Instructions for Schedule A (Form 990 or 990-EZ) (2006)

Specific Instructions

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Attach separate sheets on which you follow the same format and sequence as on the printed form, if you need more space for any part or line item.
Show totals on the printed form.
Put the organization's name and employer identification number (EIN) on the attached separate sheets and identify the part or line that the attachments support.
The organization may round off cents to whole dollars on the return and schedules. If the organization does round to whole dollars, it must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.

If the organization has to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.

Part I. Compensation of the Five Highest Paid Employees Other Than Officers, Directors, and Trustees

Complete Part I for the five non-key employees with the highest annual compensation over $50,000. At the bottom of the table, enter the number of other employees with annual compensation over $50,000 who are not individually listed in Part I.

Do not include employees listed in Part V-A of Form 990 or in Part IV of Form 990-EZ (List of Current Officers, Directors, Trustees, and Key Employees). Also do not include key employees in table one.

In columns (c) through (e), show all cash and noncash forms of compensation for each listed non-key employee whether paid currently or deferred. For purposes of reporting all amounts in columns (c) through (e), either use the organization's tax year, or the calendar year ending within such tax year.

The organization also may provide an attachment to explain the entire year 2006 compensation package for any person listed in Part I.

Column (c)

Enter salary, fees, bonuses, and severance payments received by each listed non-key employee. Include current year payments of amounts reported or reportable as deferred compensation in any prior reporting period.

Column (d)

Include in column (d) all forms of deferred compensation and future severance payments (whether or not funded, whether or not vested, and whether or not the deferred compensation plan is a qualified plan under section 401(a)). Include in this column payments to welfare benefit plans on behalf of the employee. Such plans provide benefits such as medical, dental, life insurance, severance pay, disability, etc. Reasonable estimates may be used if precise cost figures are not readily available.

Unless the amounts are reported in column (c), report as deferred compensation in column (d), salaries and other compensation earned during the reporting period, but not yet paid by the date the organization files its return.

Column (e)

Enter in column (e) both taxable and nontaxable fringe benefits (other than de minimis fringe benefits described in section 132(e)). Include expense allowances or reimbursements that the recipients must report as income on their separate income tax returns. Examples include:

Amounts for which the recipient did not account to the organization,
Allowances that were more than the payee spent on serving the organization, and
Payments made in connection with indemnification arrangements, the value of the personal use of housing, automobiles, or other assets owned or leased by the organization (or provided for the organization's use without charge), as well as any other taxable and nontaxable fringe benefits.

Example.

S is not a key employee. S receives a salary of $35,000 and a $3,000 bonus. S also receives company-paid medical, dental, and life insurance benefits for his family of $12,000. During the year, S received family educational benefits of $5,000. Enter in column (c) $38,000; enter in column (d) $12,000; enter in column (e) $5,000. Total compensation of S is $55,000, even though his salary and bonus is only $38,000. S is listed in Part I as one of the highest paid employees.

See Pub. 525, Taxable and Nontaxable Income, for more information.

Part II-A. Compensation of the Five Highest Paid Independent Contractors for Professional Services

Complete Part II-A for the five highest paid independent contractors (whether individuals or firms) who performed personal services of a professional nature for the organization and, in return, received over $50,000 for the year from the organization.

For purposes of reporting amounts in column (c), either use the organization's tax year, or the calendar year ending within such tax year.

Also show the number of other independent contractors who received more than $50,000 for the year for performing professional services but who are not individually listed in Part II-A.

Independent contractors are persons who are not treated as employees for employment tax purposes. Independent contractors may be individuals or firms. Professional independent contractors generally include attorneys, accountants, auditors, health care professionals, investment advisors, and professional fundraisers.

The organization may, at its discretion, provide an attachment to explain the entire year 2006 compensation package for any person listed in Part II-A.

Fundraising fees exceeding $50,000 are reported in Part II-A, but not reimbursements for amounts paid by the fundraiser to others for printing, paper, envelopes, postage, mailing list rental, etc. Part II-A is intended for the fee portion of payments to contractors, not for any expense reimbursements.

Part II-B. Compensation of the Five Highest Paid Independent Contractors for Other Services

Complete Part II-B for the five highest paid independent contractors (whether individuals or firms) who performed services, that were other than services of a professional nature for the organization and, in return, received over $50,000 for the year from the organization. For a definition of independent contractor, see Part II-A, above.

For purposes of reporting amounts in column (c), either use the organization's tax year, or the calendar year ending within such tax year.

Also show the number of other independent contractors who received more than $50,000 for the year for performing such services but who are not individually listed in Part II-B.

The organization may include an attachment that explains the 2006 compensation package for any person listed in Part II-B.

Part III. Statements About Activities

Line 1. If the organization answered “Yes” on this line, it must complete Part VI-A or VI-B and include the additional information discussed under those Parts; otherwise, the return may be considered incomplete.

Enter the total expenses paid or incurred in connection with the lobbying activities described on line 1. The amount of expenses the organization enters must equal the amounts on line 38, Part VI-A, or line i, Part VI-B.

Substantial part test. In general, a section 501(c)(3) organization may not devote a substantial part of its activities to attempts to influence legislation. Under the substantial part test, if such an organization engages in substantial lobbying activities, the organization will lose both its tax-exempt status and its ability to receive tax-deductible charitable contributions. Except for churches, certain church affiliated organizations, and private foundations, an organization that loses its section 501(c)(3) status because it did not meet the substantial part test will owe an excise tax under section 4912 on all of its lobbying expenditures. Managers of the organization may also be jointly and severally liable for this tax.

Expenditure test. As an alternative to the substantial part test, eligible public charities may elect the expenditure test of section 501(h). The expenditure test generally permits higher limits for lobbying expenditures than allowed under the substantial part test. Electing public charities are subject to the lobbying expenditure definitions of section 4911, which are generally more liberal than the definitions under the substantial part test. Section 4911 applies only to public charities that made a valid section 501(h) election by filing Form 5768, Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation.

Electing public charities. If the organization is an electing public charity, it must complete Part VI-A of this form.

Nonelecting public charities. If the organization checked “Yes” but is not an electing public charity, it must complete Part VI-B and attach a statement giving a detailed description of the organization's lobbying activities.

All charities, both electing and nonelecting, are absolutely prohibited from intervening in a political campaign for or against any candidate for an elective public office. If a charity does intervene in a political campaign, it will lose both its tax-exempt status and its eligibility to receive tax-deductible charitable contributions. Both the organization and its managers are subject to the tax on political expenditures under section 4955.

Line 2. See Part IV, Definitions, for the meaning of the term family member.

Lines 2a through 2e. These lines apply to both sides of a listed transaction. Reporting is required, for example, whether the exempt organization is a payer or payee, buyer or seller, lender or borrower.

Line 2d. Compensation or repayment. If the only compensation or repayment relates to amounts the organization reported in Part V-A of Form 990, or Part IV of Form 990-EZ, check “Yes” and write “See Part V-A, Form 990,” or “See Part IV of Form 990-EZ,” on the dotted line to the left of the entry space.

Line 3a. Scholarships, etc. The term qualify in line 3a means that organizations or individuals will use the funds the organization provides for charitable purposes described in sections 170(c)(1) and 170(c)(2).

The term qualify also means that individual recipients belong to a charitable class and the payments are to aid them. Examples include:

Helping the aged poor;
Training teachers and social workers from underdeveloped countries; and
Awarding scholarships to individuals.

Line 3b. Section 403(b) annuity plan. Indicate whether the organization has a section 403(b) annuity plan available for its employees.

Line 3c. Conservation easements. Answer “Yes” if the organization received or held one or more conservation easements during the year. In general, an easement is an interest in the land of another. A conservation easement is an interest in the land of another for purposes that include environmental protection; the preservation of open space; or the preservation of property for historic, educational, or recreational purposes. For more information see Notice 2004-41, 2004-28 I.R.B. 31.

Attached schedule. If “Yes,” the organization must attach a schedule that includes the following information.

The number of easements held at the beginning of the year, the acreage of these easements and the number of states where the easements are located.
The number of easements and the acreage of these easements that the organization received or acquired during the year.
The number of easements modified, sold, transferred, released, or terminated during the year and the acreage of these easements. For each easement, explain the reason for the modification, sale, transfer, release or termination. Also, identify the recipient (if any), and show if the recipient was a qualified organization (as defined in section 170(h)(3) and the related regulations at the time of transfer).
Show the number of easements held for each of the following categories:
1. Easements on buildings or structures;
2. Easements that encumber a golf course or portions of a golf course;
3. Easements within or adjacent to residential developments and housing subdivisions, including easements related to the development of property; and
4. Conservation easements that were acquired in a transaction described under Purchase of Real Property from Charitable Organizations in Notice 2004-41 and if the organization acquired any such easements during the year.
The number of easements and the acreage of these easements that were monitored by physical inspection or other means during the tax year.
Total staff hours and a list of expenses devoted to (legal fees, portion of staff salaries, etc.) incurred for monitoring and enforcing new or existing easements during the tax year.
Identify all easements on buildings or structures acquired after August 17, 2006, and show if each easement meets the requirements of section 170(h)(4)(B).

Line 3d. Answer “Yes” if the organization provides any of the following types of credit counseling and/or debt management activities:

Educating and/or counseling consumers, in person, in writing, or using electronic means;
Helping consumers consolidate debts;
Negotiating with creditors on behalf of consumers to lower interest rates, waive fees, adjust balances, or restore acceptable credit ratings;
Offering, selling, or managing debt and/or loan consolidation services and programs or down payment assistance services;
Acting as an escrow agent for debtors; or
Participating in creditor Fair Share arrangements.

Line 4a. Answer “Yes” if the organization is a sponsoring organization that maintains one or more donor advised funds.

A sponsoring organization is any organization which:

Is described in section 170(c), except for governmental organizations described in section 170(c)(1) or (2)(A);
Is not a private foundation as defined in section 509(a); and
Maintains one or more donor advised funds.

Generally, a donor advised fund is a fund or account:

That is separately identified by reference to contributions of a donor or donors;
That is owned and controlled by a sponsoring organization; and
For which the donor or donor advisor has or reasonably expects to have advisory privileges in the distribution or investment of amounts held in the donor advised funds or accounts because of the donor's status as a donor.

A donor advisor is any person appointed or designated by a donor to advise a sponsoring organization on the distribution or investment of amounts held in the donor's fund or account.

Exception. A donor advised fund does not include any fund or account:

That makes distributions only to a single identified organization or governmental entity, or
In which a person described in 3 above gives advice about which individuals receive grants for travel, study, or other similar purposes, if:
1. The person's advisory privileges are performed exclusively by such person in his or her capacity as a committee member in which all of the committee members are appointed by the sponsoring organization;
2. No combination of donors or donor advisors (and related persons as defined below) directly or indirectly control the committee;
3. All grants from the fund or account are awarded on an objective and nondiscriminatory basis following a procedure approved in advance by the board of directors of the sponsoring organization. The procedure must be designed to ensure that all grants meet the requirements of sections 4945(g)(1), (2), or (3); or
That is excepted under section 4966(d)(2)(C). For example, see Notice 2006-109, 2006-51 I.R.B. 1121, and any future related guidance.

A related person is any family member (as defined in section 4958(f)) of the donor or donor advisor and any 35% controlled entity (as defined in section 4958(f)) of the donor or donor advisor. See Notice 2006-109, and any future related guidance for more information.

Funds or accounts meeting one of these exceptions must be reported on lines 4f and 4g.

Line 4b. Answer “Yes” if the organization made any taxable distributions under section 4966.

A taxable distribution is any distribution occurring in any tax year beginning after August 17, 2006, from a donor advised fund to any:

Natural person, or
Any other person, if:
1. The distribution is for any purpose other than the promotion of religious, charitable, scientific, literary or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals; or
2. The sponsoring organization maintaining the donor advised fund does not exercise expenditure responsibility in the distribution according to section 4945(h).

Exception. A taxable distribution does not include a distribution from a donor advised fund to:

Any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization),
The sponsoring organization of the donor advised fund,
Any other donor advised fund, or
Certain natural persons as described in Notice 2006-109.

A disqualified supporting organization is a Type III supporting organization that is not functionally integrated and any Type I, Type II, or functionally integrated Type III supporting organization where the donor or donor advisor (and any related person) directly or indirectly controls a supported organization of the supporting organization. See instructions for line 13 for more information on supporting organizations.

Line 4c. Answer “Yes” if the organization made any distributions to a donor, donor advisor, or related person (as defined above).

Lines 4d and 4e. For a definition of donor advised funds, see the instructions for line 4a.

Lines 4f and 4g. Enter the number of separate funds or accounts on line 4f (other than those reported on line 4d) where donors have the right to provide advice on the distribution or investment of amounts held in such funds or accounts. Figure the number of funds or accounts owned at the end of the tax year. If line 4f is a number other than zero also complete line 4g. If the organization does not maintain any such accounts, enter zero on lines 4f and 4g.

Part IV. Reason for Non-Private Foundation Status

Definitions

The following terms are used in more than one item in Part IV. The definitions given below generally apply.

Support (for lines 10, 11, and 12 of Part IV), with certain qualified exceptions described below, is all forms of support including (but not limited to):

Support includes . . .	Part IV-A line
Gifts, grants, contributions, membership fees	15 and 16
Any amounts an organization receives from the exercise or performance of its charitable, educational, or other purpose or function constituting the basis for its exemption*.		17
Net income from unrelated business activities, whether or not such activities are carried on regularly as a trade or business	18 and 19
Gross investment income, such as interest, dividends, rents, and royalties		18
Tax revenues levied for the benefit of an organization and either paid to or expended on behalf of such organization; and		20
The value of services or facilities (exclusive of those generally furnished to the public without charge) furnished by a governmental unit referred to in Code section 170(c)(1) to an organization without charge		21
*Note.The amounts on line 17 are included as support only for those organizations that checked the box on line 12. Otherwise, the amounts on line 17 are not included in support.

Support does not include . .	Part IV-A line
Any amounts an organization receives from the exercise or performance of its charitable, educational, or other purpose or function constituting the basis for its exemption*		17
Any gain upon the sale or exchange of property which would be considered under any section of the Code as gain from the sale or exchange of a capital asset.
Contributions of services for which a deduction is not allowable.
*Note.For organizations that checked the box on line 12, the amounts on line 17 of the Support Schedule are included in support.

Support from a governmental unit, with certain exceptions described below, includes:

Any amounts received from a governmental unit, including donations or contributions and amounts received in connection with a contract entered into with a governmental unit for the performance of services or in connection with a government research grant, provided these amounts are not excluded from the term support as amounts received from exercising or performing the organization's charitable purpose or function.

An amount paid by a governmental unit to an organization is not treated as received from exercising or performing its charitable, etc., purpose or function if the payment is to enable the organization to provide a service to, or maintain a facility for, the direct benefit of the public, as for example, to maintain library facilities that are open to the public.
Tax revenues levied for the organization's benefit and either paid to or expended on its behalf.
The value of services or facilities (exclusive of services or facilities generally furnished, without charge, to the public) furnished by a governmental unit to the organization without charge. For example, a city pays the salaries of personnel to guard a museum, art gallery, etc., or provides the use of a building rent free. However, the term does not include the value of any exemption from federal, state, or local tax or any similar benefit.

Indirect contributions from the general public. Indirect contributions are what the organization receives from other organizations that receive a substantial part of their support from general public contributions. An example is the organization's share of the proceeds from an annual community chest drive (such as the United Way or United Fund). These are included on line 15.

Disqualified person. A disqualified person is:

A substantial contributor, who is—
1. Any person who gave an aggregate amount of more than $5,000, if that amount is more than 2% of the total contributions the foundation or organization received from its inception through the end of the year in which that person's contributions were received.
2. The creator of a trust (without regard to the amount of contributions received by the trust from the creator and other persons).
- Any person who is a substantial contributor at any time generally remains a substantial contributor for all future periods even if later contributions by others push that person's contributions below the 2% figure discussed above.
- Gifts from the contributor's spouse are treated as gifts from the contributor.
- Gifts are generally valued at fair market value as of the date the organization received them.
An officer, director, or trustee of the organization or any individual having powers or responsibilities similar to those of officers, directors, or trustees.
An owner of more than 20% of the voting power of a corporation, profits interest of a partnership, or beneficial interest of a trust or an unincorporated enterprise that is a substantial contributor to the organization.
A family member of an individual in the first three categories. A family member includes only a person's spouse, ancestors, children, grandchildren, great grandchildren, and the spouses of children, grandchildren, and great grandchildren.
A corporation, partnership, trust, or estate in which persons described in 1 through 4 above own more than 35% of the voting power, profits interest, or beneficial interest. See section 4946(a)(1).

Normally to satisfy public support test. An organization is considered normally to satisfy the public support test (for lines 10, 11, and 12 of the Support Schedule) for its current tax year and the tax year immediately following its current tax year, if the organization satisfies the applicable support test for the 4 tax years immediately before the current tax year.

If the organization has a material change (other than from unusual grants—see instructions for line 28) in its sources of support during the current tax year, the data ordinarily required in the Support Schedule covering the years 2002 through 2005 must be submitted for the years 2002 through 2006. Prepare and attach a 5-year schedule using the same format as provided in the Support Schedule for lines 15 through 28.

Lines 5 through 14. Reason for Non-Private Foundation Status. Check one of the boxes on these lines to indicate the reason the organization is not a private foundation. The organization's exemption letter states this reason, or the local IRS office can tell the organization the reason.

Line 6. School. Check the box on line 6 for a school whose primary function is the presentation of formal instruction, and which regularly has a faculty, a curriculum, an enrolled body of students, and a place where educational activities are regularly conducted.

A private school, in addition, must have a racially nondiscriminatory policy toward its students. For details about these requirements, see the instructions for Part V.

Line 7. Hospital or Cooperative Hospital Service Organization. Check the box on line 7 for an organization whose main purpose is to provide hospital or medical care. A rehabilitation institution or an outpatient clinic may qualify as a hospital, but the term does not include medical schools, medical research organizations, convalescent homes, homes for the aged, or vocational training institutions for the handicapped.

Check the box on line 7 also for a cooperative hospital service organization described in section 501(e).

Line 9. Hospital Medical Research Organization. Check the box on line 9 for a medical research organization operated in connection with or in conjunction with a hospital. The hospital must be described in section 501(c)(3) or operated by the Federal government, a state or its political subdivision, a U.S. possession or its political subdivision, or the District of Columbia.

Medical research is studies and experiments done to increase or verify information about physical or mental diseases and disabilities and their causes, diagnosis, prevention, treatment, or control. The organization must conduct the research directly and continuously. If it primarily gives funds to other organizations (or grants and scholarships to individuals) for them to do the research, the organization is not a medical research organization.

The organization is not required to be an affiliate of the hospital, but there must be an understanding that there will be close and continuous cooperation in any joint-effort medical research.

Assets test/Expenditure test. An organization qualifies as a medical research organization if its principal purpose is medical research, and it devotes more than half its assets, or spends at least 3.5% of the fair market value of its endowment, in conducting medical research directly.

Either test may be met based on a computation period consisting of the immediately preceding tax year or the immediately preceding 4 tax years.

If an organization does not satisfy either the assets test or the expenditure test, it may still qualify as a medical research organization, based on the circumstances involved.

These tests are discussed in Regulations sections 1.170A-9(c)(2)(v) and (vi). Value the organization's assets as of any day in its tax year but use the same day every year. Value the endowment at fair market value, using commonly accepted valuation methods. (See Regulations section 20.2031.)

Line 10. Organization Operated for the Benefit of a Governmental Unit. Check the box on line 10 and complete the Support Schedule if the organization receives and manages property for and expends funds to benefit a college or university that is owned or operated by one or more states or their political subdivisions. The school must be as described in the first paragraph of the instructions for line 6.

Expending funds to benefit a college or university includes acquiring and maintaining the campus, its buildings, and its equipment, granting scholarships and student loans, and making any other payments in connection with the normal functions of colleges and universities.

The organization must meet essentially the same public support test described below for line 11. See Rev. Rul. 82-132, 1982-2 C.B. 107.

Line 11. Organization Meeting the Section 509(a)(1) Public Support Test. Check either box (but not both) on line 11a or 11b and complete the Support Schedule to determine whether the organization meets the section 509(a)(1)/170(b)(1)(A)(vi) public support test described below.

The Support Schedule is completed for an organization that normally (see Part IV, Definitions) receives at least 33⅓% of its support (excluding income received in exercising its charitable, etc., function) from:

Direct or indirect contributions from the general public;
Other publicly supported (section 170(b)(1)(A)(vi)) organizations; or
A governmental unit.

To determine whether the section 509(a)(1)/170(b)(1)(A)(vi) test is met, donor contributions are considered support from direct or indirect contributions from the general public only to the extent that the total amount received from any one donor during the 4-tax-year period is 2% or less of the organization's total support for those 4 tax years as described below.

Any contribution by one individual will be included in full in the total support denominator of the fraction determining the 33⅓%-of-support or the 10%-of-support limitation.
Only the portion of each donor's contribution that is 2% or less of the total support denominator will be included in the numerator.

In applying the 2% limitation, all contributions by any person(s) related to the donor as described in section 4946(a)(1)(C) through (G) (and related regulations) will be treated as if made by the donor.

The 2% limitation does not apply to support from governmental units referred to in section 170(c)(1), or to contributions from publicly supported organizations (section 170(b)(1)(A)(vi)), that check the box on their line 11a or 11b.

Example.

X organization reported the following amounts in its Support Schedule for the 4-year period 2002 through 2005:

Line		(e) Total
15	Gifts, grants & contributions	$300,000
17	Gross receipts from admissions, etc.	100,000
18	Dividends & interest	300,000
24	Line 23 minus line 17	600,000
26a	2% of line 24 (2% limitation)	12,000
b	Total of contributions exceeding the 2% limitation	98,000

The X organization determined whether or not it met the section 509(a)(1)/170(b)(1)(A)(vi) public support test as follows:

Total support (line 24):				$600,000
Direct Contributions:
Total direct contributions from persons who contributed less than 2% of total support				50,000
Total direct contributions from six donors, each of whom gave more than 2% ($12,000) of total support				170,000
Indirect contributions from the general public:
United Fund				40,000
Grant from Y City				40,000
Total gifts, grants & contributions				$300,000
Total direct contributions from six donors, each of whom gave more than 2% of total support			$170,000
2% limitation for six donors: (2% × $600,000 × 6)			72,000
Less: Direct contributions in excess of 2% of total support				98,000
Total public support				202,000
Section 509(a)(1)/170(b)(1)(A)(vi) computation:
Line 26c	Total support			$600,000
Line 26d	Less total of lines:
		18	$300,000
		19	-0-
		22	-0-
		26b	98,000	$398,000
Line 26e	Total public support			$202,000
Line 26f	Public support percentage (line 26e divided by line 26c— $202,000/ $600,000)			33.67%

Since X organization received more than 33⅓% of its total support for the period from public sources, it qualifies as a section 509(a)(1)/170(b)(1)(A)(vi) publicly supported organization. Note that if an organization fails the public support test for 2 consecutive years, it loses its public charity status and becomes a private foundation.

Facts and circumstances— Public support test. An organization that does not qualify as publicly supported under the test described above may be publicly supported on the basis of the facts in its case if it receives at least 10% of its support from the general public. If the organization believes it is publicly supported according to applicable regulations, attach a detailed statement of the facts upon which the organization bases its conclusion.

Line 12. Organization Meeting the Section 509(a)(2) Public Support Tests. Check the box on line 12 and complete the Support Schedule to determine whether an organization meets both of the following section 509(a)(2) support tests:

The organization normally receives more than one-third of its support for each tax year from:
1. Persons other than disqualified persons (see Part IV, Definitions) with respect to the organization,
2. Governmental units (described in section 170(c)(1)), or
3. Organizations described in section 170(b)(1)(A) (other than in clauses (vii) and (viii)), and such support is received by the organization from any combination of:
  - Gifts, grants, contributions, or membership fees, and
  - Gross receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in an activity that is not an unrelated trade or business (within the meaning of section 513).
Gross receipts, in any tax year, do not include receipts from any person, bureau, or similar agency of a government unit (described in section 170(c)(1)) to the extent such receipts exceed the greater of $5,000 or 1% of the organization's support in such tax year.
The organization normally receives not more than one-third of its support each tax year from the sum of:
1. Gross investment income (as defined in section 509(e)), and
2. The excess (if any) of the amount of the unrelated business taxable income (as defined in section 512) over the amount of the tax imposed by section 511.

The Pension Protection Act of 2006 amended the definition of gross investment income under section 509(e).

Gross investment income. When determining whether an organization meets the gross investment income test of section 509(a)(2)(B), amounts received from the following organizations retain the character of gross investment income (rather than gifts or contributions) to the extent that these organizations characterize the amounts as gross investment income:

An organization that claims to be described in section 509(a)(3) because it supports a section 509(a)(2) organization; or
A charitable trust, corporation, fund, or association described in section 501(c)(3) (including a nonexempt charitable trust described in section 4947(a)(1)), that is required to distribute, or normally distributes, at least 25% of its adjusted net income (within the meaning of section 4942(f)) to a section 509(a)(2) organization, if the distribution normally comprises at least 5% of the distributee organization's adjusted net income.

If an organization receives an amount from a split-interest trust described in section 4947(a)(2) that is required to distribute, or normally distributes, at least 25% of its adjusted net income to a section 509(a)(2) organization, and the distribution normally comprises at least 5% of the distributee organization's adjusted net income, the amount retains the character of gross investment income if it would be characterized as gross investment income attributable to transfers in trust after May 26, 1969, if the trust were a private foundation.

All income characterized under the rules above as gross investment income in the possession of the distributing organization is considered to be distributed first by the organization and keeps its character as such in the possession of the recipient.

For more details, see Regulations section 1.509(a)-5 that covers special rules of attribution.

If the organization received any amounts from either kind of organization above, attach a statement. Show the amounts received from each organization, including amounts, such as gifts, that are not investment income.

Example.

T organization reported the following amounts in its Support Schedule for the 4-year period 2002 through 2005:

Line		(e) Total
15	Gifts, grants & contributions	$45,000
16	Membership fees	50,000
17	Gross receipts from admissions, merchandise, etc.	25,000
18	Gross income from interest, dividends, etc.	80,000
23	Total of lines 15 through 22	$200,000
27a	Gifts from disqualified persons	$25,000
b	Excess gross receipts from nondisqualified persons	$20,000

T organization determined whether or not it met the one-third tests of section 509(a)(2) in the following computation:

Section 509(a)(2) computation:
Line
27c	Add: Amounts from column (e), lines 15, 16, 17, 20, and 21		$120,000
27d	Total of line 27a	$25,000
	Total of line 27b	20,000	45,000
27e	Public support (line 27c minus line 27d total)		$75,000
27f	Total support (line 23, column (e))	$200,000
27g	Public support percentage (line 27e divided by line 27f— $75,000/$200,000)		37.50%
27h	Investment income percentage (line 18 divided by line 27f— $80,000/$200,000)		40.00%

T organization received 37.50% of its total support from the public and thus met the more-than-one-third test of public support to total support. T organization's investment income percentage was 40.00%. Therefore, it did not meet the second part of the section 509(a)(2) test—the not-more-than-one-third of total support from gross investment income and net unrelated business taxable income.

Since T organization did not satisfy both of the one-third tests of section 509(a)(2), it failed the section 509(a)(2) public support test for this year. An organization that fails the public support test for 2 consecutive years loses its public charity status and becomes a private foundation.

Line 13. Supporting organization. Check the box on line 13 if the organization is a supporting organization. A supporting organization is an organization that is operated only for the benefit of and in connection with organizations listed in lines 5 through 12, or with organizations described in sections 501(c)(4), (5), or (6) that meet the tests of section 509(a)(2) (described in line 12). For more information about supporting organizations, see Regulations section 1.509(a)-4.

If the organization is a supporting organization, it must also check one of the four boxes above the line 13 table to show the type of supporting organization it is and complete columns (a) through (e) of the line 13 table.

Type of supporting organization. Use the information below to determine the type of supporting organization the organization is. Check only one of the four boxes.

Type I. A Type I organization is operated, supervised or controlled by one or more publicly supported organizations. The relationship between the supported organization and the supporting organization is comparable to that of a parent-subsidiary relationship. If the organization can answer “Yes” to one of the following questions, check the box for “Type I.”
1. Do officials of the supported public charity(ies) select a majority of the supporting organization's directors or trustees?
2. Does the organization otherwise meet the requirements of Regulations section 1.509(a)-4(g)?
Type II. A Type II supporting organization is supervised or controlled in connection with one or more publicly supported organizations. A Type II relationship is comparable to a brother-sister relationship. If the organization can answer “Yes, ” to one of the following questions, check the box for “Type II.”
1. Is majority control of management of the supported organization(s) vested in the same persons who control or manage the supporting organization, such as directors, trustees, and officers?
2. Does the organization otherwise meet the requirements of Regulations section 1.509(a)-4(h)?
Type III-Functionally Integrated. A Type III functionally integrated organization is a Type III supporting organization which is not required, under regulations established by the Secretary, to make payments to supported organizations (as defined under section 509(f)(3)) due to the activities of the organization related to performing the functions of, or carrying out the purposes of, such supported organizations, see section 4943(f)(5). For purposes of checking a box on line 13 only, an organization may rely on section 3.02 of Notice 2006-109. Notice 2006-109 states that for limited purposes, an organization will be considered a functionally integrated Type III supporting organization if the activities it engages in for, or on behalf of, the supported organization are activities to perform the functions of, or to carry out the purposes of, such organizations, and but for the involvement of the supporting organization, would normally be engaged in by the supported organizations themselves. See Regulations section 1.509(a)-4(i)(3)(ii).
Type III - Other. Check this box if the organization is not described as a Type I, Type II, or Type III-Functionally Integrated organization.

Table-information regarding supported organizations. All organizations checking the box at the beginning of line 13, must complete the line 13 table.

Columns (a) and (b). List the name and employer identification number for each supported organization even if no monetary support was actually provided to the supported organization.
Column (c). For each supported organization, enter the line number (from lines 5 through 12) that describes the supported organization. For example, if the organization supported a hospital, enter “7” in column (c). If the supported organization is not a section 501(c)(3) organization, enter the Code section that describes the supported organization.
Column (d). Check “Yes” if the supported organization was specifically named as a supported organization in the supporting organization's trust instrument, articles of incorporation, or other governing document.
Column (e). Enter the total amount of monetary support paid by the supporting organization to or for the benefit of each supported organization during the tax year. Enter “-0-” if no monetary support was provided during the tax year.
Total. Enter the sum of all monetary support provided to each supported organization.

Line 14. Organization operated to test for public safety. Check the box on line 14 only if the organization has received a ruling from the IRS that it is organized and operated primarily to test for public safety.

Part IV-A. Support Schedule

Complete the Support Schedule if a box on line 10, 11, or 12 was checked.

The Support Schedule must be completed on the cash method of accounting.

For example, if a grantor makes a grant to an organization payable over a term of years, such grant will be includible in the support fraction of the grantee organization only when and to the extent amounts payable under the grant are received by the grantee.

If the organization uses the accrual method of accounting, a worksheet such as the one that follows may be used to convert any revenue account from an accrual basis to a cash basis.

Worksheet to convert a revenue account from the accrual to the cash basis

1.	Revenue per books (accrual basis)
2.	Add:
a.	Beginning-of-year entry (if any) reversing accrual of income at the end of the prior year; and
b.	Any amounts collected during the year that were not credited to the revenue account in the current year
3.	Subtotal
4.	Less:
	Income accrued during the current year but not collected as of the end of the year
5.	Revenue on a cash basis

If the organization has not existed during the whole period the Support Schedule covers, fill in the information for the years that apply. If the organization's status is based on years not shown in the Support Schedule, attach an additional schedule for the other years.

Lines 15, 16, 17, 26, and 27. See Part IV, Definitions. See also Regulations section 1.509(a)-3 for the:

Distinction between gross receipts from gifts and contributions, grants, and gross investment income, and
Definition of membership fees and a bureau or similar agency of a governmental unit.

Organizations completing line 26 should note the instructions and examples for lines 10 or 11 regarding the public support test applicable to their type of organization.

Organizations completing line 27 should note the instructions and examples for line 12 for guidance in computing their public support test.

Line 17. Gross Receipts From Activities Related to Organization's Charitable, etc., Purpose. Include income generated by the organization's exempt function activities (charitable, educational, etc.) and by its nontaxable fundraising events (excluding any contributions received, which are reported on line 15).

Examples include income from:

Ticket sales to performances by a symphony orchestra,
Raffles, bingo, or
Fundraising events, income from which is not taxable as unrelated business income because:
• Substantially all the work is performed without compensation, or
• Carried on by the organization primarily for the convenience of its members, or
• Consists of the selling of merchandise, substantially all of which has been received by the organization as gifts or contributions (section 513(a)(1), (2), or (3)).

Line 26b. Contributions in Excess of the 2% Limitation. Prepare a list for the organization's files to show the name of and amount contributed by each person (other than a governmental unit or publicly supported organization) whose total gifts for 2002 through 2005 exceeded the amount shown in line 26a. (Do not file this list with the organization's return.) Enter the total of all these excess amounts on line 26b. An example of such a list for line 26b is given later.

Line 26b Example

Amount on line 26a of 2006 Schedule A (2% limitation)						$12,000
Contributors whose total gifts from 2002 through 2005 were in excess of the 2% limitation
(a) Name	(b) 2002	(c) 2003	(d) 2004	(e) 2005	(f) Total	(g) Excess contri- butions (col. (f) less the 2% limitation)
XYZ Foundation			$59,000	$ 3,000	$62,000	$50,000
Apple Office Supply	$12,000			3,000	15,000	3,000
Plum Corporation			15,000	15,000	30,000	18,000
John Smith	5,000	$5,000	5,000	1,000	16,000	4,000
Sue Adams		10,000		10,000	20,000	8,000
Apple Trade Assoc.			20,000	7,000	27,000	15,000
Total (Carry the total of column (g) to line 26(b) of the 2006 Schedule A (Form 990 or 990-EZ)).						$98,000

Line 27a. Contributions, Membership Fees, and Gross Receipts From Disqualified Persons. For amounts included in lines 15, 16, and 17 that were received from a disqualified person, prepare a list for the organization's records to show the name of, and total amounts received in each year from each disqualified person. (Do not file this list with the organization's return.) Enter the sum of such amounts for each year. An example of such a list for line 27a is given later.

Line 27a Example

(a) Name		(b) 2005	(c) 2004	(d) 2003	(e) 2002	(f) Total
David Smith		$7,000	$6,000			$13,000
Anne Parker				$5,000	$7,000	$12,000
Total		$7,000	$6,000	$5,000	$7,000	$25,000
▶	Enter the total for each year of columns (b) through (e) on line 27a, 2006 Schedule A (Form 990 or 990-EZ).
▶	Enter the total of column (f) on the line 27a entry space for line 27d, 2006 Schedule A (Form 990 or 990-EZ).

Line 27b. Gross Receipts From Other Than Disqualified Persons. For any amount included in line 17 that was received from each person (other than disqualified persons) prepare a list for the organization's records to show the name of, and amount received for each year, that was more than the larger of:

The amount on line 25 for
the year, or
$5,000.

After computing the difference between the amount received and the larger amount described in 1 or 2, enter the sum of these differences (the excess amounts) for each year. An example of such a list for line 27b is given below for the year 2005 entry line. Prepare similar lists to determine excess amounts for the other entry lines of 27b. (Do not file these lists with the organization's return.)

Line 27b Example

Year 2005
(a) Name	(b) Amount received in (2005)	(c) Amount on line 25 for (2005)	(d) Enter the larger of column (c) or $5000	(e) Year (2005) Excess (column (b) less column (d))
Word Processing, Inc.	$25,000	$2,000	$5,000	$20,000
Enter the total for column (e) on line 27b for the year (2005) entry space				$20,000

Line 28. Unusual Grants. Unusual grants generally are substantial contributions and bequests from disinterested persons and are:

Attracted because of the organization's publicly supported nature,
Unusual and unexpected because of the amount, and
Large enough to endanger the organization's status as normally meeting the support test described in the instructions for lines 10, 11, and 12.

A grant that meets these terms may be treated as an unusual grant (that is disregarded entirely in the public support computation) even if the organization receives the funds over a period of years. In the list of unusual grants, show only what the organization received during the year.

Do not treat gross investment income items as unusual grants. Instead, include all investment income in support.

See Rev. Rul. 76-440, 1976-2 C.B. 58 and Regulations sections 1.170A-9(e)(6)(ii) and 1.509(a)-3(c)(3) and (4) for details about unusual grants.

For an organization described in lines 10, 11, or 12 that received any unusual grants during 2002 through 2005, prepare a list for the organization's records to show, for each year, the name of the contributor, the date and amount of the grant, and a brief description of the grant. (Do not file this list with the organization's return.) Do not include these grants in line 15. An example for such a list for line 28 is given below.

Line 28 Example

Year ▶ 2005	Description
Name ▶ Mr. Disinterested Donor	Undeveloped land - (Volume 578, page Form 990 or 990-EZ Schedule A, Dept. of Land Records, Jefferson County, Ohio)
Date of Grant ▶ January 15, 2005
Amount of Grant ▶ $6,000

Part V. Private School Questionnaire

All schools that checked the box on line 6, Part IV, must complete Part V. Relevant parts of Rev. Proc. 75-50, 1975-2 C.B. 587 are given below. The revenue procedure gives guidelines and recordkeeping requirements for determining whether private schools that are recognized as exempt from tax have racially nondiscriminatory policies toward their students.

4.01 Organizational requirements. A school must include a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that it has a racially nondiscriminatory policy as to students and therefore does not discriminate against applicants and students on the basis of race, color, and national or ethnic origin.

4.02 Statement of policy. Every school must include a statement of its racially nondiscriminatory policy as to students in all its brochures and catalogues dealing with student admissions, programs, and scholarships. A statement substantially similar to the Notice described in paragraph (a) of subsection 1 of section 4.03, infra, will be acceptable for this purpose. Further, every school must include a reference to its racially nondiscriminatory policy in other written advertising that it uses as a means of informing prospective students of its programs. The following references will be acceptable:

The (name) school admits students of any race, color, and national or ethnic origin.

4.03 Publicity. The school must make its racially nondiscriminatory policy known to all segments of the general community served by the school.

1. The school must use one of the following two methods to satisfy this requirement:

(a) The school may publish a notice of its racially nondiscriminatory policy in a newspaper of general circulation that serves all racial segments of the community. This publication must be repeated at least once annually during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period. Where more than one community is served by a school, the school may publish its notice in those newspapers that are reasonably likely to be read by all racial segments of the communities that it serves. The notice must appear in a section of the newspaper likely to be read by prospective students and their families and it must occupy at least three column inches. It must be captioned in at least 12 point boldface type as a notice of nondiscriminatory policy as to students, and its text must be printed in at least 8 point type. The following notice will be acceptable:

Notice Of Nondiscriminatory Policy As To Students

The (name) school admits students of any race, color, national and ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school. It does not discriminate on the basis of race, color, national and ethnic origin in administration of its educational policies, admissions policies, scholarship and loan programs, and athletic and other school-administered programs.

(b) The school may use the broadcast media to publicize its racially nondiscriminatory policy if this use makes such nondiscriminatory policy known to all segments of the general community the school serves. If this method is chosen, the school must provide documentation that the means by which this policy was communicated to all segments of the general community was reasonably expected to be effective. In this case, appropriate documentation would include copies of the tapes or script used and records showing that there was an adequate number of announcements, that they were made during hours when the announcements were likely to be communicated to all segments of the general community, that they were of sufficient duration to convey the message clearly, and that they were broadcast on radio or television stations likely to be listened to by substantial numbers of members of all racial segments of the general community. Announcements must be made during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period.

Communication of a racially nondiscriminatory policy as to students by a school to leaders of racial groups as the sole means of publicity generally will not be considered effective to make the policy known to all segments of the community.

2. The requirements of subsection 1 of this section will not apply when one of the following paragraphs applies:

(a) If for the preceding 3 years the enrollment of a parochial or other church-related school consists of students at least 75% of whom are members of the sponsoring religious denomination or unit, the school may make known its racially nondiscriminatory policy in whatever newspapers or circulars the religious denomination or unit utilizes in the communities from which the students are drawn. These newspapers and circulars may be those distributed by a particular religious denomination or unit or by an association that represents a number of religious organizations of the same denomination. If, however, the school advertises in newspapers of general circulation in the community or communities from which its students are drawn and paragraphs (b) and (c) of this subsection are not applicable to it, then it must comply with paragraph (a) of subsection 1 of this section.

(b) If a school customarily draws a substantial percentage of its students nationwide or worldwide or from a large geographic section or sections of the United States and follows a racially nondiscriminatory policy as to students, the publicity requirement may be satisfied by complying with section 4.02, supra. Such a school may demonstrate that it follows a racially nondiscriminatory policy within the meaning of the preceding sentence either by showing that it currently enrolls students of racial minority groups in meaningful numbers or, when minority students are not enrolled in meaningful numbers, that its promotional activities and recruiting efforts in each geographic area were reasonably designed to inform students of all racial segments in the general communities within the area of the availability of the school. The question whether a school satisfies the preceding sentence will be determined on the basis of the facts and circumstances of each case.

(c) If a school customarily draws its students from local communities and follows a racially nondiscriminatory policy as to students, the publicity requirement may be satisfied by complying with section 4.02, supra. Such a school may demonstrate that it follows a racially nondiscriminatory policy within the meaning of the preceding sentence by showing that it currently enrolls students of racial minority groups in meaningful numbers. The question whether a school satisfies the preceding sentence will be determined on the basis of the facts and circumstances of each case. One of the facts and circumstances that the Service will consider is whether the school's promotional activities and recruiting efforts in each area were reasonably designed to inform students of all racial segments in the general communities within the area of the availability of the school. The Service recognizes that the failure by a school drawing its students from local communities to enroll racial minority group students may not necessarily indicate the absence of a racially nondiscriminatory policy as to students when there are relatively few or no such students in these communities. Actual enrollment is, however, a meaningful indication of a racially nondiscriminatory policy in a community in which a public school or schools became subject to a desegregation order of a Federal court or otherwise expressly became obligated to implement a desegregation plan under the terms of any written contract or other commitment to which any Federal agency was a party.

The Service encourages schools to satisfy the publicity requirement by the methods described in subsection 1 of this section, regardless of whether a school considers itself within subsection 2, because it believes these methods to be the most effective to make known a school's racially nondiscriminatory policy. In this regard it is each school's responsibility to determine whether paragraph (a), (b), or (c) of subsection 2 applies to it. On audit, a school must be prepared to demonstrate that the failure to publish its racially nondiscriminatory policy in accordance with subsection 1 of this section was justified by the application to it of paragraph (a), (b), or (c) of subsection 2. Further, a school must be prepared to demonstrate that it has publicly disavowed or repudiated any statements purported to have been made on its behalf (after November 6, 1975) that are contrary to its publicity of a racially nondiscriminatory policy as to students, to the extent that the school or its principal official were aware of such statements.

4.04 Facilities and programs. A school must be able to show that all of its programs and facilities are operated in a racially nondiscriminatory manner.

4.05 Scholarship and loan programs. As a general rule, all scholarship or other comparable benefits procurable for use at any given school must be offered on a racially nondiscriminatory basis. Their availability on this basis must be known throughout the general community being served by the school and should be referred to in the publicity required by this section in order for that school to be considered racially nondiscriminatory as to students. . . . [S]cholarships and loans that are made pursuant to financial assistance programs favoring members of one or more racial minority groups that are designed to promote a school's racially nondiscriminatory policy will not adversely affect the school's exempt status. Financial assistance programs favoring members of one or more racial groups that do not significantly derogate from the school's racially nondiscriminatory policy similarly will not adversely affect the school's exempt status.

4.06 Certification. An individual authorized to take official action on behalf of a school that claims to be racially nondiscriminatory as to students is required to certify annually, under penalties of perjury, that to the best of his or her knowledge and belief the school has satisfied the applicable requirements of sections 4.01 through 4.05 of the Rev. Proc. This certification is line 35 in Part V.

4.07 Faculty and staff. The existence of a racially discriminatory policy with respect to employment of faculty and administrative staff is indicative of a racially discriminatory policy as to students. Conversely, the absence of racial discrimination in employment of faculty and administrative staff is indicative of a racially nondiscriminatory policy as to students.

7.01 Specific records. Except as provided in section 7.03, each exempt private school must maintain for a minimum period of three years, beginning with the year after the year of compilation or acquisition, the following records for the use of the Service on proper request:

Records indicating the racial composition of the student body, faculty, and administrative staff for each academic year.
Records sufficient to document that scholarship and other financial assistance is awarded on a racially nondiscriminatory basis.
Copies of all brochures, catalogues, and advertising dealing with student admissions, programs, and scholarships. Schools advertising nationally or in a large geographic segment or segments of the United States need only maintain a record sufficient to indicate when and in what publications their advertisements were placed.
Copies of all materials used by or on behalf of the school to solicit contributions.

7.02 Limitation.

For purposes of section 7.01, the racial composition of the student body, faculty, and administrative staff may be an estimate based on the best information readily available to the school, without requiring student applicants, students, faculty, or administrative staff to submit information to the school that the school otherwise does not require. For each academic year, however, a record of the method by which racial composition is determined must be maintained. . . .
The Service does not require that a school release personally identifiable records or personal information contained therein except in accordance with the requirements of the "Family Educational Rights and Privacy Act of 1974," 20 U.S.C. section 1232g (1974). Similarly, the Service does not require a school to keep records the maintenance of which is prohibited under state or federal law.

7.03 Exceptions. The records described in section 7.01 need not be independently maintained for Internal Revenue Service use if:

Substantially the same information that each of these records would provide has been included in a report or reports filed in accordance with law with an agency or agencies of Federal, state, or local government, and this information is current within one year, and
The school maintains copies of these reports from which this information is readily obtainable. Records described in section 7.01 providing information not included in reports filed with an agency or agencies must be maintained by the school for Service use.

7.04 Failure to maintain records. Failure to maintain or to produce upon the proper request the required records and information will create a presumption that the organization has failed to comply with these guidelines.

Part VI-A. Lobbying Expenditures by Electing Public Charities

Complete Part VI-A only for an eligible organization that elected to be subject to the lobbying expenditure limitations of section 501(h) by filing Form 5768 and for which the election was valid and in effect for its tax year beginning in the year 2006.

A public charity that makes a valid section 501(h) election may spend up to a certain percentage of its exempt purpose expenditures to influence legislation without incurring tax or losing its tax-exempt status.

Expenditure test. Under the expenditure test, there are limits both upon the amount of the organization's grassroots lobbying expenditures and upon the total amount of its direct lobbying and grassroots lobbying expenditures. If the electing public charity does not meet this expenditure test, it will owe a section 4911 excise tax on its excess lobbying expenditures. Moreover, if over a 4-year averaging period the organization's average annual total lobbying or grassroots lobbying expenditures are more than 150% of its dollar limits, the organization will lose its exempt status.

The following terms are used in Part VI-A. See Regulations section 56.4911 for details.

Exempt purpose expenditures. The amount an electing public charity may spend on lobbying (without incurring tax) is a scaled percentage of the organization's exempt purpose expenditures. In general, an expenditure is an exempt purpose expenditure if it is paid or incurred by an electing public charity to accomplish the organization's exempt purpose.

In general, exempt purpose expenditures are:

The total amount paid or incurred for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, or to foster national or international amateur sports competition (not including providing athletic facilities or equipment, other than by qualified amateur sports organizations described in section 501(j)(2)),
The allocable portion of administrative expenses paid or incurred for the above purposes,
Amounts paid or incurred to try to influence legislation, whether or not for the purposes described in 1 above,
Allowance for depreciation or amortization, and
Fundraising expenditures, except that exempt purpose expenditures do not include amounts paid to or incurred for either the organization's separate fundraising unit or other organizations, if the amounts are primarily for fundraising.

See also Regulations section 56.4911-4(c) for a discussion of excluded expenditures.

Lobbying expenditures. The term lobbying expenditures is expenditures paid or incurred for the purpose of attempting to influence legislation:

Through communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of the legislation, and
By attempting to affect the opinions of the general public.

To determine if an organization has spent excessive amounts on lobbying, the organization must know which expenditures are lobbying expenditures and which are not lobbying expenditures. An electing public charity's lobbying expenditures for a year are the sum of its expenditures during that year for (1) direct lobbying communications (direct lobbying expenditures) plus (2) grassroots lobbying communications (grassroots expenditures).

Direct lobbying communications (direct lobbying expenditures). A direct lobbying communication is any attempt to influence any legislation through communication with any:

Member or employee of a legislative body, or
Government official or employee (other than a member or employee of a legislative body) who may participate in the formulation of the legislation, but only if the principal purpose of the communication is to influence legislation.

A communication with a legislator or government official will be treated as a direct lobbying communication, if, but only if, the communication:

Refers to specific legislation, and
Reflects a view on such legislation.

Grassroots lobbying communications (grassroots expenditures). A grassroots lobbying communication is any attempt to influence any legislation through an attempt to affect the opinions of the general public or any part of the general public.

A communication is generally not a grassroots lobbying communication unless (in addition to referring to specific legislation and reflecting a view on that legislation) it encourages recipients to take action about the specific legislation.

A communication encourages a recipient to take action when it:

States that the recipient should contact legislators;
States a legislator's address, phone number, etc.;
Provides a petition, tear-off postcard, or similar material for the recipient to send to a legislator; or
Specifically identifies one or more legislators who:
1. Will vote on legislation;
2. Opposes the communication's view on the legislation;
3. Is undecided about the legislation;
4. Is the recipient's representative in the legislature; or
5. Is a member of the legislative committee that will consider the legislation.

A communication described in (4) above generally is grassroots lobbying only if, in addition to referring to and reflecting a view on specific legislation, it is a communication that cannot meet the full and fair exposition test as nonpartisan analysis, study, or research.

Communication with members. For purposes of section 4911, expenditures for certain communications between an organization and its members are treated more leniently than are communications to nonmembers. Expenditures for a communication that refers to, and reflects a view on, specific legislation are not lobbying expenditures if the communication satisfies the following requirements:

The communication is directed only to members of the organization,
The specific legislation the communication refers to, and reflects a view on, is of direct interest to the organization and its members,
The communication does not directly encourage the member to engage in direct lobbying (whether individually or through the organization), and
The communication does not directly encourage the member to engage in grassroots lobbying (whether individually or through the organization).

Expenditures for a communication directed only to members that refers to, and reflects a view on, specific legislation and that satisfies the requirements of paragraphs 1, 2, and 4, but does not satisfy the requirements of paragraph 3, are treated as expenditures for direct lobbying.

Expenditures for a communication directed only to members that refers to, and reflects a view on, specific legislation and satisfies the requirements of paragraphs 1 and 2, but does not satisfy the requirements of paragraph 4, are treated as grassroots expenditures, whether or not the communication satisfies the requirements of paragraph 3.

See Regulations section 56.4911-5 for details.

There are special rules regarding certain paid mass media advertisements about highly publicized legislation; allocation of mixed purpose expenditures; certain transfers treated as lobbying expenditures and special rules regarding lobbying on referenda, ballot initiatives, and similar procedures (see Regulations sections 56.4911-2 and -3).

Legislation. In general, the term legislation includes Acts, bills, resolutions, or similar items. Specific legislation includes both legislation that has already been introduced in a legislative body and a specific legislative proposal that the organization either supports or opposes.

Exceptions to the definitions of direct lobbying communication and/or grassroots lobbying communication. In general, engaging in nonpartisan analysis, study, or research and making its results available to the general public or segment or members thereof, or to governmental bodies, officials, or employees is not considered either a direct lobbying communication or a grassroots lobbying communication. Nonpartisan analysis, study, or research may advocate a particular position or viewpoint as long as there is a sufficiently full and fair exposition of the pertinent facts to enable the public or an individual to form an independent opinion or conclusion.

A communication that responds to a governmental body's or committee's written request for technical advice is not a direct lobbying communication.

A communication is not a direct lobbying communication if the communication is an appearance before, or communication with, any legislative body whose action might affect the organization's existence, its powers and duties, its tax-exempt status, or the deductibility of contributions to the organization, as opposed to affecting merely the scope of the organization's future activities.

Affiliated groups. Treat members of an affiliated group as a single organization to measure lobbying expenditures and permitted lobbying expenditures.

Two organizations are affiliated if one is bound by the other organization's decisions on legislative issues (control) or if enough representatives of one belong to the other organization's governing board to cause or prevent action on legislative issues (interlocking directorate).

If the organization is not sure whether its group is affiliated, it may ask the IRS for a ruling letter. There is a fee for this ruling.

For Information on requesting rulings, see Rev. Proc. 2007-4, 2007-1 I.R.B. 118.

Members of an affiliated group measure both lobbying expenditures and permitted lobbying expenditures on the basis of the affiliated group's tax year. If all members of the affiliated group have the same tax year, that year is the tax year of the affiliated group.

However, if the affiliated group's members have different tax years, the tax year of the affiliated group is the calendar year, unless all the members of the group elect otherwise. See Regulations section 56.4911-7(e)(3).

If the electing organization belongs to an affiliated group, complete in Part VI-A, lines 36 through 44:

Column (a) for the affiliated group as a whole, and
Column (b) for the electing member of the group.

If there are no excess lobbying expenditures on either line 43 or 44 of column (a), treat each electing member as having no excess lobbying expenditures.

However, if there are excess lobbying expenditures on either line 43 or 44 of column (a), treat each electing member as having excess lobbying expenditures. In such case, each electing member must file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code , and must pay the tax on its proportionate share of the affiliated group's excess lobbying expenditures.

To find a member's proportionate share, see Regulations section 56.4911-8(d). Enter the proportionate share in column (b) on line 43 or line 44, or on both lines.

Attached schedule. Attach a schedule showing each affiliated group member's name, address, EIN, and expenses. Use the format of Part VI-A for this schedule. Show which members elected and which did not.

Include each electing member's share of the excess lobbying expenditures on the attached schedule. Nonelecting members do not owe tax, but remain subject to the general rule, which provides that no substantial part of their activities may consist of carrying on propaganda or otherwise trying to influence legislation.

Limited control. If two organizations are affiliated because their governing instruments provide that the decisions of one will control the other only on national legislation, apply expenditures as follows:

Charge the controlling organization with its own lobbying expenditures and the national legislation expenditures of the affiliated organizations.
Do not charge the controlling organization with other lobbying expenditures (or other exempt-purpose expenditures) of the affiliated organizations, and
Treat each local organization as though it were not a member of an affiliated group; for example, the local organization should account for its own expenditures only and not any of the national legislation expenditures deemed as incurred by the controlling organization.

When this type of limited control is present, each member of the affiliated group should complete column (b) only.

Group returns. Although membership in a group affiliated for lobbying does not establish eligibility to file a group return, a group return can sometimes meet the filing requirements of more than one member of an affiliated group. (General Instruction R of the Instructions for Form 990 and Form 990-EZ explains who may file a group return.)

If a central or parent organization files a group return on behalf of two or more members of the group, complete column (a), Part VI-A, for the affiliated group as a whole. Include the central, electing, and nonelecting members.

In column (b), except on lines 43 and 44, include the amounts that apply to all electing members of the group if they are included in the group return.

Attach the schedule described above under Affiliated groups. Show what amounts apply to each group member.

If the group return includes organizations that belong to more than one affiliated group, show in column (a) the totals for all such groups. On the attached schedule, show the amounts that apply to each affiliated group and to each group member.

If the parent organization has made the lobbying expenditure election, its separate return must also show in column (a) the amounts that apply to the affiliated group as a whole and, in column (b), the amounts that apply to the parent organization only.

A subordinate organization not included in the group return would also complete column (a) for the affiliated group as a whole and column (b) for itself only.

However, if limited control (defined above) exists, complete only column (b) in Part VI-A of the group return for the electing members in the group.

Attach a schedule to show the amounts that apply to each electing member.

In the separate returns filed by the parent and by any subordinate organizations not included in the group return, complete only column (b).

Lines 36 through 44. Complete column (b) for any organization using Part VI-A but complete column (a) only for affiliated groups.

Use lines 36 through 44 to determine whether any of the organization's current year lobbying expenditures are subject to tax. File Form 4720 if the organization needs to report and pay the excise tax.

Lines 45 through 50. Lines 45 through 50 are used to determine if the organization exceeded lobbying expenditure limits during the 4-year averaging period.

Any organization for which a lobbying expenditure election under section 501(h) was in effect for its tax year beginning in 2006 must complete columns (a) through (e) of lines 45 through 50 except in the following situations.

An organization first treated as a section 501(c)(3) organization in its tax year beginning in 2006 does not have to complete any part of lines 45 through 50.
An organization does not have to complete lines 45 through 50 for any period before it is first treated as a section 501(c)(3) organization.
If 2006 is the first year for which an organization's first section 501(h) election is effective, that organization must complete line 45, columns (a) and (e).

The organization must then complete all of column (e) to determine whether the amount on line 47, column (e), is equal to or less than the lobbying ceiling amount calculated on line 46 and whether the amount on line 50 is equal to or less than the grassroots ceiling amount calculated on line 49.

The organization does not satisfy both tests if either its total lobbying expenditures or grassroots lobbying expenditures exceed the applicable ceiling amounts. When this occurs, all five columns must be completed and a recomputation made unless exception 1 or 2 above applies.
If 2006 is the second or third tax year for which the organization's first section 501(h) election is in effect, that organization is required to complete only the columns for the years in which the election has been in effect, entering the totals for those years in column (e).

The organization must determine, for those 2 or 3 years, whether the amount entered in column (e), line 47, is equal to or less than the lobbying ceiling amount reported on line 46, and whether the amount entered in column (e), line 50, is equal to or less than the grassroots ceiling amount calculated on line 49.

The organization does not satisfy both tests if either its total lobbying expenditures or grassroots lobbying expenditures exceed applicable ceiling amounts. When that occurs, all five columns must be completed and a recomputation made, unless exception 1 or 2 above applies.

If the organization is not required to complete all five columns, attach a statement explaining why. In the statement, show the ending date of the tax year in which the organization made its first section 501(h) election and state whether or not that first election was revoked before the start of the organization's tax year that began in 2006.

If the organization belongs to an affiliated group, enter the appropriate affiliated group totals from column (a), lines 36 through 44, when completing lines 45, 47, 48, and 50.

Line 45. Lobbying nontaxable amount. For 2003 through 2006, enter the amount from line 41 of the Schedule A (Form 990 or 990-EZ) filed for each year.

Line 47. Total lobbying expenditures. For 2003 through 2006, enter the amount from line 38 of the Schedule A (Form 990 or 990-EZ) filed for each year.

Line 48. Grassroots nontaxable amount. For 2003 through 2006, enter the amount from line 42 of the Schedule A (Form 990 or 990-EZ) filed for each year.

Line 50. Grassroots lobbying expenditures. For 2003 through 2006, enter the amount from line 36 of the Schedule A (Form 990 or 990-EZ) filed for each year.

Part VI-B. Lobbying Activity by Nonelecting Public Charities

The Part VI-A instructions defining direct and grassroots lobbying activities by organizations that made the section 501(h) election do not apply to nonelecting organizations that complete Part VI-B.

Part VI-B provides a reporting format for any organization that engaged in lobbying activities in its 2006 tax year but did not make a section 501(h) lobbying expenditure election for that year by filing Form 5768.

A nonelecting public charity will generally be regarded as lobbying if the organization either: (1) contacts, or urges the public to contact, members of a legislative body for the purpose of proposing, supporting, or opposing legislation or the government's budget process; or (2) advocates the adoption or rejection of legislation.

Nonelecting organizations must complete Part VI-B to show lobbying expenditures paid or incurred.

In item g, direct contact is a personal telephone call or visit with legislators, their staffs, or government officials.

These nonelecting organizations must also attach a statement giving a detailed description of their lobbying activities. The detailed description of lobbying activities should include all lobbying activities, whether expenses are incurred or not (for example, even lobbying activities carried out by unreimbursed volunteers).

For example, the activities should be included in the attached statement if an organization (either through its employees or volunteers) attempts to influence legislation in any of the following ways:

Sending letters or publications to government officials or legislators,
Meeting with or calling government officials or legislators,
Sending or distributing letters or publications (including newsletters, brochures, etc.) to members or to the general public, or
Using direct mail, placing advertisements, issuing press releases, holding news conferences, or holding rallies or demonstrations.

Part VII. Information Regarding Transfers To and Transactions and Relationships With Noncharitable Exempt Organizations

Part VII is used to report direct and indirect transfers to (line 51a), direct and indirect transactions with (line 51b), and relationships with (line 52) any other noncharitable exempt organization (section 6033(b)(9)).

A noncharitable exempt organization is an organization exempt under section 501(c) (that is not exempt under section 501(c)(3)), or a political organization described in section 527.

For purposes of these instructions, the section 501(c)(3) organization completing this Schedule A (Form 990 or 990-EZ) is referred to as the reporting organization.

A noncharitable exempt organization is related to or affiliated with the reporting organization if:

The two organizations share some element of common control, or
A historic and continuing relationship exists between the two organizations.

A noncharitable exempt organization is unrelated to the reporting organization if:

The two organizations share no element of common control, and
A historic and continuing relationship does not exist between the two organizations.

An element of common control is present when one or more of the officers, directors, or trustees of one organization are elected or appointed by the officers, directors, trustees, or members of the other. An element of common control is also present when more than 25% of the officers, directors, or trustees of one organization serve as officers, directors, or trustees of the other organization.

A historic and continuing relationship exists when two organizations participate in a joint effort to work in concert toward the attainment of one or more common purposes on a continuous or recurring basis rather than on the basis of one or several isolated transactions or activities. Such a relationship also exists when two organizations share facilities, equipment, or paid personnel during the year, regardless of the length of time the arrangement is in effect.

Line 51. Reporting of certain transfers and transactions. Except as provided below, report on line 51 any transfer to or transaction with a noncharitable exempt organization even if the transfer or transaction constitutes the only connection with the noncharitable exempt organization.

Related organizations. If the noncharitable exempt organization is related to or affiliated with the reporting organization, report all direct and indirect transfers and transactions except for contributions and grants received by the reporting organization.

Unrelated organizations. All transfers from the reporting organization to an unrelated noncharitable exempt organization must be reported on line 51a. All transactions between the reporting organization and an unrelated noncharitable exempt organization must be shown on line 51b unless they meet the Exception in the specific instructions for that line.

Line 51a. Transfers. Answer “Yes” to lines 51a(i) and 51a(ii) if the reporting organization made any direct or indirect transfers of any value to a noncharitable exempt organization.

A transfer is any transaction or arrangement whereby one organization transfers something of value (cash, other assets, services, use of property, etc.) to another organization without receiving something of more than nominal value in return. Contributions, gifts, and grants are examples of transfers.

If the only transfers between the two organizations were contributions and grants made by the noncharitable exempt organization to the reporting organization, answer “No.”

Line 51b. Other transactions. Answer “Yes” for any transaction described in lines 51b(i) through (vi), regardless of its amount, if it is with a related or affiliated organization.

Unrelated organizations. Answer “Yes” for any transaction between the reporting organization and an unrelated noncharitable exempt organization, regardless of its amount, if the reporting organization received less than adequate consideration. There is adequate consideration where the fair market value of the goods, other assets, or services furnished by the reporting organization is not more than the fair market value of the goods, other assets or services received from the unrelated noncharitable exempt organization. The Exception described below does not apply to transactions for less than adequate consideration.

Answer “Yes” for any transaction, including transfers for adequate consideration, between the reporting organization and an unrelated noncharitable exempt organization if the amount involved is more than $500. The amount involved is the fair market value of the goods, services, or other assets furnished by the reporting organization.

Exception. If a transaction with an unrelated noncharitable exempt organization was for adequate consideration and the amount involved was $500 or less, it is not necessary to answer “Yes” for that transaction.

Line 51b(iii). Answer “Yes” for transactions in which the reporting organization was either the lessor or the lessee.

Line 51b(iv). Answer “Yes” if either organization reimbursed expenses incurred by the other.

Line 51b(v). Answer “Yes” if either organization made loans to the other or if the reporting organization guaranteed the other's loans.

Line 51b(vi). Answer “Yes” if either organization performed services or membership or fundraising solicitations for the other.

Line 51c. Complete line 51c regardless of whether the noncharitable exempt organization is related to or closely affiliated with the reporting organization. For the purposes of this line, facilities includes office space and any other land, building, or structure whether owned or leased by, or provided free of charge to, the reporting organization or the noncharitable exempt organization.

Line 51d. Use this schedule to describe the transfers and transactions for which the organization entered “Yes” on lines 51a through 51c above. The organization must describe each transfer or transaction for which it answered “Yes.” The organization may combine all of the cash transfers (line 51a(i)) to each organization into a single entry. Otherwise, make a separate entry for each transfer or transaction.

Column (a). For each entry, enter the line number from lines 51a through 51c. For example, if the organization answered “Yes” to line 51b(iii), enter “b(iii)” in column (a).

Column (d). If additional space is needed, write “see attached” in column (d) and use an attached sheet for the description. If the organization is making more than one entry on line 51d, specify, on the attached sheet, which transfer or transaction it is describing.

Line 52. Reporting of certain relationships. Enter on line 52 each noncharitable exempt organization to or with which the reporting organization is related, or affiliated, as defined above. If the control factor or the historic and continuing relationship factor (or both) is present at any time during the year, the organization must identify the organization on line 52 even if neither factor is present at the end of the year.

Do not enter unrelated noncharitable exempt organizations on line 52 even if the organization reports transfers to or transactions with those organizations on line 51. For example, if the organization reported a one-time transfer to an unrelated noncharitable exempt organization on line 51a(ii), it should not list the organization on line 52.

Column (b). Enter the exempt category of the organization; for example, 501(c)(4).

Column (c). In most cases, a simple description, such as common directors or auxiliary of reporting organization will be sufficient. If additional space is needed, write “see attached” in column (c) and use a separate sheet to describe the relationship. If the organization lists more than one organization on line 52, identify which organization it is describing on the attached sheet.

Specific Instructions

Part I. Compensation of the Five Highest Paid Employees Other Than Officers, Directors, and Trustees

Column (c)

Column (d)

Column (e)

Part II-A. Compensation of the Five Highest Paid Independent Contractors for Professional Services

Part II-B. Compensation of the Five Highest Paid Independent Contractors for Other Services

Part III. Statements About Activities

Part IV. Reason for Non-Private Foundation Status

Definitions

Part IV-A. Support Schedule

Note.

Note.

Part V. Private School Questionnaire

Part VI-A. Lobbying Expenditures by Electing Public Charities

Note.

Part VI-B. Lobbying Activity by Nonelecting Public Charities

Part VII. Information Regarding Transfers To and Transactions and Relationships With Noncharitable Exempt Organizations