Financial Planning Strategies

Before finalizing your Form 990, address critical nonprofit tax reporting requirements regarding nonprofits and foreign investment holdings. Make it a priority to contact your broker(s) and investment manager(s) regarding the associated tax reporting requirements on these accounts. When these types of holdings occur, federal information filing requirements must be prepared and submitted. If these returns are not filed on time, substantial penalties may be incurred for late filing. Often, these holdings are not obvious “foreign” investments and may be hard to identify by looking at monthly statements.

The following questions and can be used to check with your broker(s) and investment manager(s) to determine if your investments are considered foreign holdings:

  1. Did the organization own or have signature power over financial accounts outside the U.S. in excess of $10,000 in aggregate at any time during the year?
  2. Does the organization have any ownership or investment in a foreign corporation or foreign partnership?
  3. Did the organization contribute cash or property to a foreign entity or purchase stock in a foreign entity during the year?
  4. Is the organization paying any foreign tax through its investment accounts or otherwise?
  5. Are the organization’s investment advisors suggesting alternative and/or foreign investments?
  6. Has the organization received prospectuses on its investments that discuss foreign reporting requirements?
  7. Is the organization invested in any domestic partnerships?
    • If yes, please provide Forms K-1 for all partnership investments.
  8. Are any of these foreign investments debt-financed? In other words, is this income unrelated to business income tax (UBIT)?
    • If yes, then we need to look at PFIC reporting.
    • If no, then no additional reporting is necessary.
  9. Is the value of any of these stocks more than $100,000?
    • If yes, did the organization purchase $100,000 or more of stock in any of these companies during the year?
    • If no, then no additional reporting is necessary.

Should you need assistance with these conversations between your broker and/or investment manager, we encourage you to contact your Anderson ZurMuehlen CPA.


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