Instructions For Form 990-Pf - Return Of Private Foundation Or Section 4947(A)(1) Nonexempt Charitable Trust Treated As A Private Foundation - Return Of Private Foundation Or Section 4947(A)(1) Nonexempt Charitable Trust Treated As A Private Foundation - Page 22
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governmental committee, or subdivision
Other indirect expenses that are
generally 5% of the total fair market value
of either, in response to a written request
allocated on the basis of direct salary
of its noncharitable assets, subject to
by the governmental body, committee, or
expenses or total direct expenses.
further adjustments as explained in the
subdivision;
instructions for Part XI. The amount of
Part IX-B—Summary of
this minimum investment return is figured
9. Conduct performing arts
in Part X and is used in Part XI to figure
performances; or
Program-Related
the amount that is required to be paid out
10. Provide technical assistance to
Investments
(the distributable amount).
grantees and other charitable
organizations. This assistance must have
Minimum investment return. In figuring
Program-related investment. Section
the minimum investment return, include
significance beyond the purposes of the
4944(c) and corresponding regulations
only those assets that are not actually
grants made to the grantees and must not
define a program-related investment as
consist merely of monitoring or advising
used or held for use by the organization
one that is made primarily to accomplish
for a charitable, educational, or other
the grantees in their use of the grant
a charitable purpose of the foundation
similar function that contributed to the
funds. Technical assistance involves the
and no substantial purpose of which is to
furnishing of expert advice and related
charitable status of the foundation. Cash
produce investment income or a capital
on hand and on deposit is considered
assistance regarding, for example:
gain from the sale of the investment.
used or held for use for charitable
a. Compliance with governmental
Examples of program-related investments
purposes only to the extent of the
regulations,
include educational loans to individuals
reasonable cash balances reported in
b. Reducing operating costs or
and low-interest loans to other section
Part X, line 4. See the instructions for
increasing program accomplishments,
501(c)(3) organizations.
lines 1b and 4 below.
c. Fundraising methods, and
General instructions. Include only
Assets that are held for the production
d. Maintaining complete and accurate
those investments that were reported in
of income or for investment are not
financial records.
Part XII, line 1b, for the current year. Do
considered to be used directly for
not include any investments made in any
charitable functions even though the
prior year even if they were still held by
Report both direct and indirect
income from the assets is used for the
the foundation at the end of 2005.
expenses in the expense totals. Direct
charitable functions. It is a factual
expenses are those that can be
Investments consisting of loans to
question whether an asset is held for the
specifically identified as connected with a
individuals (such as educational loans)
production of income or for investment
particular activity. These include, among
are not required to be listed separately
rather than used or held for use directly
others, compensation and travel
but may be grouped with other
by the foundation for charitable purposes.
expenses of employees and officers
program-related investments of the same
For example, an office building that is
directly engaged in an activity, the cost of
type. Loans to other section 501(c)(3)
used to provide offices for employees
materials and supplies utilized in
organizations and all other types of
engaged in managing endowment funds
conducting the activity, and fees paid to
program-related investments must be
for the foundation is not considered an
outside firms and individuals in
listed separately on lines 1 through 3 or
asset used for charitable purposes.
connection with a specific activity.
on an attachment.
Dual-use property. When property is
Lines 1 and 2. List the two largest
Indirect (overhead) expenses are
used both for charitable and other
program-related investments made by the
those that are not specifically identified as
purposes, the property is considered used
foundation in 2005, whether or not the
connected with a particular activity but
entirely for charitable purposes if 95% or
investments were still held by the
that relate to the direct costs incurred in
more of its total use is for that purpose. If
foundation at the end of the year.
conducting the activity. Examples of
less than 95% of its total use is for
indirect expenses include: occupancy
Line 3. Combine all other
charitable purposes, a reasonable
expenses; supervisory and clerical
program-related investments and enter
allocation must be made between
compensation; repair, rental, and
the total on the line 3 Amount column. List
charitable and noncharitable use.
maintenance of equipment; expenses of
the individual investments or groups of
Excluded property. Certain assets
other departments or cost centers (such
investments included (attach a schedule if
are excluded entirely from the
as accounting, personnel, and payroll
necessary).
computation of the minimum investment
departments or units) that service the
return. These include pledges of grants
The total of lines 1 through 3 in
department or function that incurs the
and contributions to be received in the
TIP
the Amount column must equal
direct expenses of conducting an activity;
future and future interests in estates and
the amount reported on line 1b of
and other applicable general and
trusts. See Pub. 578, chapter VII, for
Part XII.
administrative expenses, including the
more details.
compensation of top management, to the
Part X—Minimum
Line 1a — Average monthly fair market
extent reasonably allocable to a particular
value of securities. If market quotations
activity.
Investment Return
are readily available, a foundation may
No specific method of allocation is
use any reasonable method to determine
Who must complete this section? All
required. The method used, however,
the average monthly fair market value of
domestic foundations must complete
must be reasonable and must be used
securities such as common and preferred
Part X.
consistently.
stock, bonds, and mutual fund shares, as
Foreign foundations that checked box
long as that method is consistently used.
D2 on page 1 do not have to complete
Examples of acceptable allocation
For example, a value for a particular
Part X unless claiming status as a private
methods include:
month might be determined by the closing
•
operating foundation.
Compensation that is allocated on a
price on the first or last trading days of the
time basis,
Private operating foundations,
month or an average of the closing prices
•
Employee benefits that are allocated on
described in sections 4942(j)(3) or
on the first and last trading days of the
4942(j)(5), must complete Part X in order
the basis of direct salary expenses,
month. Market quotations are considered
•
to complete Part XIV.
Travel, conference, and meeting
readily available if a security is any of the
expenses that are charged directly to the
Overview. A private foundation that is
following:
•
activity that incurred the expense,
not a private operating foundation must
Listed on the New York or American
•
Occupancy expenses that are allocated
pay out, as qualifying distributions, its
Stock Exchange or any city or regional
on a space-utilized basis, and
minimum investment return. This is
exchange in which quotations appear on
-22-
Form 990-PF Instructions
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