Form 990 Schedule D: Filing Requirements, Deadlines, and Penalties

Schedule D of Form 990 is a supplemental financial statement that tax-exempt organizations attach to their annual return when they hold certain assets or arrangements the IRS wants to see broken out: donor-advised funds, conservation easements, art and museum collections, escrow or custodial accounts, endowments, and specific balance-sheet items. Whether you need to file it comes down to how you answered a short run of yes-or-no questions on Form 990 itself.

Who Has to File Schedule D

The requirement is triggered entirely by Part IV of Form 990, the Checklist of Required Schedules. If you answer “Yes” to any of lines 6 through 12a, you must complete the corresponding part of Schedule D.¹ Each line points to a specific part: line 6 to Part I (donor-advised funds), line 7 to Part II (conservation easements), and so on through the checklist.

Line 12 has a wrinkle worth catching. Line 12a asks whether the organization received separately issued audited financial statements. Line 12b asks whether financial statements were compiled, reviewed, or audited by an independent accountant. If you answered “Yes” to 12b but “No” to 12a, Parts XI and XII of Schedule D are optional rather than required.¹

Schedule D only attaches to the full Form 990. Organizations small enough to file Form 990-EZ or the electronic notice (Form 990-N) do not use it. The full 990 kicks in at gross receipts of $200,000 or more, or total assets of $500,000 or more.²

When Schedule D Is Due

Because Schedule D travels with Form 990, it shares the return’s deadline: the 15th day of the 5th month after your fiscal year ends. Calendar-year filers are due May 15. If the date lands on a weekend or federal holiday, it moves to the next business day.

Need more time? File Form 8868 before the original due date and you get an automatic six-month extension.³ For calendar-year organizations, that pushes the filing to November 15. No reason is required. The extension covers filing only; any tax owed is still due on the original date.

What Each Part Covers

Schedule D is really thirteen small forms bundled into one, and most organizations only complete the parts their checklist answers activate. Here is what each part asks for.

Part I: Donor-Advised Funds

Part I applies to organizations that sponsor donor-advised funds or similar accounts, where the donor retains advisory privileges over investment or distribution but the sponsoring organization holds legal control.¹ You report the total number of funds at year-end, aggregate contributions received during the year, aggregate grants distributed, and the year-end value. Figures are broken out in separate columns for donor-advised funds and other similar accounts.⁴ Part I also asks whether the organization informed donors that the fund assets belong to the sponsoring organization and that advisory privileges are not legally binding.

Part II: Conservation Easements

Part II covers organizations holding easements or similar real-property interests for conservation or preservation.¹ You report the number of easements held at year-end and the total acreage restricted, the purposes served (historic preservation, habitat protection, open space, and similar), and whether you have a written policy for monitoring and enforcing the easement terms.⁴ If the easements sit as assets on your balance sheet, describe the accounting treatment in Part XIII.

Part III: Art, Historical Treasures, and Similar Collections

Part III is where nonprofits have a real accounting choice. If you have elected not to capitalize collection items, you provide the relevant financial-statement footnotes describing them in Part XIII. If you do capitalize them, you report revenue from collection items and their asset value on the balance sheet.¹ Organizations holding collections as financial assets (essentially for sale rather than for exhibition or education) report separately. Part III also asks how the collection is used, whether donations of art were solicited for sale as a fundraising strategy, and how the collection furthers the exempt purpose.

Part IV: Escrow and Custodial Arrangements

Part IV comes into play when the organization holds assets as an agent, trustee, custodian, or intermediary for someone else, and those assets are not reported on Form 990, Part X.⁴ A community foundation holding funds for another charity, or a fiscal sponsor managing grant money for an unincorporated project, would report here. You disclose the amount held at year-end and describe the arrangement. The point is to keep the balance sheet from overstating what the organization actually owns.

Part V: Endowment Funds

Part V is a full roll-forward of endowment activity. You start with the beginning-of-year balance and account for the changes: contributions and transfers in, net investment earnings and gains or losses, grants and scholarships paid out, amounts withdrawn for facilities and programs, and administrative expenses.¹ The end-of-year balance should equal the beginning balance plus additions and gains, minus losses, distributions, and expenses.

You then estimate the percentage of the total endowment classified as board-designated (quasi) endowment, permanent endowment, and term endowment. Those three should sum to 100%. Organizations following FASB ASC 958 should align these percentages with the footnote disclosures under that standard.

Parts VI Through X: Balance-Sheet Detail

Part VI breaks out land, buildings, and equipment: original cost or other basis, accumulated depreciation, and net book value by category. These figures support the single-line totals on Form 990, Part X.¹ Parts VII, VIII, and IX itemize investments (securities, program-related, and other) and other assets that don’t fit elsewhere. Part X is for other liabilities, including uncertain tax positions. If the organization has adopted FIN 48 (now within ASC 740) and carries a liability for uncertain tax positions, describe it in Part XIII along with the relevant footnotes.

Parts XI and XII: Reconciliation With Audited Financials

Parts XI and XII reconcile revenue and expenses on Form 990 to the amounts in your audited financial statements prepared under FASB ASC 958. Part XI handles revenue, Part XII handles expenses. Both are required only if you answered “Yes” on Form 990, Part IV, line 12a.¹ If no audited statements were issued for the year, skip both parts.

The reconciliation exists because audited financials and Form 990 follow different rules. Common adjustments include unrealized investment gains and losses, donated services and facilities that appear in audited statements but not on Form 990, and investment expenses netted against income in the audited statements but reported separately on the return. You also identify the accounting method used to prepare Form 990: cash, accrual, or other.

Part XIII: Supplemental Information

Part XIII is the narrative catch-all. Any explanation called for elsewhere in Schedule D (accounting policies for easements or collections, uncertain-tax-position footnotes, endowment description, and similar) is written out here.

Penalties for Late or Incomplete Filing

Schedule D is part of Form 990, so a missing or incomplete Schedule D exposes the organization to the same penalties as a late return. Under 26 U.S.C. § 6652(c), the base penalty is $20 per day the failure continues, capped at the lesser of $10,000 or 5% of gross receipts for the year.⁵

Larger organizations pay more. If gross receipts exceed $1,000,000, the daily penalty rises to $100 and the cap to $50,000 per return.⁵ These statutory amounts are adjusted annually for inflation, so the numbers actually assessed in a given year run somewhat higher.⁶

Penalties can also reach individuals. If the IRS demands corrected information and the organization does not comply by the specified date, responsible individuals can be charged $10 per day, up to $5,000 total across all individuals for a single return.⁵

Abatement is available for reasonable cause. The request is a written statement, made under penalties of perjury, attached to the Form 990. It should identify what prevented timely or complete filing, why no extension was requested if that applies, and what steps the organization has taken to prevent a recurrence.⁷ The IRS looks for evidence of ordinary business care and prudence. Vague claims of understaffing or ignorance rarely succeed.

Automatic Revocation After Three Missed Years

Under 26 U.S.C. § 6033(j), if an organization fails to file its required annual return or notice for three consecutive years, its tax-exempt status is automatically revoked.⁸ Revocation happens by operation of law. There is no appeals process.

The IRS does send a warning after two consecutive misses, notifying the organization that revocation follows if the third return is not filed by its due date. If that deadline passes without a filing, revocation takes effect automatically, dated to the third missed return’s due date.

The consequences are real. The organization must begin filing income tax returns (Form 1120 for corporations or Form 1041 for trusts) and paying tax on its income. For 501(c)(3) organizations, contributions are no longer deductible for donors, and the organization is removed from the IRS’s list of eligible charitable recipients. Reinstatement requires a new application for exempt status; retroactive reinstatement is available only where the organization can show reasonable cause for the failures.⁸

1
Internal Revenue Service. Instructions for Schedule D (Form 990)
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Internal Revenue Service. Form 990 Series: Which Forms Do Exempt Organizations File
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Internal Revenue Service. Extension of Time to File Exempt Organization Returns
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Internal Revenue Service. Schedule D (Form 990)
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Office of the Law Revision Counsel. 26 USC 6652 – Failure to File Certain Information Returns, Registration Statements, Etc.
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Internal Revenue Service. Annual Exempt Organization Return: Penalties for Failure to File
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Internal Revenue Service. Exempt Organizations Annual Reporting Requirements – Filing Procedures: Abatement of Late Filing Penalties
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Office of the Law Revision Counsel. 26 USC 6033 – Returns by Exempt Organizations