Mastering Schedule M
How to report non-cash contributions on the new Form 990.
Dave Moja
Many ministries have delved into the intricacies and contradictions of the IRS's new Form 990. The IRS has certainly built some interesting reporting requirements into the Core Form and its 16 brothers and sisters, known semi-affectionately as "Schedules A through R."
One of the most overlooked—and perhaps daunting—corners of Form 990 is Schedule M and its requirements for reporting the details of an organization's non-cash contributions. We have seen even the best-run organizations struggle at times with reporting gifts of publicly traded securities. Under the new 990 regime, figuring out the accounting for appreciated securities (appreciated being a misnomer in today's economy) is the tip of the iceberg.
It all begins innocently enough, on Form 990, Part IV. Line 29 reads: "Did the organization receive more than $25,000 in non-cash contributions? If 'Yes,' complete Schedule M." Sounds simple enough, until someone on the accounting team digs up Schedule M.
I have traveled all over the country leading workshops and talking to organizations' leaders about Form 990, and very few of them have given the schedule its due. That is understandable for three reasons: One, it is near the end of the group of 16 schedules we may or may not have to complete (I'm not counting Schedule O—it's just a glorified piece of wide-ruled notebook paper). Two, non-cash contribution reporting can be confusing. And three, does anyone really want to talk about "scientific specimens"?
The new schedule is in a columnar format and lists 24 items of typical non-cash gifts. Then, filers are given four lines for other types of gifts. The list includes various types of art, books, clothing and household goods, vehicles, intellectual property, securities, real-estate contributions, collectibles, food, and drugs. Lines 21-24 are, and I quote, "taxidermy, historical artifacts, scientific specimens, and archaeological artifacts." I jokingly tell my clients, "If you have 'scientific specimens,' you may not want to admit it!"
Organizations that file Schedule M—again, those that report more than $25,000 on Form 990, Part VIII, Line 1g—will check column (a) on each line for which they received the property type identified. In column (b), they will enter the number of contributions received during the year. An example explains that "number of contributions" means each gift received. (For publicly traded stock, you don't record the number of shares but the number of stock gifts.) Note that for "books and publications" and "clothing and household goods," the number of contributions is not required. In column (c), the total revenues reported for each line item is recorded. Although the IRS failed to include a total line for column (c), it should be noted that the total of this column must match the amount reported on Form 990, Part VIII, Statement of Revenue.
Then, in column (d), the "method of determining revenues" is entered. The instructions list "cost or selling price of the donated property, sale of comparable properties, replacement cost, opinions of experts, etc." as possible entries in this column. This may take some extra work. On contributed goods that don't require appraisal, how will your team value the gifts? It may be a good idea to put together a small group of accountants to meet with your CPA firm to set up procedures to decide how you will value gifts. The CPA firm can help and will be closely involved during your audit or tax-return preparation.
Finally, Schedule M, Line 31 may create more work. It asks, "Does the organization have a gift acceptance policy that requires the review of any non-standard contributions?" A gift acceptance policy is always a good idea.
At the end of the day, your organization should assess whether your current accounting system positions you to completely and accurately fill out Schedule M. Understand that many organizations are finding a deficiency in this area.
Just for the fun of it, let's return to the "scientific specimens" issue. According to the instructions, these include "living plant and animal specimens and objects or materials that are examples of natural and physical sciences, such as rocks and minerals, that relate to, or exhibit, the methods or principles of science." Hmm—not so scary after all.
Dave Moja, CPA, is a tax services director at McGladrey in Melbourne, Florida. He is the Florida lead for nonprofit organizations. Dave speaks extensively throughout the U.S. at conferences, through webinars, at chapter meetings, and in boardrooms regarding issues that affect the public sector.
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