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Form 990-PF: What Private Foundations Report and How Accounting Software Prepares It

Sherman Hsieh
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Form 990-PF: What Private Foundations Report and How Accounting Software Prepares It

Last updated: October 11, 2026 · Independent guide · We do not sell rankings or coverage.

Form 990-PF is the annual return every private foundation files with the IRS instead of Form 990, whatever its size. It does two jobs: it computes the 1.39% Section 4940 excise tax on net investment income, and it tests whether the foundation met the Section 4942 minimum distribution requirement. Most of the work comes from the three-column analysis in Part I and the asset, grant and spending data behind Parts IX to XII. This guide explains each rule and how foundation accounting and grantmaking systems keep that data ready for the return.

The rule in brief

  • Who files: All private foundations, including taxable foundations and section 4947(a)(1) trusts treated as private foundations. There is no small-filer exception.
  • Excise tax: 1.39% of net investment income, with estimated payments if the expected tax is $500 or more.
  • Payout: A nonoperating foundation must distribute roughly 5% of its average noncharitable-use assets, adjusted, by the end of the following tax year, or face a 30% tax on the shortfall.
  • Due date: The 15th day of the 5th month after year end (May 15 for calendar-year foundations), filed electronically. Form 8868 gives an automatic extension.
  • Official sources: IRS Instructions for Form 990-PF (2025), 26 U.S.C. 4940 and 26 U.S.C. 4942, checked October 11, 2026.

Who files Form 990-PF instead of Form 990

A 501(c)(3) organization is a private foundation unless it falls into an excluded category such as a hospital, school or publicly supported charity. The IRS says “all private foundations, including nonexempt trusts treated as private foundations, must annually file” Form 990-PF (IRS, June 28, 2026). The $50,000 Form 990-N option is limited to exempt organizations “other than a private foundation” (IRS, June 27, 2026).

What Part I requires: one ledger, four columns

Part I reports each revenue and expense line in up to four columns, and each column follows a different rule. Columns (b) to (d) are tax views of your ledger, so your coding has to support them.

Column What goes in it Basis What your books need
(a) Per books All revenue and expenses that changed net assets Book method, often accrual Accounts mapped to Part I lines
(b) Net investment income Interest, dividends, rents, royalties and capital gain net income, less investment expenses Section 4940 rules Income by type, tax basis, shared-cost allocation
(c) Adjusted net income Required for operating foundations; limited use otherwise Excludes contributions and long-term gains Income and expense by activity
(d) Charitable disbursements Grants paid and the charitable share of expenses Cash basis Payment dates and a functional split

Two rules cause most of the rework. Column (d) must use “the cash receipts and disbursements method of accounting no matter what accounting method is used in keeping the books” (IRS Instructions for Form 990-PF (2025), January 15, 2026). A grant approved in December and paid in February is in column (a) in the year accrued but in column (d) only in the year paid. Also, expenses that serve both investment and charitable work, such as salaries and audit fees, must be allocated on a reasonable basis so only the investment share reaches column (b).

For each grant, Part XIV, line 3 asks for the recipient’s name and address, any relationship of an individual recipient to a foundation manager or substantial contributor, foundation status and purpose. It separates grants paid during the year (3a) from grants approved for future payment (3b). Some grants generally do not count in column (d), including grants to organizations the foundation or its disqualified persons control and grants to Type III supporting organizations that are not functionally integrated.

What Section 4940 requires: the investment income tax

Section 4940(a) imposes a tax “equal to 1.39 percent of the net investment income” of an exempt private foundation (26 U.S.C. 4940, no date shown). For tax years beginning after December 20, 2019, there is no reduced 1% rate (IRS, September 11, 2026). Net investment income is gross investment income plus capital gain net income, less ordinary and necessary expenses of producing it. You compute the tax in Part V, using realized gains from Part IV.

  • Capital losses offset gains only in the same year, with no carryback or carryforward.
  • Donated securities generally carry over the donor’s basis under section 1015, not the fair value you booked at receipt, because gain uses the regular income tax basis rules (eCFR, 26 CFR 53.4940-1(f)(2), up to date as of October 8, 2026). Bequests generally take a stepped-up basis.
  • Income reported on Form 990-T stays out of column (b).

What Section 4942 requires: the minimum distribution

A nonoperating foundation must pay out its distributable amount as qualifying distributions. The IRS defines that amount as “the foundation’s minimum investment return with certain adjustments” (IRS, June 28, 2026).

Part IX, minimum investment return. Add the average monthly value of securities, the average of monthly cash balances and the value of other noncharitable-use assets. Subtract acquisition debt and cash deemed held for charitable activities, generally 1.5%. The minimum investment return is 5% of the result. Securities may be valued by “any reasonable method” used consistently, cash is averaged from the first and last day of each month, and other assets are valued annually (eCFR, up to date as of October 8, 2026).

Part X, distributable amount. Subtract the Part V tax and any income tax, then add back recoveries such as refunded grants. The 2025 distributable amount must be paid out by the end of 2026, because the 30% tax under Section 4942(a) applies to any amount still undistributed at the start of 2027.

Part XI, qualifying distributions. This is Part I line 26, column (d), plus program-related investments, assets bought for direct charitable use and approved set-asides. Section 4942(g)(1) includes “reasonable and necessary administrative expenses” (26 U.S.C. 4942, no date shown).

Part XII, undistributed income. Current-year distributions first reduce last year’s undistributed income, then the current year’s amount. Any excess carries forward for five years.

Illustrative example

These figures are an illustration, not a real foundation: a calendar-year nonoperating foundation in 2025, with no prior undistributed income and no debt.

Step Form line USD
Securities (average monthly value) IX, 1a 20,000,000
Cash (average monthly balance) IX, 1b 500,000
Less 1.5% cash deemed held IX, 4 (307,500)
Minimum investment return (5% of 20,192,500) IX, 6 1,009,625
Section 4940 tax (1.39% of 600,000 net investment income) V; X, 2a 8,340
Distributable amount, due by December 31, 2026 X, 7 1,001,285
Grants paid (900,000) plus charitable admin paid (120,000) XI, 4 1,020,000
Excess carried forward XII 18,715

Now add a $300,000 grant approved in December 2025 and paid in February 2026. It is a 2025 expense in column (a) and appears in Part XIV, line 3b, but it counts as a qualifying distribution only in 2026. A grants report that shows approvals instead of payments would overstate the 2025 payout by $300,000.

Who is exempt

Private operating foundations under Section 4942(j)(3) still file Form 990-PF and complete Part IX, but they skip Part X and pass the Part XIII tests instead. An exempt operating foundation under Section 4940(d) also owes no excise tax. It must have been publicly supported for at least 10 tax years, have a governing body that is at least 75% non-disqualified individuals, and have no disqualified officer. Public charities file Form 990 or 990-EZ and are outside both rules.

Deadlines and penalties

  • Filing: due the 15th day of the 5th month after year end. The 2025 return must be filed electronically.
  • Late filing: $25 a day, up to the lesser of $13,000 or 5% of gross receipts. For gross receipts over $1,309,500, it is $130 a day, up to the lesser of $65,000 or 5% of gross receipts.
  • Estimated tax: required if the expected 4940 tax is $500 or more, with the section 6655 penalty for underpayment. Form 990-W works out the installments.
  • Undistributed income: a 30% tax for each year the shortfall remains, and an additional 100% tax if it is not corrected within 90 days after IRS notice (IRS, June 28, 2026).

Records you must keep

  • Monthly security valuations using a consistent method, and first-day and last-day cash balances for each month.
  • Annual valuations of other investment assets, and any five-year independent real estate appraisal.
  • Lot-level purchase and sale records, including donor basis for gifted stock.
  • Your written method for allocating shared expenses.
  • For each grant: approval and payment dates, donee details, status, purpose, related-party flags and refunds.
  • Expenditure responsibility reports, set-aside approvals and estimated tax deposits.

What to set up in your systems

None of the vendor documentation we reviewed claims to produce a finished Form 990-PF. Your CPA or tax software prepares the return. The goal is that each Part I column and each Part IX to XII input comes out as a report instead of a spreadsheet rebuild.

Sage Intacct tags every transaction with dimensions, and you can add user-defined dimensions, for which Sage says additional fees may apply (Sage Intacct Help, October 8, 2026). A dimension for investment, charitable or shared spending lets columns (a), (b) and (d) come from one ledger. Sage’s foundations page cites tracking of “qualified and non-qualified expenses,” program-related investments and prebuilt reports for “Form 990 submissions,” and names Fluxx as an example grants integration (Sage, no date shown). It does not mention Form 990-PF by name. See our Sage Intacct for nonprofits guide.

Blackbaud Financial Edge NXT tracks “revenue and expenses at the project and grant level” (Blackbaud, September 29, 2026). That page does not mention Form 990-PF, payout tracking or investment accounting. A Blackbaud Community post describes an Invoice Sync Utility that creates invoices from scheduled Blackbaud Grantmaking payments and writes the payment date, check number and paid status back to the grant (Blackbaud Community, September 2022). That paid date is what column (d) needs. Confirm with Blackbaud that the utility is still current.

Foundant Grant Lifecycle Manager is a grants system, not a ledger. Its payments “track which installments have been paid and which are outstanding for approved requests” (Foundant Support, May 29, 2026), which maps to Part XIV lines 3a and 3b. Foundant lists sync with QuickBooks Online and its CommunitySuite, and publishes pricing of $6,500, $9,900 or $13,900 a year plus implementation from $2,500 (Foundant, August 17, 2026). It does not list Sage Intacct or Financial Edge NXT integrations, so plan an import or API project. Our grant management software guide covers alternatives.

Whatever the system, set up four things: a Part I line map with a column code, grants payable posted at approval with payments as separate dated entries, a monthly valuation import from your custodian with tax basis kept apart from book basis, and a quarterly payout tracker comparing cash qualifying distributions with the prior-year distributable amount. Our nonprofit accounting software guide compares ledgers that support this coding.

How we researched this

We read the 2025 Form 990-PF and its instructions, Sections 4940 and 4942, the Treasury regulation on minimum investment return and current IRS pages, all checked October 11, 2026. We also reviewed Sage, Blackbaud and Foundant documentation and the blogs that rank for this topic. No vendor paid for or reviewed this guide.

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Frequently asked questions

Does a small family foundation have to file Form 990-PF?

Yes. Every private foundation files Form 990-PF each year regardless of size. The Form 990-N e-postcard is not available to private foundations.

What is the excise tax rate on private foundation investment income?

A flat 1.39% of net investment income for tax years beginning after December 20, 2019. The old 2% and reduced 1% rates no longer apply.

When does the 5% payout have to be made?

The distributable amount calculated for one year must be paid out by the end of the following tax year. The 2025 amount, for example, is due by the end of 2026.

Do grants count toward the payout when the board approves them?

No. Qualifying distributions are measured on the cash basis, so a grant counts in the year it is paid. Approved but unpaid grants go in Part XIV, line 3b.

Can accounting software file Form 990-PF for us?

The foundation accounting and grants systems we reviewed hold the ledger, grant payment and investment data the return needs, but do not describe producing the return. Most foundations use a CPA or tax software to prepare and e-file it.

Sources

Sherman Hsieh

CEO & Editor-in-Chief, Business-Software.com
Independent analysis of enterprise software — ERP, CRM and more
Sherman Hsieh is the founder, CEO, and editor-in-chief of Business-Software.com. He leads the site's independent, buyer-focused coverage of ERP, CRM, and other business systems, including vendor-neutral comparisons, pricing analysis, and implementation guidance. Before founding Business-Software.com, Sherman was an executive at Siebel ...

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