Part IX. Statement of Functional Expenses

Check the box in the heading of Part IX if Schedule O (Form 990) contains any information pertaining to this part.

Use the organization’s normal accounting method to complete this section. If the organization’s accounting system doesn’t allocate expenses, the organization can use any reasonable method of allocation. The organization must report amounts accurately and document the method of allocation in its records. Report any expense described on lines 1–23 on the appropriate line; don’t report such expense on line 24. Don’t report in Part IX expenses that must be reported on line 6b, 7b, 8b, 9b, or 10b in Part VIII.

Column (A)—Total Section 501(c)(3) and 501(c)(4) organizations must complete columns (A) through (D).

All other organizations must complete column (A) but can complete columns (B), (C), and (D).

Caution: State reporting requirements can be different from IRS reporting requirements applicable to Part IX.

Column (B)—Program Services Program services are mainly those activities that further the organization’s exempt purposes. Fundraising expenses shouldn’t be reported as program service expenses even though one of the organization’s purposes is to solicit contributions .

Include lobbying expenses in this column if the lobbying is directly related to the organization’s exempt purposes.

Example. Foundation M, an organization exempt under section 501(c)(3), has the exempt purpose of improving health care for senior citizens. Foundation M operates in State N. The legislature of State N is considering legislation to improve funding of health care for senior citizens. Foundation M lobbies state legislators in support of the legislation. Because this

42 2025 Instructions for Form 990

lobbying is directly related to Foundation M’s exempt purpose, it would be considered an exempt function expense and would be included in column (B).

Program services can also include the organization’s unrelated trade or business activities. Publishing a magazine is a program service even though the magazine contains both editorials and articles that further the organization’s exempt purpose as well as advertising, the income from which is taxable as unrelated business income .

Also include costs to secure a grant, or contract, to conduct research, produce an item, or perform a program service, if the activities are conducted to meet the grantor’s or other contracting party’s specific needs. Don’t report these costs as fundraising expenses in column (D). Costs to solicit restricted or unrestricted grants to provide services to the general public should be reported in column (D).

Column (C)—Management and General Use column (C) to report expenses that relate to the organization’s overall operations and management, rather than to fundraising activities or program services. Overall management usually includes the salaries and expenses of the organization’s CEO and his or her staff, unless a part of their time is spent directly supervising program services or fundraising activities. In that case, their salaries and expenses should be allocated among management, fundraising, and program services.

Expenses incurred to manage investments must be reported in column (C). Lobbying expenses should be reported in this column if they don’t directly relate to the organization’s exempt purposes.

Organizations must also report the following in column (C): costs of board of directors meetings; committee meetings and staff meetings (unless they involve specific program services or fundraising activities); general legal services; accounting (including patient accounting and billing); general liability insurance; office management; auditing, human resources, and other centralized services; preparation, publication, and distribution of an annual report; and management of investments.

However, report expenses related to the production of program-related income in column (B) and expenses related to the production of rental income on Part VIII, line 6b. Rental expenses incurred for the organization’s office space or facilities are reported on line 16.

Don’t use this column to report costs of special meetings or other activities that relate to fundraising or specific program services.

Column (D)—Fundraising Fundraising expenses are the expenses incurred in soliciting cash and noncash contributions, gifts, and grants. Report as fundraising expenses all expenses, including allocable overhead costs, incurred in (a) publicizing and conducting fundraising campaigns; and (b) soliciting bequests and grants from individuals, foundations, other organizations, or governmental units that are reported on Part VIII, line 1. This includes expenses incurred in participating in federated fundraising campaigns; preparing and distributing fundraising manuals, instructions, and other materials; and preparing to solicit or receive contributions. Report direct expenses of fundraising events on Part VIII, line 8b, rather than in column (D) of Part IX. However, report indirect expenses of fundraising events, such as certain advertising expenses, in column (D) of Part IX, rather than on Part VIII, line 8b.

Example. For an employee who works on fundraising 40% of the time and program management 60% of the time, an

organization must allocate that employee’s salary 40% to fundraising and 60% to program service expenses. It can’t report the 100% of salary as program expenses simply because the employee spent over 50% of his time on program management.