Changes to Reporting Information on Joint Ventures and Partnerships on Forms 990 and 990-EZ

Earlier this year, the IRS issued Announcement 2012-19: Reporting Information Regarding Joint Ventures and Other Partnerships on Forms 990 and 990-EZ for Tax Year 2011. Pursuant to the announcement, it is now generally optional for tax year 2011 filers to report their interests in the income, expenses and assets of joint ventures and other partnerships in which they have an ownership interest using information from Form 1065, U.S. Return of Partnership Income, Schedule K-1.

Parts VIII, IX and X of the Form 990, Return of Organization Exempt From Income Tax, require reporting with respect to an organization's interests in joint ventures or other partnerships revenue, expenses and assets. Appendix F of the 2010 Form 990 instructions provides that such information should be reported in accordance with the organization's books and records. In an effort to promote consistency and accuracy, the IRS revised the 2011 Form 990 and Form 990-EZ Instructions to require the filing organization to report these interests using information from the Form 1065, Schedule K-1 provided by the partnership.

The public responded to the changes to the instructions with concerns that an organization's books and records may be more accurate than using the Schedule K-1 information, that requiring reporting from Schedule K-1 can be burdensome, "and that organizations cannot report information from all Forms 1065, Schedules K-1 they receive because some partnerships do not submit those Forms until after the Form 990 filing due date." In consideration of the public's response and in order to determine "how best to promote compliance and transparency while minimizing burden in reporting of partnership interests, the IRS has decided to make the new Schedule K-1 reporting instructions for Forms 990 and 990-EZ optional for tax year 2011."

Accordingly, an organization reporting proportionate interests in the income, expenses and assets of partnerships in which it has an ownership interest may generally continue to report these interests based on its books and records on the 2011 Form 990 or Form 99-EZ. "However, as in prior years, organizations that complete Form 990, Schedule H and Form 990, Schedule R must continue to use information from Form 1065, Schedule K-1 in reporting certain partnership information on those schedules, as explained in the instructions for 2011 Form 990, Schedule H and 2011 Form 990, Schedule R."

This issue is one to follow when the instructions to the 2012 Forms 990 are released in early 2013. A copy of the announcement and the Form 990 and Form 990-EZ instructions can be found on the IRS website.