Guide to Form 990 Schedule B for Independent Schools

Independent schools must make their annual tax filings public, but there’s one exception: Schedule B. What’s inside this mystery schedule?

Form 990 Schedule B is where nonprofits report gifts, grants, and other contributions during the reporting year to the IRS. As the leader of an independent school, it’s critical to know what’s reported on Schedule B—and how the IRS uses it—to ensure your organization’s compliance and best serve your donors.

What Is Schedule B?

Schedule B, Schedule of Contributors, is one of the 16 schedules that can accompany your organization’s annually filed Form 990, Return of Organization Exempt from Income Tax. On Schedule B, nonprofits report a cornucopia of information about so-called substantial contributors, including their names and addresses. The IRS uses Schedule B to detect donor fraud and match donors’ tax deductions to the sources they claim to have given to.

Most nonprofits are required to include Schedule B with Form 990. Political organizations and private foundations must generally make public all details reported on Schedule B. However, for other organizations—including independent schools—the names and addresses of donors reported on Schedule B may be redacted for public viewing. Still, the type and value of reportable contributions must be made public.  

Generally, contributions from donors that total $5,000 or more are reported on Schedule B. However, a shortcut method exists: 501(c)(3) organizations that receive at least one-third of their support from public sources during the year can elect to report only contributions from individuals that a) total $5,000 or more and b) are also greater than 2% of their total contributions for the year. Independent schools are generally 501(c)(3) organizations, making the streamlined reporting method popular among these organizations. The shortcut method also potentially reduces the number of interested parties for purposes of Schedule L, Transactions with Interested Persons.

So, let’s say your school receives $1 million in contributions, including donations and government grants. If you qualify for the Schedule B 2% rule, you’ll report only contributions from sources that gave $20,000 or more during the year.

What Types of Contributions Are Reported on Schedule B?

Reportable contributions include gifts, bequests, and devises of any tangible or intangible property, including:

• Cash
• Grants
• Stock
• Supplies
• Real estate
• Vehicles
• Intellectual property

Although a gift of professional services—such as pro bono legal work—is valuable to your organization, it’s not considered a contribution for tax purposes. As such, donated services aren’t reported on Schedule B and don’t count toward the value of contributions when determining the amount of public support for your organization.  

Note that only recognized contributions are reported on Schedule B. Whether your organization is required to report pledged contributions depends on its and any conditions of the gift. In general, pledged contributions that are recognized as income for book accounting purposes are included as Schedule B contributions in the year of the pledge, not necessarily in the year when the pledge is paid. Your tax advisor can help you comply with the complex revenue recognition rules that apply to contributions to your organization.

What Information Needs to be Collected for Schedule B?

As 501(c)(3) organizations, independent schools are required to keep detailed records of their contributions, including:

• Whether the gift was cash or noncash
• Whether the gift was made via an employee’s payroll deduction  
• Descriptions of noncash contributions
• The contributions’ fair market values
• The donors’ names and addresses
• The dates contributions or pledges were received  

How are anonymous donations reported on Schedule B?

Donations to your independent school can be anonymous to the public but not to the IRS. When you fill out Schedule B, you’ll be required to provide the names and addresses of donors who make anonymous gifts when they exceed the thresholds discussed earlier.  

This point underscores the importance of accurately tracking the source of all donations. Precise recordkeeping benefits your donors, too: The IRS requires that individuals receive a written acknowledgment to deduct charitable contributions of $250 or more.

Your nonprofit tax advisor can help you develop a system to track donations of any size, ensuring that you collect the information you and your donors need.

Smith + Howard: Your Partner in Form 990 Compliance

It can seem contradictory that tax-exempt organizations are subject to so many tax compliance rules. However, federal and state tax compliance is crucial for organizations to maintain the benefits of their nonprofit tax status.

Smith + Howard specializes in nonprofit tax compliance for independent schools, with more than 50 years of experience serving nonprofits nationwide. To learn more about Smith + Howard’s nonprofit accounting, advisory and tax services, contact an advisor.