Schedules H–R

Schedule H: hospitals

• Any organization operating one or more state-licensed hospital facilities (Part IV line 20a), entity by entity, including facilities run through disregarded entities and its share of joint-venture hospitals (by the K-1 ending capital percentage). Part I financial assistance and community benefit at cost: the financial assistance policy (free and discounted care by federal poverty level), unreimbursed Medicaid and other means-tested programs, community health improvement, health professions education, subsidized services, research, cash and in-kind contributions — not bad debt and not Medicare shortfalls, which go in Part III with the argument for why some of each is community benefit. Part II community building. Part IV management companies and joint ventures in which officers and physicians together hold 10% or more. Part V facility by facility: the §501(r) requirements — a community health needs assessment every three years with public-health input and an implementation strategy (§4959 tax of $50,000 per facility per year for missing it), a written financial assistance policy publicized on the website and in the facility and in the community, limits on charges to FAP-eligible patients (no more than amounts generally billed), and no extraordinary collection actions (selling debt, credit reporting, lawsuits, deferring care) before reasonable efforts to determine FAP eligibility. Rev. Proc. 2015-21 lets minor failures be corrected and disclosed. The 2025 instructions make it mandatory to treat multiple buildings under one license as one facility. Part VI the narrative. updated 2026
• Also attach the audited financial statements (Part IV line 20b). This is where exempt and for-profit hospitals compete head-on, and where the IRS and Congress look first; the chapter’s authors report the industry feels “under attack.” Not a Lone Tree problem.

Schedule I: grants and assistance inside the United States

• Part I: whether the organization keeps records to substantiate grants, eligibility and selection, and how it monitors use. Part II (Part IV line 21; Part IX line 1 over $5,000): each domestic organization or government that received more than $5,000 — name, EIN, IRC section, cash, noncash with valuation method, purpose. Part III (line 22; Part IX line 2 over $5,000): assistance to individuals by type of grant — number of recipients, cash, noncash, method — no names. Part IV narrative, including Part I line 2 (the monitoring procedure). Scholarships from a public charity need objective, nondiscriminatory selection and a selection committee that excludes the donor; from a private foundation they also need advance IRS approval of the program (§4945(g)). Grants to individuals for disaster relief follow Pub. 3833 (needs assessment, no insiders).

Schedule J: compensation

• Required when any Part VII Section A person exceeds $150,000 in total (D + E + F), when any listed person is paid by an unrelated organization for services to the filer, or when a former officer or key employee is listed (Part IV line 23). Part I applies to everyone in Part VII regardless: line 1a the perks — first-class or charter travel, companion travel, tax indemnification and gross-ups, discretionary spending accounts, housing allowances or a residence, payments for business use of a personal residence, health or social club dues, personal services (maid, chauffeur, chef); 1b whether a written policy covers them; line 2 substantiation before reimbursement; line 3 how the top official’s pay was set — compensation committee, independent consultant, other organizations’ 990s, written contract, surveys, board approval; lines 4–9 severance, supplemental retirement plans, equity-based pay, pay contingent on revenues or net earnings, non-fixed payments, and the initial-contract exception of Reg. §53.4958-4(a)(3).
• Part II for each person over the line: reportable compensation split into base, bonus and incentive, and other (severance, longevity awards, payments earned in a prior year); deferred compensation (the year’s accrual under a qualified or nonqualified plan and the change in actuarial value of a defined benefit plan, not already on a W-2); nontaxable benefits (health, life, disability, dependent care, tuition — the items dropped from Part VII under $10,000 come back here); the total; and the amount reported as deferred on a prior year’s return, so the same dollars can be traced. An independent consultant is one with no family or business relationship to the executive whose appraisals that year are mostly for other organizations — even if the consultant’s firm also does the audit.
• Compensation here and in Part VII is on the calendar year ending within the fiscal year, from the W-2 (box 1 or 5, greater) and 1099-NEC. Part IX line 5 is on the fiscal year. The three numbers will not agree and are not supposed to; Schedule O can say so.

Schedule K: tax-exempt bonds

• Each outstanding issue of more than $100,000 principal issued after 2002 of which the organization is the beneficiary (Part IV line 24). Part I the issue (issuer, EIN, CUSIP, date, price, purpose, defeased, on-behalf-of issuer, pooled). Part II proceeds by use (reserve, refunding escrow, capital spending, working capital, issuance costs, unspent) and whether the final allocation was made and records kept. Part III private business use: leases, management and research contracts (Rev. Proc. 2017-13 safe harbors), partnership and LLC ownership of financed property, the private-use percentages (5% for (c)(3) bonds after issuance costs, 10% for governmental bonds), the private security or payment test, dispositions. Part IV arbitrage: variable rate, hedges, guaranteed investment contracts, rebate computations and Form 8038-T. Part V procedures. Post-issuance compliance is a records problem for the life of the bonds plus three years; a college or hospital client needs bond counsel in the loop, not the tax preparer.

Schedule L: transactions with interested persons

• Part I, excess benefit transactions (Part IV line 25a–b; (c)(3), (c)(4) and (c)(29) organizations): any transaction in which the organization gave a disqualified person an economic benefit worth more than what it got back — and whether it was corrected, and the §4958 tax imposed on the person and managers (Form 4720). A disqualified person is anyone who was in a position to exercise substantial influence over the organization at any time in the five years before the transaction — voting board members, the president, CEO, COO, treasurer and CFO by definition; others on the facts (founders, substantial contributors, people who control a department that is a substantial part of the whole); their family (spouse, siblings and their spouses, ancestors, descendants and their spouses); and entities more than 35% owned by them. For a donor-advised fund, any grant, loan or payment to the donor, advisor or their family or 35% entities is an excess benefit in full; for a supporting organization, likewise any payment to a substantial contributor or family, and any loan to a disqualified person. [Glossary, “Excess benefit transaction”]
• §4958 intermediate sanctions (the course assumes these; stated here because the exam does not): first tier 25% of the excess benefit on the disqualified person, 10% on each organization manager who knowingly approved it (capped at $20,000 per transaction, joint and several); second tier 200% on the person if not corrected (repaid with interest, and the organization made whole) before the deficiency notice or assessment. Revocation is possible on top, judged by the size and repetition of the benefit and whether the organization had safeguards. Automatic excess benefit (Reg. §53.4958-4(c)): any economic benefit to a disqualified person that the organization did not clearly show as compensation when paid — on the W-2 or 1099, in the 990, or in a contemporaneous approved written record — is an excess benefit in full regardless of reasonableness. The personal expenses on the executive’s credit card that nobody reported are the classic case. added 2026
• Rebuttable presumption of reasonableness (Reg. §53.4958-6): compensation or a property transaction is presumed reasonable, and the IRS must prove otherwise, if (1) it was approved in advance by the board or a committee of people with no conflict, (2) they relied on appropriate comparability data — for an organization with gross receipts under $1 million, three comparables from similar organizations suffice — and (3) they documented the decision, the data and the vote contemporaneously (before the later of the next meeting or 60 days), with the minutes approved within a reasonable time. Those three elements are Form 990 Part VI lines 15a–b. A one-page memo in the minutes each year is the cheapest insurance a nonprofit buys. added 2026
• Part II, loans (line 26): loans, salary advances, other advances and receivables between the organization and current or former officers, directors, trustees, key employees, high-five employees, §4958 disqualified persons, substantial contributors, §509(a)(3) disqualified persons, their families and 35% entities — outstanding at year-end only, each separately: purpose, original amount, balance, in default, board-approved, written agreement. Loans repaid during the year are not listed, but the board minutes should still show the approval.
• Part III, grants or assistance (line 27): scholarships, fellowships, prizes, internships and similar aid to an interested person or family member — the trustee’s grandchild’s scholarship goes here (with a selection process that excludes the trustee).
• Part IV, business transactions (line 28a–c): sales, leases, licenses, services, and joint ventures (both over 10%) between the organization and a current or former officer, director, trustee or key employee, a family member, or an entity any of them owns more than 35% of or serves as officer, director, trustee, partner or 5% owner. Reporting thresholds under the current instructions: all payments between the parties during the year exceeded $100,000; or payments under a single transaction exceeded the greater of $10,000 or 1% of total revenue; or compensation to a family member of a listed person exceeded $10,000; or a joint venture in which both hold over 10% and the venture’s profits or capital exceed $10,000. The course’s flat $10,000 was the draft instruction. Payments are reported in the year made regardless of when the contract was signed. Compensation to the listed people themselves is Part VII, not here. updated 2026
• Part V the narrative. Note the independence link: any director (or family member) who appears on this year’s Schedule L is not independent for Part VI line 1b.

Schedule M: noncash contributions

• More than $25,000 of noncash gifts in the year (Part IV line 29), or any gift of art, historical treasures or similar assets, or qualified conservation contributions (line 30) regardless of amount. Lines 1–24 are the inventory by type: art (works, historical treasures, fractional interests), books and publications, clothing and household goods (no count needed), cars, boats and planes, intellectual property, securities (public, closely held, partnership and trust interests, miscellaneous), easements (historic structures, other), real estate (residential, commercial, other), collectibles, food, drugs, taxidermy, historical artifacts, scientific specimens, archeological artifacts, and four “other” lines for things that did not qualify as the category above (household goods not in good used condition, non-qualifying easements, self-created manuscripts, auction donations not for sale). Columns: whether applicable, number of items, revenue reported on Part VIII line 1g, and method of valuation. Museums report only the check and the count. [Final Q24 topic; SQ 24, B; Review image18, B]
• Lines 29–33: Forms 8283 received, items that must be held three years (and Form 8282 if sold), a gift acceptance policy for nonstandard contributions (no ready market, speculative value, not usable for the exempt purpose), use of third parties to solicit, process or sell gifts, and the explanation for any line 1g revenue not matching. Part II narrative. Donated services and use of facilities are not noncash contributions (Part III line 4 narrative only).

Schedule N: liquidation, termination, dissolution, significant disposition

• Part I (line 31): the organization ceased operations — each asset distributed or expense paid (aggregated by category), date, fair value and method, recipient and its EIN and IRC section; transaction expenses of $10,000 or more to lawyers and accountants listed separately (brokerage fees adjust value instead); whether any officer or director became an officer, employee or owner of a successor; whether assets went as the articles and state law require; whether the state attorney general was notified; whether liabilities were paid; whether tax-exempt bonds were outstanding; and the certified articles of dissolution. Part II (line 32): a significant disposition — more than 25% of fair-value assets at the beginning of the year, aggregating unrelated transactions, sold, contributed or transferred, whether or not for value. Part III narrative.
• Colorado: articles of dissolution with the Secretary of State; the Colorado Charitable Solicitations Act registration is withdrawn; and under C.R.S. §7-134-105 the assets of a dissolving nonprofit go where the articles say, which is why the dissolution clause mattered on Form 1023 check.

Schedule O

• The general explanation schedule, always attached (line 38), one entry per part and line in order: Part VI lines 11b, 19 and anything answered “Yes” or “No” that the instructions say to explain; Part VII hours for related organizations; Part IX line 24e; the amendment list; the mission and program narratives that overflow Part III. Do not use it where a schedule has its own narrative part (A Part VI, D Part XIII, E Part II, F Part V, G Part IV, H Part VI, I Part IV, J Part III, K Part VI, L Part V, M Part II, N Part III, R Part VII) — the IRS does not accept Schedule O as a substitute.

Schedule R: related organizations and unrelated partnerships

• Part I disregarded entities (single-member LLCs). Parts II–IV related tax-exempt organizations, related partnerships, related corporations and trusts — “related” meaning parent, subsidiary, brother-sister (common control), supporting or supported organization, or the sponsoring organization of a VEBA; control is more than 50% of the board, stock or profits, or the power to appoint a majority, with §318 attribution. Part IV’s column asks whether a related taxable corporation is a §512(b)(13) controlled entity. Part V transactions with related organizations: 19 types (gifts, loans, sales, leases, services, sharing of staff and facilities, reimbursements, dividends received — line 1f), each reported if over $50,000 with the related organization (and controlled-entity transactions regardless, per Part IV line 35a–b); transfers between two (c)(3)s and from a (c)(3) to an unrelated exempt organization need not be itemized. Part VI unrelated partnerships through which the organization conducts more than 5% of its activities by assets or revenue. Part VII narrative.
• The common small-shop pattern: a (c)(3) that owns a single-member LLC holding its building (Part I), or a (c)(3) whose founder also controls a for-profit vendor (not Schedule R — that is Schedule L and Part VI line 2), or a church that formed a separate (c)(3) school (Part II, and Part V for the shared staff).

Private reference, not client advice. Notes taken from a continuing-education course, Form 990: A Practical Guide (Thomson Reuters Checkpoint Learning, 12 hours, 2022 edition written on 2021 law and the 2021 forms). Figures and rules brought current to 2026 in October 2026 (P.L. 119-21, Rev. Proc. 2025-32, T.D. 9933, T.D. 9898, the 2025 form instructions). Items tagged check are to be confirmed against primary sources before they are relied on.