanical device or computer software
program.
Paid Preparer Authorization. If the
organization wants to allow the IRS to

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discuss its 2005 tax return with the paid
preparer who signed it, check the “Yes”
box in the signature area of the return.
This authorization applies only to the
individual whose signature appears in the
“Paid Preparer’s Use Only” section of its
return. It does not apply to the firm, if any,
shown in that section.
If the “Yes” box is checked, the
organization is authorizing the IRS to call
the paid preparer to:
• Give the IRS any information that is
missing from its return,
• Call the IRS for information about the
processing of its return or the status of its
refund or payment(s), and
• Respond to certain IRS notices that the
organization has shared with the preparer
about a math error, offsets, and return
preparation. The notices will not be sent
to the preparer.
The organization is not authorizing the
paid preparer to receive any refund
check, bind the organization to anything
(including any additional tax liability), or
otherwise represent the organization
before the IRS. If the organization wants
to expand the paid preparer’s
authorization, see Pub. 947, Practice
Before the IRS and Power of Attorney.
The authorization cannot be revoked.
However, the authorization will
automatically end no later than the due
date (excluding extensions) for filing the
2006 Form 990-T.

Schedule A—Cost of
Goods Sold
Generally, inventories are required at the
beginning and end of each tax year if the
production, purchase, or sale of
merchandise is an income-producing
factor. See Regulations section 1.471-1.
However, if the organization is a
qualifying taxpayer or a qualifying small
business taxpayer, it may adopt or
change its accounting method to account
for inventoriable items in the same
manner as materials and supplies that are
not incidental (unless its business is a tax
shelter (as defined in section 448(d)(3))).
A qualifying taxpayer is a taxpayer
that, for each prior tax year ending after
December 16, 1998, has average annual
gross receipts of $1 million or less for the
3-tax-year period ending with that prior
tax year.
A qualifying small business taxpayer is
a taxpayer (a) that, for each prior tax year
ending on or after December 31, 2000,
has average annual gross receipts of $10
million or less for the 3-tax-year period
ending with that prior tax year, and (b)
whose principle business activity is not an
ineligible activity.
Under this accounting method,
inventory cost for raw materials
purchased for use in producing finished
goods and merchandise purchased for
resale are deductible in the year the
finished goods or merchandise are sold
(but not before the year the organization
paid for the raw materials or

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merchandise, if it is also using the cash
method). For additional guidance on this
method of accounting for inventoriable
items, see Pub. 538 and the Instructions
for Form 3115.
Enter amounts paid for all raw
materials and merchandise during the tax
year on line 2. The amount the
organization can deduct for the tax year is
figured on line 7.
All filers not using the cash method of
accounting should see Section 263A
uniform capitalization rules in the
instructions for Limitations on Deductions
on page 9 before completing Schedule A.
The instructions for lines 4a, 4b, and 6
below apply to Schedule A.
Inventory valuation methods.
Inventories can be valued at:
1. Cost as described in Regulations
section 1.471-3,
2. Lower of cost or market as
described in Regulations section 1.471-4,
or
3. Any other method approved by the
IRS that conforms to the requirements of
the applicable regulations cited below.
However, if the organization is using
the cash method of accounting, it is
required to use cost.
A small producer is one whose
average annual gross receipts are $1
million or less. Small producers that
account for inventories in the same
manner as materials and supplies that are
not incidental may currently deduct
expenditures for direct labor and all
indirect costs that would otherwise be
included in inventory costs.
The average cost (rolling average)
method of valuing inventories generally
does not conform to the requirement of
the regulations. See Rev. Rul. 71-234,
1971-1 C.B. 148.
Organizations that use erroneous
valuation methods must change to a
method permitted for federal income tax
purposes. File Form 3115 to make this
change.
Inventory may be valued below cost
when the merchandise is unsalable at
normal prices, or unusable in the normal
way because the goods are subnormal
because of damage, imperfections, shop
wear, etc., within the meaning of
Regulations section 1.471-2(c). The
goods may be valued at the current bona
fide selling price, minus direct cost of
disposition (but not less than scrap value)
if such a price can be established.
If this is the first year the Last-in
First-out (LIFO) inventory method was
either adopted or extended to inventory
goods not previously valued under the
LIFO method provided in section 472,
attach Form 970, Application To Use
LIFO Inventory Method, or a statement
with the information required by
Form 970.
If the organization changed or
extended its inventory method to LIFO
and had to write up the opening inventory
to cost in the year of election, report the

effect of this write up as other income
(line 12, page 1) proportionately over a
3-year period that begins in the tax year
the LIFO election was made
(section 472(d)).
Schedule A, line 1. If the organization is
changing its method of accounting to no
longer account for inventories, it must
refigure last year’s closing inventory using
the new method of accounting and enter
the result on line 1. If there is a difference
between last year’s closing inventory and
the refigured amount, attach an
explanation and take it into account when
figuring the organization’s section 481(a)
adjustment (explained on page 6).
Schedule A, line 4a. An entry is required
on this line only for organizations that
have elected a simplified method of
accounting.
For organizations that have elected the
simplified production method, additional
section 263A costs are generally those
costs, other than interest, that are now
required to be capitalized under section
263A but that were not capitalized under
the organization’s method of accounting
immediately prior to the effective date of
section 263A. For details, see
Regulations section 1.263A-2(b).
For organizations that have elected the
simplified resale method, additional
section 263A costs are generally those
costs incurred with respect to the
following categories: off-site storage or
warehousing; purchasing; handling, such
as processing, assembling, repackaging,
and transporting; and general and
administrative costs (mixed service
costs). For details, see Regulations
section 1.263A-3(d).
Enter on line 4a the balance of section
263A costs paid or incurred during the tax
year not included on lines 2 and 3.
Schedule A, line 4b. Enter on line 4b
any costs paid or incurred during the tax
year not entered on lines 2 through 4a.
Schedule A, line 6. See Regulations
sections 1.263A-1 through 1.263A-3 for
details on figuring the amount of
additional section 263A costs to be
included in ending inventory.
If the organization accounts for
inventories in the same manner as
materials and supplies that are not
incidental, enter on line 6 the portion of its
raw materials and merchandise
purchased for resale that are included on
line 5 and were not sold during the year.

organizations, only the following rents are
taxable in Part I, line 6:
1. Rents from personal property
leased with real property, if the rents from
the personal property are more than 10%
of the total rents received or accrued
under the lease, determined at the time
the personal property is placed in service.
2. Rents from real and personal
property if:
a. More than 50% of the total rents
received or accrued under the lease are
for personal property; or
b. The amount of the rent depends on
the income or profits derived by any
person from the property leased (except
an amount based on a fixed percentage
of receipts or sales).
A redetermination of the percentage of
rent for personal property is required
when either:
1. There is an increase of 100% or
more by the placing of additional or
substitute personal property in service; or
2. There is a modification of the lease
that changes the rent charged.
Rents from both real and personal
property not taxable in Part I, line 6, may
be taxable on line 8 if the income is from
a controlled organization or on line 7 if the
property is debt-financed. Taxability of the
rents must be considered in that order;
that is, rents not taxed on line 6 may be
taxed on line 8 and rents not taxed on line
6 or line 8 may be taxed on line 7.
Rents from personal property that is
not leased with real property should be
reported on line 12 of Part I.
See Form 8582 (for trusts) or Form
8810 (for corporations) and section 469
for limitations on losses from rental
activities.

Schedule E—Unrelated
Debt-Financed Income
Schedule E applies to all organizations
except sections 501(c)(7), (9), and (17)
organizations.
When debt-financed property is held
for exempt purposes and other purposes,
the organization must allocate the basis,
debt, income, and deductions among the
purposes for which the property is held.
Do not include in Schedule E amounts
allocated to exempt purposes.
For section 514 purposes, do not
treat an interest in a qualified state
CAUTION tuition program (QSTP) as debt.
However, a QSTP’s investment income is
treated as debt-financed income if the
QSTP incurs indebtedness when
acquiring or improving income-producing
property.
Column 1 — Description of
debt-financed property. Any property
held to produce income is debt-financed
property if at any time during the tax year
there was acquisition indebtedness
outstanding for the property. When any
property held for the production of income
by an organization is disposed of at a

!

Schedule C—Rent Income
Section 501(c)(7), (9), and (17)
organizations, enter gross rents on Part I,
line 6, and applicable expenses on Part II,
lines 14 through 28. All rents except those
that are exempt function income must be
included.
All organizations that have applicable
rent income, other than section 501(c)(7),
(9), and (17) organizations, should
complete Schedule C on page 3 of the
return. For organizations other than
section 501(c)(7), (9), and (17)

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gain during the tax year, and there was
acquisition indebtedness outstanding for
that property at any time during the
12-month period before the date of
disposition, the property is debt-financed
property. Securities purchased on margin
are considered debt-financed property if
the liability incurred in purchasing them
remains outstanding.
Acquisition indebtedness is the
outstanding amount of principal debt
incurred by the organization to acquire or
improve the property:
1. Before the property was acquired
or improved, if the debt was incurred
because of the acquisition or
improvement of the property; or
2. After the property was acquired or
improved, if the debt was incurred
because of the acquisition or
improvement, and the organization could
reasonably foresee the need to incur the
debt at the time the property was
acquired or improved.
With certain exceptions, acquisition
indebtedness does not include debt
incurred by:
1. A qualified (section 401) trust in
acquiring or improving real property. See
section 514(c)(9) for more details.
2. A tax-exempt school (section
170(b)(1)(A)(ii)) and its affiliated support
organizations (section 509(a)(3)) for
indebtedness incurred after July 18, 1984.
3. An organization described in
section 501(c)(25) in tax years beginning
after December 31, 1986.
4. An obligation, to the extent that it is
insured by the Federal Housing
Administration, to finance the purchase,
rehabilitation, or construction of housing
for low and moderate income persons, or
indebtedness incurred by a small
business investment company licensed
after October 22, 2004, under the Small
Business Investment Act of 1958 if such
indebtedness is evidenced by a
debenture issued by such company under
section 303(a) of that Act, and held or
guaranteed by the Small Business
Administration (see section 514(c)(6)(B)
for limitations).
See Pub. 598 for additional exceptions
to the rules for debt-financed property.
Column 2. Income is not unrelated
debt-financed income if it is otherwise
included in unrelated business taxable
income. For example, do not include rents
from personal property shown in
Schedule C, or rents and interest from
controlled organizations shown in
Schedule F.
Column 4. Average acquisition
indebtedness for any tax year is the
average amount of the outstanding
principal debt during the part of the tax
year the property is held by the
organization. To figure the average
amount of acquisition debt, determine the
amount of the outstanding principal debt
on the first day of each calendar month
during that part of the tax year that the
organization holds the property. Add
these amounts together, and divide the

result by the total number of months
during the tax year that the organization
held the property. See section 514(a) and
the related regulations for property
acquired for an indeterminate price.
Column 5. The average adjusted basis
for debt-financed property is the average
of the adjusted basis of the property on
the first and last days during the tax year
that the organization holds the property.
Determine the adjusted basis of property
under section 1011. Adjust the basis of
the property by the depreciation for all
earlier tax years, whether or not the
organization was exempt from tax for any
of these years. Similarly, for tax years
during which the organization is subject to
tax on unrelated business taxable
income, adjust the basis of the property
by the entire amount of allowable
depreciation, even though only a part of
the deduction for depreciation is taken
into account in figuring unrelated
business taxable income.
If no adjustments to the basis of
property under section 1011 apply, the
basis of the property is cost.
See section 514(d) and the related
regulations for the basis of debt-financed
property acquired in a complete or partial
liquidation of a corporation in exchange
for its stock.
Column 7. The amount of income from
debt-financed property included in
unrelated trade or business income is
figured by multiplying the property’s gross
income by the percentage obtained from
dividing the property’s average acquisition
indebtedness for the tax year by the
property’s average adjusted basis during
the period it is held in the tax year. This
percentage cannot be more than 100%.
Column 8. For each debt-financed
property, deduct the same percentage (as
determined above) of the total deductions
that are directly connected to the income
(including the dividends-received
deductions allowed by sections 243, 244,
and 245). However, if the debt-financed
property is depreciable property, figure
the depreciation deduction by the straight
line method only, and enter the amount in
column 3(a).
For each debt-financed property,
attach schedules showing separately a
computation of the depreciation deduction
(if any) reported in column 3(a) and a
breakdown of the expenses included in
column 3(b). Corporations owning stock
that is unrelated debt-financed property
should see Schedule C (Dividends and
Special Deductions) of Form 1120, U.S.
Corporation Income Tax Return, to
determine the dividends-received
deductions to include in column 3(b).
Enter on the last line of Schedule E,
the total dividends-received deductions
(after reduction, when applicable, by the
debt-basis percentage(s)) included in
column 8.
When a capital loss for the tax year
may be carried back or carried over to
another tax year, the amount to carry over
or back is figured by using the percentage
determined above. However, in the year

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to which the amounts are carried, do not
apply the debt-basis percentage to
determine the deduction for that year.
Example 1. An exempt organization
owns a four-story building. Two floors are
used for an exempt purpose and two
floors are rented (as an unrelated trade or
business) for $10,000. Expenses are
$1,000 for depreciation and $5,000 for
other expenses that relate to the entire
building. The average acquisition
indebtedness is $6,000, and the average
adjusted basis is $10,000. Both apply to
the entire building.
To complete Schedule E for this
example, describe the property in column
1. Enter $10,000 in column 2 (since the
entire amount is for debt-financed
property), $500 and $2,500 in columns
3(a) and 3(b), respectively (since only
one-half of the expenses are for the
debt-financed property), $3,000 and
$5,000 in columns 4 and 5, respectively
(since only one-half of the acquisition
indebtedness and the average adjusted
basis are for debt-financed property),
60% in column 6, $6,000 in column 7, and
$1,800 in column 8.
Example 2. Assume the same facts
as in Example 1, except the entire
building is rented out as an unrelated
trade or business for $20,000. To
complete Schedule E for this example,
enter $20,000 in column 2, $1,000 and
$5,000 in columns 3(a) and 3(b),
respectively (since the entire amount is
for debt-financed property), $6,000 and
$10,000 in columns 4 and 5 (since the
entire amount is for debt-financed
property), 60% in column 6, $12,000 in
column 7, and $3,600 in column 8.

Schedule F—Interest,
Annuities, Royalties, and
Rents From Controlled
Organizations
Interest, annuities, royalties, and rents
received or accrued (directly or indirectly)
by a controlling organization from a
controlled organization are subject to tax,
whether or not the activity conducted by
the controlling organization to earn these
amounts is a trade or business or is
regularly carried on.

Controlled Organization
An entity is a “controlled organization” if
the controlling organization owns:
• By vote or value more than 50% of a
corporation’s stock (for an organization
that is a corporation);
• More than 50% of a partnership’s
profits or capital interests (for an
organization that is a partnership); or
• More than 50% of the beneficial
interests in an organization (for an
organization other than a corporation or
partnership).
To determine the ownership of stock in
a corporation, apply the principles of
section 318 (constructive ownership of
stock). Apply similar principles to

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determine the ownership of interests in a
partnership or any other organization.
Specified payment. Specified payment
means any payment of interest, annuity,
royalty, or rent. Include the specified
payment in gross income to the extent
that the payment reduces the net
unrelated income (or increases the net
unrelated loss) of the controlled
organization.
If any part of a specified payment is
included in gross income, Schedule F
must be completed.
Net unrelated income. Net unrealized
income means:
• For a controlled organization that is
exempt from tax under section 501(a), the
unrelated business taxable income of the
controlled organization.
• For a controlled organization that is not
exempt from tax under section 501(a), the
part of the controlled organization’s
taxable income that would be unrelated
business taxable income if the controlled
organization was tax exempt under
section 501(a) and had the same
tax-exempt purpose as the controlling
organization.
Net unrelated loss. Net unrealized loss
means the net operating loss using rules
similar to those discussed under Net
unrelated income.

Schedule G—Investment
Income of a Section
501(c)(7), (9), or (17)
Organization
Generally, for section 501(c)(7), (9), or
(17) organizations, unrelated trade or
business income includes all gross
income from nonmembers with certain
modifications. See section 512(a)(3)(A).
Report on Schedule G all income from
investments in securities and other similar
investment income from nonmembers,
including 100% of income and directly
connected expenses from debt-financed
property. Do not report nonmember
income from debt-financed property on
Schedule E.
All section 501(c)(7), (9), and (17)
organizations figure their investment
income using Schedule G. Do not include
interest on state and local governmental
obligations described in section 103(a).
Investment income includes all income
from debt-financed property.
Deduct only those expenses that are
directly connected to the net investment
income. Allocate deductions between
exempt activities and other activities
where necessary. The organization may
not take the dividends-received
deductions in figuring net investment
income because they are not treated as
directly connected with the production of
gross income.
Section 501(c)(7), (9), and (17)
organizations may set aside income that
would otherwise be taxable under section
512(a)(3). However, income derived from
an unrelated trade or business may not

be set aside and thus cannot be exempt
function income. In addition, any income
set aside and later expended for other
purposes must be included in income.
Sections 501(c)(7), (9), and (17)
organizations will not be taxed on income
set aside for:
1. Religious, charitable, scientific,
literary, or educational purposes, or for
the prevention of cruelty to children or
animals;
2. The payment of life, sick, accident,
or other benefits by a section 501(c)(9) or
(17) organization. The amount allowed as
a set aside may not exceed a limit
determined using section 419A. See
sections 419A and 512(a)(3)(E) for
details;
3. Reasonable administration costs
directly connected with 1 and 2 above.
Report income set aside in column 4 of
Schedule G. Amounts set aside are not
deductible under section 170 or any other
section of the Code.
The organization may elect to treat
income set aside by the date for filing the
return, including any extensions of time,
as income set aside in the tax year for
which the return is filed. The income set
aside must have been includible in gross
income for that earlier tax year.
Although set aside income may be
accumulated, any accumulation that is
unreasonable will be evidence that the set
aside was not for the purposes described
above.
Net investment income set aside must
be specifically earmarked as such, or
placed in a separate account or fund
(except for an employees’ association
which, by the terms of its governing
instrument, must use its net investment
income for the purposes stated in 2
above).
These rules apply to a corporation
described in section 501(c)(2) (title
holding corporation) whose income is
payable to an organization described in
section 501(c)(7), (9), or (17) if it files a
consolidated return with the section
501(c)(7), (9), or (17) organization.
If a section 501(c)(7), (9), or (17)
organization (or a title holding corporation
described above) sells property that was
used for the exempt function of the
section 501(c)(7), (9), or (17)
organization, and buys other property
used for the organization’s exempt
function within a period beginning 1 year
before the date of the sale, and ending 3
years after the date of the sale, the gain
from the sale will be recognized only to
the extent that the sales price of the old
property is more than the cost of the other
property. The other property need not be
similar in type or use to the old property.
The organization must notify the IRS of
the sale by a statement attached to the
return, or other written notice.
To compute the gain on the sale of
depreciable property, see the instructions
for column 5 of Schedule E to determine
the adjusted basis of the property.

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Schedule I—Exploited
Exempt Activity Income,
Other Than Advertising
Income
A section 501(c)(7), (9), or (17)
organization does not report exploited
exempt activity income in Schedule I.
Report the income in Part I, line 1a
instead, or the appropriate line for the
particular kind of income.
Exempt organizations (other than
section 501(c)(7), (9), or (17)
organizations) that have gross income
from an unrelated trade or business
activity that exploits an exempt activity
(other than advertising income) should
complete Schedule I. See Regulations
section 1.513-1(d)(4)(iv) for a definition of
exploited exempt activity.
An organization may take all
deductions directly connected with the
gross income from the unrelated trade or
business activity. In addition, the
organization may take into account all
deductible items attributable to the
exploited exempt activity, with the
following limitations:
1. Reduce the deductible items of the
exempt activity by the income from the
activity;
2. Limit the net amount of deductible
items arrived at in 1 above for the exempt
activity to the net unrelated business
income from the exploited exempt activity;
3. Exclude income and expenses of
the exempt activity in figuring a loss
carryover or carryback from the unrelated
trade or business activity exploiting the
exempt activity; and
4. Exclude deductible items of the
exempt activity in figuring unrelated trade
or business income from an activity that is
not exploiting the same exempt activity.
Therefore, the net includible exploited
exempt activity income is the unrelated
business taxable income minus the
excess of the exempt activity expenses
over the exempt activity income. If the
income from the exempt activity exceeds
the exempt activity expenses, do not add
that profit to the net income from the
unrelated business activity. If two or more
unrelated trade or business activities
exploit the same exempt activity, treat
those activities as one on Schedule I.
Attach a separate schedule showing the
computation.

Schedule J—Advertising
Income
A section 501(c)(7), (9), or (17)
organization does not report advertising
income on Schedule J. Instead, report
that income in Part I, line 1a.
An exempt organization (other than a
section 501(c)(7), (9), or (17)
organization) that earned gross income
from the sale of advertising in an exempt
organization periodical must complete

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Schedule J. The part of the advertising
income taken into account is determined
as follows:
1. If direct advertising costs
(expenses directly connected with
advertising income) are more than
advertising income (unrelated business
income), deduct that excess in figuring
unrelated business taxable income from
any other unrelated trade or business
activity carried on by the organization.
2. If advertising income is more than
direct advertising costs, and circulation
income (exempt activity income) equals
or exceeds readership costs (exempt
activity expenses), then unrelated
business taxable income is the excess of
advertising income over direct advertising
costs.
3. If advertising income is more than
direct advertising costs, and readership
costs are more than circulation income,
then unrelated business taxable income is
the excess of total income (advertising
income and circulation income) over total
periodical costs (direct advertising costs
and readership costs).
4. If the readership costs are more
than the circulation income, and the net
readership costs are more than the
excess of advertising income over direct
advertising costs, no loss is allowable.
See Regulations section
1.512(a)-1(f)(2)(ii)(b).
For allocating membership receipts to
circulation income, see Rev. Rul. 81-101,
1981-1 C.B. 352.
Consolidated periodicals. If an
organization publishes two or more
periodicals, it may elect to treat the gross
income for all (but not less than all)
periodicals, and deductions directly
connected with those periodicals
(including excess readership costs), as if
the periodicals were one to determine its
unrelated business taxable income. This
rule only applies to periodicals published
for the production of income. A periodical
is considered published for the production
of income if gross advertising income of
the periodical is at least 25% of the

readership costs, and the periodical is an
activity engaged in for profit.

Schedule K—
Compensation of Officers,
Directors, and Trustees
Complete columns 1 through 4, Schedule
K, for those officers, directors, and
trustees whose salaries or other
compensation are allocable to unrelated
business gross income. Do not include in
column 4 compensation that is deducted
on lines 15, 28, or Schedules A through J
of Form 990-T.
Include on Schedule K (or elsewhere
on the return) only compensation that is
directly attributable to the unrelated trade
or business activities of the organization.
If personnel is used both to carry on
exempt activities and to conduct
unrelated trade or business activities, the

salaries and wages of those individuals
will be allocated between the activities.
For example, assume an exempt
organization derives gross income from
the conduct of certain unrelated trade or
business activities. The organization pays
its president a salary of $65,000 a year.
Ten percent of the president’s time is
devoted to the unrelated business activity.
On Form 990-T, the organization enters
$6,500 (10% of $65,000) on Schedule K
for the part of the president’s salary
allocable to the unrelated trade or
business activity. However, the remaining
$58,500 (90% of $65,000) cannot be
deducted on Form 990-T because it is not
directly attributable to the organization’s
unrelated trade or business activities.
If taxable fringe benefits are provided
to your employees, such as personal use
of a car, do not deduct as salaries and
wages the amounts you deducted for
depreciation and other deductions.

Privacy Act and Paperwork Reduction Act Notice. We ask for the information on
this form to carry out the Internal Revenue laws of the United States. You are required
to give us the information. We need it to ensure that you are complying with these laws
and to allow us to figure and collect the right amount of tax. Section 6109 requires
return preparers to provide their identifying numbers on the return.
You are not required to provide the information requested on a form that is subject
to the Paperwork Reduction Act unless the form displays a valid OMB control number.
Books or records relating to a form or its instructions must be retained as long as their
contents may become material in the administration of any Internal Revenue law.
Generally, tax returns and return information are confidential, as required by section
6103.
The time needed to complete and file this form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67 hr., 26 min.

Learning about the law or the form . . . . . . . . . . . . . .

27 hr., 10 min.

Preparing the form . . . . . . . . . . . . . . . . . . . . . . . . . .

43 hr., 25 min.

Copying, assembling, and sending the form to the IRS

4 hr., 1 min.

If you have comments concerning the accuracy of these time estimates or
suggestions for making this form simpler, we would be happy to hear from you. You
can write to the Internal Revenue Service, Tax Products Coordinating Committee,
SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6406, Washington, DC 20224.
Do not send the Form 990-T to this address. Instead, see Where To File on page 3.

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2005Instructions for Form 990-T

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Codes for Unrelated Business Activity
(If engaged in more than one unrelated business activity, select up to two codes for the principal activities. List first the largest in terms of gross
unrelated income, then the next largest. Be sure to classify your unrelated activities, rather than your related activities. For example, code income
from advertising in publications as 541800, Advertising and related services, rather than selecting a code describing a printing or publishing
activity. Also, if possible, select a code that more specifically describes your unrelated activity, rather than a code for a more general activity.)
AGRICULTURE, FORESTRY, HUNTING,
AND FISHING
Code
110000 Agriculture, forestry, hunting, and fishing
111000 Crop production

MINING
Code
211110 Oil and gas extraction
212000 Mining (except oil and gas)

UTILITIES
Code
221000 Utilities

CONSTRUCTION
Code
230000 Construction
236000 Construction of buildings

MANUFACTURING
Code
310000 Manufacturing
323100 Printing and related support activities
339110 Medical equipment and supplies manufacturing

WHOLESALE TRADE
Code
423000 Merchant wholesalers, durable goods
424000 Merchant wholesalers, nondurable goods

RETAIL TRADE
Code
441100
442000
443120
444100
445100
445200
446110
446199
448000
451110
451211
452000
453000
453220
453310
454110

Automobile dealers
Furniture and home furnishings stores
Computer and software stores
Building materials and supplies dealers
Grocery stores
Specialty food stores
Pharmacies and drug stores
All other health and personal care stores
Clothing and clothing accessories stores
Sporting goods stores
Book stores
General merchandise stores
Miscellaneous store retailers
Gift, novelty, and souvenir stores
Used merchandise stores
Electronic shopping and mail-order houses

TRANSPORTATION AND WAREHOUSING
Code
480000 Transportation
485000 Transit and ground passenger transportation
493000 Warehousing and storage

INFORMATION
Code
511110
511120
511130
511140
511190
512000
515100
516110
517000
518111
518112

Newspaper publishers (except Internet)
Periodical publishers (except Internet)
Book publishers (except Internet)
Directory and mailing list publishers (except
Internet)
Other publishers (except Internet)
Motion picture and sound recording industries
Radio and television broadcasting (except
Internet)
Internet publishing and broadcasting
Telecommunications (including paging, cellular,
satellite, cable, and other telecommunications)
Internet service providers
Web search portals

518210 Data processing, hosting, and related services
519100 Other information services

FINANCE AND INSURANCE
Code
522100 Depository credit intermediation (including
commercial banking, savings institutions, and
credit unions)
522200 Nondepository credit intermediation (including
credit card issuing and sales financing)
523000 Securities, commodity contracts, and other
financial investments and related activities
524113 Direct life insurance carriers
524114 Direct health and medical insurance carriers
524126 Direct property and casualty insurance carriers
524292 Third-party administration of insurance and
pension funds
524298 All other insurance-related activities
525100 Insurance and employee benefit funds
525920 Trusts, estates, and agency accounts
525990 Other financial vehicles

REAL ESTATE AND RENTAL AND LEASING
Code
531110 Lessors of residential buildings and dwellings
531120 Lessors of nonresidential buildings (except
miniwarehouses)
531190 Lessors of other real estate property
531310 Real estate property managers
531390 Other activities related to real estate
532000 Rental and leasing services
532420 Office machinery and equipment rental and
leasing
533110 Lessors of nonfinancial intangible assets
(except copyrighted works)

EDUCATIONAL SERVICES
Code
611600 Other schools and instruction (other than
elementary and secondary schools or colleges
and universities, which should select a code to
describe their unrelated activities)
611710 Educational support services

HEALTHCARE AND SOCIAL ASSISTANCE
Code
621110
621300
621400
621500
621610
621910
621990
623000
623990
624100
624200

Offices of physicians
Offices of other health practitioners
Outpatient care centers
Medical and diagnostic laboratories
Home health care services
Ambulance services
All other ambulatory health care services
Nursing and residential care facilities
Other residential care facilities
Individual and family services
Community food and housing, and emergency
and other relief services
624310 Vocational rehabilitation services
624410 Child day care services

ARTS, ENTERTAINMENT, AND
RECREATION
Code
711110
711120
711130
711190
711210
711300

PROFESSIONAL, SCIENTIFIC, AND
TECHNICAL SERVICES
Code
541100 Legal services
541200 Accounting, tax preparation, bookkeeping, and
payroll services
541300 Architectural, engineering, and related services
541380 Testing laboratories
541511 Custom computer programming services
541519 Other computer-related services
541610 Management consulting services
541700 Scientific research and development services
541800 Advertising and related services
541860 Direct mail advertising
541900 Other professional, scientific, and technical
services

MANAGEMENT OF COMPANIES AND
ENTERPRISES
Code
551111 Offices of bank holding companies
551112 Offices of other holding companies

ADMINISTRATIVE AND SUPPORT AND
WASTE MANAGEMENT AND
REMEDIATION SERVICES

713110
713200
713910
713940
713990

Theater companies and dinner theaters
Dance companies
Musical groups and artists
Other performing art companies
Spectator sports (including sports clubs
and racetracks
Promoters of performing arts, sports, and
simiilar events
Amusement and theme parks
Gambling industries
Golf courses and country clubs
Fitness and recreational sports centers
All other amusement and recreation industries
(including skiing facilities, marinas, and bowling
centers)

ACCOMMODATION AND FOOD SERVICES
Code
721000 Accomodation
721110 Hotels (except casino hotels) and motels
721210 RV (recreational vehicle) parks and recreational
camps
721310 Rooming and boarding houses
722100 Full-service restaurants
722210 Limited-service eating places
722320 Caterers
722410 Drinking places (alcoholic beverages)

OTHER SERVICES
Code
811000
812300
812900
812930

Repair and maintenance
Drycleaning and laundry services
Other personal services
Parking lots and garages

Administrative and Support Services
Code
561000 Administrative and support services
561300 Employment services
561439 Other business service centers (including copy
shops)
561499 All other business support services
561500 Travel arrangement and reservation services
561520 Tour operators
561700 Services to buildings and dwellings

Waste Management and Remediation Services
Code
562000 Waste management and remediation services
(sanitary services)

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OTHER
Code
900000 Unrelated debt-financed activities other than
rental of real estate
900001 Investment activities of section 501(c)(7), (9), or
(17) organizations
900002 Rental of personal property
900003 Passive income activities with controlled
organizations
900004 Exploited exempt activities