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c. Ownership of more than 50% of the

organization included in another group

the disregarded entity, if it has one. A

profits or capital in a limited liability

exemption (but you need not include the

disregarded entity generally must use the

company (LLC) treated as a partnership

names of such related organizations).

EIN of its sole member. An exception

regardless of the designation under state

applies to employment taxes: for wages

law of the ownership interests as stock,

Even if a related organization is not

paid to employees of a disregarded entity

membership shares, or otherwise.

required to be listed in Part II, however,

on or after January 1, 2009, the

d. Being a managing partner or

the organization must report its

disregarded entity must file separate

managing member in a partnership or

transactions with the related organization

employment tax returns and use its own

LLC treated as a partnership which has

in Part V, as required by the Part V

EIN on such returns. See Regulations

three or fewer managing partners or

instructions (for example, transactions

sections 301.6109-1(h) and

managing members (regardless of which

over the applicable $50,000 reporting

301.7701-2(c)(2)(iv).

partner or member has the most actual

threshold for line 2), including listing the

Enter the details of each disregarded

control).

name of the related organization in Part

entity on a separate line of Part I. If there

e. Being a general partner in a limited

V, line 2, column (A), for transactions that

are more disregarded entities to report in

partnership which has three or fewer

must be reported in line 2.

Part I than space available, use Schedule

general partners (regardless of which

Indirect control. Control can be

R-1, Part I. Use as many Schedules R-1

partner has the most actual control).

indirect. For example, if the filing

as needed.

f. Being the sole member of a

organization controls Entity A, which in

(B) Primary activity. Briefly describe the

disregarded entity.

turn controls (under the definition of

primary activity of the disregarded entity.

g. Ownership of more than 50% of the

control above) Entity B, the organization

beneficial interests in a trust.

will be treated as controlling Entity B. To

(or U.S. possession) or foreign country

determine indirect control through

See Regulations sections 301.7701-2,

in which the disregarded entity is

constructive ownership of a corporation,

301.7701-3, and 301.7701-4, for more

organized (the state or foreign country

rules under section 318 apply. Similar

information on classification of

whose law governs the disregarded

principles apply for purposes of

corporations, partnerships, disregarded

entity’s internal affairs).

determining constructive ownership of

entities, and trusts.

another entity (a partnership or trust). If

(D) Total income. State the amount of

Group exemption. Central

an entity (X) controls an entity treated as

the filing organization’s total revenue

organizations and subordinate

a partnership by being one of three or

reported in Form 990, Part VIII, line 12,

organizations of a group exemption are

fewer partners or members, then an

column (A), attributable to the

not required to be listed as related

organization that controls X also controls

disregarded entity.

organizations in Schedule R, Part II. All

the partnership.

(E) End-of-year assets. State the

other related organizations of the

Example 1. B, an exempt

amount of the organization’s total assets

central organization or of a subordinate

organization, wholly owns (by voting

reported in Form 990, Part X, line 16,

organization are required to be listed in

power) C, a taxable corporation. C holds

column (B), attributable to the

Schedule R. The following rules apply.

a 51% profits interest in D, a partnership.

•

disregarded entity.

An organization that is a central or

Under the principles of section 318, B is

subordinate organization in a group

(F) Direct controlling entity. If the

deemed to own 51% of D (100% of C’s

exemption (whether filing an individual

organization controls the disregarded

51% interest in D)). Thus, B controls both

return or a group return) is not required to

entity indirectly through one or more

C and D, which are therefore both related

list any of the subordinate organizations

other disregarded entities, state the name

organizations with respect to B.

of the group in Schedule R, Part II.

of the entity that directly controls the

•

Example 2. X, an exempt

In the case of a group return, the

disregarded entity . Otherwise, state

organization, owns 80% (by value) of Y, a

central organization must attach a list of

“N/A.”

taxable corporation. Y holds a 60% profits

the subordinate organizations included in

interest as a limited partner of Z, a limited

Part II. Identification of

the group return in response to Form 990,

partnership. Under the principles of

page one, item H(b). The central

Related Tax-Exempt

section 318, X is deemed to own 48% of

organization must list in Schedule R the

Z (80% of Y’s 60% interest in Z). Thus, X

related organizations of each subordinate

Organizations

controls Y. X does not control Z through

organization other than (1) related

X’s ownership in Y. Y is a related

(A) Name, address, and EIN. State the

organizations that are included within the

organization with respect to X, and

related organization’s full legal name,

group exemption, or (2) related

(absent other facts) Z is not.

mailing address, and EIN.

organizations that the central organization

Example 3. Same facts as in

knows to be included in another group

Enter the details of each related

Example 2, except that Y is also one of

exemption. If an organization is not listed

organization on a separate line of Part II.

three general partners of Z. Because Y

because it is known to be included in

If there are more related organizations to

controls Z through means other than

another group exemption, the central

report in Part II than space available, use

ownership percentage, and X controls Y,

organization must explain in Schedule O

Schedule R-1, Part II. Use as many

in these circumstances, Z is a related

(Form 990), Supplemental Information to

Schedules R-1 as needed.

organization with respect to X. The other

Form 990, the relationship between its

(B) Primary activity. Briefly describe the

general partners of Z (if organizations)

own group and members and the related

primary activity of the related

are not related organizations with respect

organization known to be included in

organization.

to X, absent other facts.

another group exemption (but you need

not include the names of such related

organizations).

(or U.S. possession) or foreign country

•

An organization that is not included in a

in which the related organization is

Specific Instructions

group exemption is not required to list a

organized. For a corporation, enter the

related organization that is included in a

state of incorporation (country of

Part I. Identification of

group exemption. Similarly, an

incorporation for a foreign corporation

organization that is included in a group

formed outside the U.S.). For a trust or

Disregarded Entities

exemption is not required to list a related

other entity, enter the state whose law

organization that is included in another

(A) Name, address, and EIN. State the

governs the organization’s internal affairs

group exemption. In either case, the

full legal name and mailing address of the

(the foreign country whose law governs

organization must explain in Schedule O

disregarded entity. State also the

for a foreign organization other than a

the relationship between it and the related

employer identification number (EIN) of

corporation).

-2-

Instructions For Schedule R (Form 990) - Related Organizations And Unrelated Partnerships - 2008 Page 2

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