Schedule K (Form 990) – Supplemental Information on Tax‑Exempt Bonds

Last reviewed: 2025‑10‑27

Use the Schedule K (Form 990) Tax Form Calculator Schedule K (Form 990) as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 990sk state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.

Schedule K (Form 990) is used by organizations that file Form 990 and have issued tax‑exempt bonds to report information about their outstanding debt. The IRS uses this schedule to verify that proceeds of the bonds continue to qualify for tax‑exempt treatment under federal law. Failure to maintain compliance with the bond covenants or use proceeds as required under IRC §141–150 may result in revocation of tax‑exempt status or reclassification of interest income as taxable.

This form must be completed by 501(c)(3) organizations, governmental entities, and conduit borrowers that have outstanding tax‑exempt bonds issued after 2002. It provides transparency into post‑issuance activities such as use of proceeds, private‑business use, and arbitrage rebate compliance.

Key reporting sections of Schedule K:

• Part I: Identifies each bond issue by name, CUSIP, and purpose, along with issue and maturity dates.
• Part II: Tracks proceeds spent, outstanding principal, and any refinancing or defeasance actions.
• Part III: Focuses on private business use limits—typically 5 percent or less for 501(c)(3) use bonds—requiring disclosure of any management contracts, leases, or research agreements with private parties.
• Part IV: Documents post‑issuance compliance programs, including arbitrage rebate calculations, record retention, and use of bond‑financed property.

Filing Tip: Report each bond issue on a separate line and maintain detailed supporting schedules for private use analysis and rebate computations. The IRS expects records to be retained for at least three years after the bond is retired.

Organizations must ensure that their reporting aligns with the post‑issuance compliance requirements outlined in IRS Publication 4079, “Tax‑Exempt Governmental Bonds.” Each year, the IRS examines Schedule K data for indicators of excessive private business use, unspent proceeds, or failures to monitor compliance. Improperly used bond proceeds—such as financing non‑qualified activities or unrelated trade operations—can cause portions of the issue to lose tax‑exempt status.

In Part III, filers must carefully document management or service contracts involving bond‑financed facilities. Any agreement granting use to a private business beyond the 5 percent limit can trigger remediation requirements under Treas. Reg. 1.141‑12. Organizations should consult bond counsel before renewing or modifying leases or management agreements that affect private‑use calculations.

Part IV emphasizes ongoing oversight: annual arbitrage calculations, timely rebate payments, and maintenance of written compliance policies. The IRS increasingly targets filers that check “No” in questions related to monitoring procedures. Institutions should have internal controls ensuring funds are segregated, investments tracked, and bond‑financed projects remain qualified throughout the life of the issue.

Errors on Schedule K often arise when organizations refinance bonds but fail to report the carryover of proceeds correctly or when they omit new management contracts. Accurate recordkeeping prevents IRS correspondence and protects the organization’s tax‑exempt status.

Best Practices & IRS Compliance Strategy

Maintain a central compliance file for each bond issue, including closing documents, use‑of‑proceeds reports, management agreements, and arbitrage calculations. The IRS expects tax‑exempt borrowers to demonstrate continuous oversight, not just initial qualification at issuance.

Coordinate among finance, facilities, and legal departments to ensure any project changes or property uses are reviewed before execution. Establishing annual compliance certifications signed by responsible officers is considered best practice.

Automated tools or bond compliance software can streamline annual Schedule K reporting by tracking expenditure allocations and private‑use calculations in real time. These systems help identify potential violations early, allowing organizations to take remedial action under Treas. Reg. 1.141‑12 before IRS discovery.

For further reference, see IRS Schedule K (Form 990) and IRS Publication 4079. Proper documentation, accurate responses, and a proactive compliance posture minimize audit risk and ensure ongoing eligibility for tax‑exempt financing.

Important Notes

All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.