General Instructions—Schedule A (Form 990-T)

Purpose of the Schedule Complete a separate Schedule A (Form 990-T) to report income and allowable deductions for each separate unrelated trade or business.

Separate Trades or Businesses

An exempt organization may engage in more than one unrelated trade or business. Prior to the enactment of section 512(a)(6), an exempt organization deriving gross income from the regular conduct of two or more unrelated trades or businesses calculated UBTI by determining its aggregate gross income from all such unrelated trades or businesses and reducing that amount by the aggregate deductions allowed with respect to all such unrelated trades or businesses. However, section 512(a)(6) changed this calculation for exempt organizations with more than one unrelated trade or businesses so that, in the case of any exempt organization with more than one unrelated trade or business:

• UBTI, including for purposes of determining any NOL deduction, shall be computed separately with respect to each trade or business and without regard to section 512(b)(12) (allowing a specific deduction of $1,000);

• The UBTI of such exempt organization shall be the sum of the UBTI so computed with respect to each

18 Instructions for Form 990-T (2025)

Chapter 1 that are directly connected with the carrying on of such trade or business. To be “directly connected” with a trade or business, an item of deduction must have a proximate and primary relationship to the carrying on of the unrelated trade or business generating the gross income. See Regulations section 1.512(a)-1(a).

Expenses, depreciation, and similar items attributable solely to the conduct of an unrelated trade or business are proximately and primarily related to that trade or business and qualify to reduce income from such trade or business under section 512(a)(1) to the extent such items meet the requirements of section 162 (trade or business expenses), section 167 (depreciation), and other relevant provisions. To the extent that an exempt organization may have items of deduction that are shared between an exempt activity and an unrelated trade or business, Regulations section 1.512(a)-1(c) provides special rules for allocating such expenses.

For example, if facilities are used both to carry on exempt activities and to conduct unrelated trade or business activities, then expenses, depreciation, and similar items attributable to such facilities must be allocated between the two uses on a reasonable basis. See Regulations section 1.512(a)-1(c). The allocation issues under section 512(a)(1) are also relevant under section 512(a)(6) because an exempt organization with more than one unrelated trade or business must not only allocate indirect expenses among exempt and taxable activities, as described in Regulations section 1.512(a)-1(c) but also among separate unrelated trades or businesses.

The allocation of expenses, depreciation, and similar items using an unadjusted gross-to-gross method is not reasonable if the cost of providing the good or service is substantially the same but the price charged differs between related and unrelated activities.

Which Parts To Complete

Complete a separate Schedule A (Form 990-T), Parts I and II, for each unrelated trade or business. Complete only the lines relevant to the unrelated trade or business being reported on that Schedule A (Form 990-T).

Is gross income more than $10,000? If the sum of the amounts in all Schedules A (Form 990-T), Part I, line 13, column (A), is more than $10,000, you must complete all parts of each Schedule A (Form 990-T) that apply to the unrelated trade or business reported on that Schedule A (Form 990-T).

Is gross income $10,000 or less? If the sum of the amounts in all Schedules A (Form 990-T), Part I, line 13, column (A), is $10,000 or less, complete Schedule A (Form 990-T) and Form 990-T as follows.

1. Schedule A (Form 990-T).

a. Complete the heading on each Schedule A (Form

990-T).

b. Part I. Complete only the lines that apply.

i. Enter information directly into column (A) on

lines 1, 3–5, 12, and 13.

ii. Entries for lines 2 and 6–11, must be made on

the part referenced in the text for the line in Part I. For example, enter the amount for Part I, line 2, on Part III, line 8. For Part I, line 6, columns (A) and (B), enter the amounts on Part IV, line 3 and line 5, respectively.

iii. Make entries as necessary to complete the

applicable lines in column (C).

c. Part II. Complete lines 15–18, and if necessary,

the attachment to line 17 (NOL deduction).

2. Form 990-T.

a. Complete all applicable lines in the heading area.

b. Complete all applicable lines as needed to

determine the appropriate tax, applicable credits, and balance due or refund amounts.

c. Complete the signature area.

Caution: If an entry for a line on Part I or Part II must be made on a different part of Schedule A (Form 990-T), complete only the lines in the part that reference a specific line on Part I or Part II. Leave all other lines in the applicable Part blank.

Filers with gross income of $10,000 or less, as described above, don’t have to complete Schedule A (Form 990-T), Parts III through X (except as described above because certain entries must be made in those sections to populate lines in Parts I and II). However, refer to the applicable parts of Schedule A (Form 990-T) when completing Schedule A (Form 990-T), Part I, column (A), and in determining the deductible expenses to include on Schedule A (Form 990-T), Part I, line 13, column (B).

Exceptions and Special Rules

Member income of mutual or cooperative electric companies. Income of a mutual or cooperative electric company described in section 501(c)(12), which is treated as member income under subparagraph (H), is excluded from UBTI.

Income from qualifying shipping activities. The organization’s gross income doesn’t include income from qualifying shipping activities (as defined in section 1356) if the organization makes an election under section 1354 on a timely filed return (including extensions) to be taxed on its notional shipping income (as defined in section 1353) at the highest corporate rate. If the election is made, the organization generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. An organization making this election may also elect to defer gain on the disposition of a qualifying vessel under section 1359. Use Form 8902 to figure the tax. Include the alternative tax on Form 990-T, Part III, line 3e.

Passive loss and at-risk limitations. Under section 469, certain taxpayers, including certain tax-exempt organizations, may not deduct a passive activity loss (PAL). Such tax-exempt organizations (“affected tax-exempt organizations”) include a trust (such as a trust

Instructions for Form 990-T (2025) 19

described in section 501(c), a trust described in section 401(a), or an IRA), and a corporation if at any time during the last half of its tax year more than 50% in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for not more than five organizations that are private foundations under section 509(a) or are described in section 401(a) or 501(c)(17) (for example, a stock corporation described in section 501(c)(2) with a 401(a) parent or private foundation parent). A PAL occurs when total losses (including prior-year unallowed losses) from all the organization’s passive activities exceed the total income from all its passive activities. Generally, passive activities include (1) trade or business activities in which the organization didn’t materially participate for the tax year; and (2) rental activities, regardless of your participation. If the organization has income or loss from a passive activity, several lines on Form 990-T and Schedule A (Form 990-T) may be affected by these rules.

PALs can’t be used to offset income from nonpassive activities. Passive activity income doesn’t include portfolio income. Portfolio income (see Temporary Regulations section 1.469-2T(c)(3)) is income from a nonpassive activity. Portfolio income includes all gross income, other than income derived in the ordinary course of a trade or business, that is attributable to interest, dividends, annuities, and royalties (by contrast, a bank’s receipt of interest is in the ordinary course of a trade or business, as is a securities dealer’s receipt of dividends). Portfolio income also includes gain or loss from the disposition of property that produces portfolio income or is held for investment (see section 163(d)(5)). The rule treating portfolio income as not from a passive activity doesn’t apply to the extent that income, of a type generally regarded as portfolio income, is derived in the ordinary course of a trade or business. For example, the business income of a bank typically is largely interest. Similarly, a securities broker/dealer may earn a substantial portion of the income from the business in the form of dividends and gains on sales of dividend-bearing instruments. Interest income may also arise in the ordinary course of a trade or business with respect to installment sales and interest charges on accounts receivable. This means that portfolio income may not be reduced by PALs or passive activity credits. For example, any portfolio income earned by a trust described in section 501(a) that is UBTI (such as unrelated debt-financed income) may not be offset by PALs from an unrelated trade or business.

Section 469(k) provides that the passive activity limitations must be applied separately to items from each publicly traded partnership (PTP). A PTP is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market (or its substantial equivalent). PALs from a PTP may generally be used only to offset income or gain from passive activities of the same PTP. This means that a partner in a PTP may not use PALs and passive activity credits from a PTP to offset income from other sources, including passive activity income from another PTP. Such PALs and passive activity credits aren’t allowed for the tax year.

Generally, PALs are subject to other limitations (for example, basis and at-risk limitations) before they are

subject to the PAL limitations. For example, the at-risk rules under section 465 generally prohibit trusts and corporations that are affected tax-exempt organizations from claiming losses from activities in excess of the taxpayer’s amount at risk in the activity.

An affected tax-exempt organization may need to attach Form 6198 and either Form 8582 or Form 8810. For more information on these rules, see Pub. 925, Passive Activity and At-Risk Rules.

Caution: How to report income received from a payment card and third-party network transaction. An organization that receives a Form 1099-K reporting a “gross amount” received from payment card and third-party network transactions in the tax year should report these amounts in the same manner as if the payments weren’t reported on a Form 1099-K. There isn’t any one specific line on which to report an amount from Form 1099-K; the correct line should be determined based on the nature of the payments. Some payments received may constitute unrelated business income; see the instructions below to determine the appropriate line. For instance, if some of the payments are sales income from an unrelated business, then those payments would be reported on Schedule A (Form 990-T), Part I, line 1a. Retain Form 1099-K with your other records.