The instructions for Form 990 Schedule F require tax-exempt organizations to report their foreign activities whenever those activities cross one of three dollar thresholds on Form 990, Part IV. Which parts of Schedule F you complete depends on which threshold you trip, and every filer who triggers any part must also complete Parts IV and V. Get the structure right first; the details follow from there.
When Schedule F Is Required
Schedule F is triggered by three separate questions in the Checklist of Required Schedules on Form 990, Part IV. Each “Yes” answer pulls in different parts of the schedule.
- Line 14b: aggregate revenues or expenses over $10,000 from grantmaking, fundraising, business, investment, or program service activities outside the United States, or foreign investments with an aggregate book value of $100,000 or more. This requires Parts I and IV.
- Line 15: more than $5,000 in grants or other assistance to any single foreign organization. This requires Parts II and IV.
- Line 16: more than $5,000 in aggregate grants or assistance to foreign individuals. This requires Parts III and IV.
Two subtleties about the thresholds. The $5,000 figure for Part II is measured per recipient, so one large grant to a single foreign entity triggers the requirement even if your total foreign grantmaking is small. The $5,000 figure for Part III is measured in the aggregate across all foreign individual recipients. Any organization that completes any part of Schedule F also completes Part V, the narrative section.
Part I: Direct Foreign Activities and Expenditures
Part I captures what your organization spent running its own operations abroad. Grants that flow through a foreign partner organization belong in Part II instead.
Reporting is done by geographic region rather than by country. The IRS uses defined regions covering Central America and the Caribbean, East Asia and the Pacific, Europe, Middle East and North Africa, North America (Canada and Mexico only), Russia and Neighboring States, South America, South Asia, Sub-Saharan Africa, and Antarctica. If a country isn’t on the IRS’s published lists, assign it to the most appropriate region.
For each region, identify the type of activity: program services, fundraising, investments, or unrelated trade or business. For program services, give a specific description of the work. Labels like “charitable activities” don’t satisfy the instructions; something like “maternal health clinics” or “teacher training workshops” does.
Report total expenditures using the accounting method your organization uses for its financial statements, and describe that method in Part V. Investments and program-related investments are reported separately at total book value as of the end of the tax year, not amounts spent during the year.
Part I also asks whether the organization monitors the use of its grant funds outside the United States. If you check “Yes,” describe the procedures in Part V. This is one of the places the IRS looks closely during examinations. “We review reports” is not enough; describe the frequency, method, and type of reports or site visits.
Part II: Grants to Foreign Organizations
Part II covers grants and other financial assistance given to foreign organizations, foreign governments, and certain domestic intermediaries that pass funds along to designated foreign recipients. Each recipient that received more than $5,000 during the tax year gets its own line.
For each recipient, you report the region (where the recipient’s principal foreign office is located, or where the funds will be used if there is no foreign office); the purpose of the grant; the cash amount in U.S. dollars; the manner of disbursement (wire transfer, check, electronic funds transfer, or other); and the fair market value, description, and valuation method for any non-cash assistance. The instructions are explicit that the purpose description must be concrete. Not “charitable” or “educational,” but something like “construction of a rural health clinic” or “disaster relief following earthquake.”
The form also asks you to count how many recipients fall into three due diligence categories: those recognized by the IRS as Section 501(c)(3) organizations, those recognized as charities by their home country, and those for which the organization obtained an equivalency determination.
Equivalency Determinations and Expenditure Responsibility
An equivalency determination is a formal finding that a foreign organization is functionally equivalent to a U.S. public charity. Under Revenue Procedure 2017-53, the determination must be prepared by a qualified tax practitioner (an attorney, CPA, or enrolled agent) and can generally be relied on for two consecutive tax periods.
When a grantee doesn’t qualify as a public charity equivalent, private foundations must exercise expenditure responsibility under IRC Section 4945 to avoid treating the grant as a taxable expenditure. The core requirements include a pre-grant inquiry into the grantee’s identity, history, and management; a written grant agreement, signed by an officer of the grantee, covering how the funds will be used and how the grantee will report back; and ongoing reporting from the grantee, including annual reports on how the money was spent. The grant agreement must restrict the funds from being used for lobbying, electioneering, or purposes outside Section 170(c)(2)(B).
Public charities making foreign grants should document their due diligence just as carefully. IRS examination guidelines indicate auditors may request grant agreements, evidence of how the organization controls and monitors the use of funds, periodic reports from grantees, and a complete list of distributions with recipient names and amounts.
Part III: Grants to Foreign Individuals
Part III covers grants and assistance provided directly to foreign individuals. The $5,000 threshold here is aggregate, not per person.
Individual names are not disclosed. You report by type of grant (scholarships, medical assistance, disaster relief, and so on) and by region, along with the estimated number of recipients and the total cash and non-cash amounts. Because the recipient count is an estimate, the IRS expects you to explain in Part V how you arrived at it. The accounting method used for the cash and non-cash figures also goes in Part V.
Part IV: Foreign Offices and Related Organizations
Every filer completes Part IV. It is a series of yes-or-no questions designed to identify whether the organization has obligations to file other specialized international tax forms, including Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation), Form 3520 (Annual Return to Report Transactions With Foreign Trusts), and FinCEN Report 114 (the FBAR for foreign bank accounts). A “Yes” doesn’t mean something is wrong, but it does flag additional filings that are handled separately from Form 990.
Part IV also asks whether the organization maintains foreign offices, employees, or agents. For each foreign office, disclose the location and primary function. For each related foreign entity, report the name, country of incorporation, principal address, and a relationship code identifying whether the entity is controlled by, controlling, or under common control with the filing organization.
Part V: The Narratives That Tie It Together
Part V is where you provide the written explanations that the other parts reference. Every Schedule F filer has at least some Part V requirements, and skipping them is one of the fastest ways to draw IRS attention.
The mandatory narratives are the grant monitoring procedures referenced on Part I, line 2; the accounting method used for the expenditures and investments in Part I, line 3; the accounting method used for the cash grants and non-cash assistance in Parts II and III; and the method used to estimate the number of individual recipients in Part III. Part V is also the right place to explain unusual or complex transactions that don’t fit the structured sections. Identify the part and line number each narrative supports so the IRS can match the explanation to the data.
Penalties for Late or Incomplete Filing
Schedule F is part of Form 990, so the Form 990 penalties apply to the entire return, including every required schedule. Under Section 6652(c)(1)(A), the base statutory penalty is $20 per day the return is late, up to the lesser of $10,000 or 5% of gross receipts for the year. Organizations with gross receipts over $1,000,000 face $100 per day with a $50,000 cap.
These amounts are adjusted annually for inflation. For returns required to be filed in 2026, the penalty is $25 per day, up to the lesser of $13,000 or 5% of gross receipts. Organizations with gross receipts over $1,309,500 face $130 per day, with a maximum of $65,000.
Penalties can be abated for reasonable cause, which the IRS evaluates case by case on all relevant facts and circumstances. An incomplete Schedule F filed with an otherwise timely Form 990 can still trigger the penalty, because missing required information counts as a failure under the statute.
Sanctions Screening Before You Disburse
Reporting correctly on Schedule F does not satisfy a separate obligation that applies to any organization sending money abroad. Under Executive Order 13224, U.S. persons, including nonprofits, are prohibited from conducting transactions with individuals and entities on the Treasury Department’s Specially Designated Nationals and Blocked Persons List. A grant to a designated person can expose the organization to criminal and civil penalties regardless of the grant’s charitable purpose. Screen foreign grantees and partners against the SDN List before disbursing funds. Treasury has published voluntary best practices recommending a risk-based due diligence approach that includes screening beneficiaries and partner organizations; the underlying prohibition on dealing with designated persons is not voluntary.
Recordkeeping for Foreign Activities
The IRS can request documentation supporting every figure on Schedule F. The general rule is that records must be kept for at least three years from the date the return was filed, but for income attributable to foreign financial assets exceeding $5,000, the assessment period extends to six years.
For Schedule F filers, the records worth maintaining include grant agreements, grantee reports, wire transfer confirmations, equivalency determinations, board minutes approving foreign grants, and correspondence with foreign partners about fund use. If an auditor asks how you monitored a grant reported in Part II and you cannot produce the documentation described in your Part V narrative, the credibility of the whole return suffers. Organizations with sloppy records on their domestic programs can often muddle through an examination. Organizations with sloppy records on international grants rarely can.