Schedule N is for organizations that have either ended their activities and closed down, or have sold or disposed of a significant portion of their assets. If you’ve completely liquidated your assets, dissolved your organization, and have no plans to continue operations, complete Part I. If you’re still in the process of winding down, or will not be closing your organization but liquidated at least 25% of your net assets, fill out Part II. In either part, if the number of transactions involved in disposing of your assets is more than the space available, you can duplicate Schedule N to make enough room.
If you’re filling out Part I, it may be due to dissolving and terminating your organization, or merging into another organization. You’ll need to support your claim by attaching a certified copy of your articles of dissolution or merger. If this isn’t available, you can submit resolutions of your governing board approving the dissolution or merger and/or related plans that have been approved by your governing board.
In Part II, 25% of your net assets is based on your net assets at the start of the year you’re reporting on your 990 and is calculated based on fair market value. The disposition may have happened in a single transaction or a series of transactions that add up to at least 25% of the starting net asset balance. You don’t need to report:
- Changes in the composition of publicly traded securities in a passive investment portfolio
- Asset sales you make in the ordinary course of your exempt activities to accomplish your exempt purpose, e.g. sales of inventory
- Grants and other assistance you distribute in the ordinary course of your exempt activities to accomplish your exempt purpose
- A decrease in the value of net assets due to market fluctuation in the value of assets you hold
- Transfers to a disregarded entity, if you’re the sole member
In both parts of the form, you report the same type of information, starting with describing the assets you’ve distributed and transaction expenses you’ve paid. Transaction expenses are payments you make to professionals and other third parties for services they provide to help you liquidate assets and/or wind down your activities. List expenses that are at least $10,000. Line 2 asks questions about potential relationships and compensation your officers, directors, trustees, or key employees may have with the successor or transferee organization(s). Organizations completing Part I have additional information to submit, in lines 3-6, which make sure you’ve dotted your “i”s and crossed your “t”s with some steps you need to take as you close a nonprofit.
In line 1, column (a), group assets into categories and describe what was distributed, or what the transaction expense was. In column (b), put the date the assets were distributed or the expenses were paid, and put the fair market value in column (c). In column (d), list the valuation method for the assets you distributed, e.g. appraisals, comparables, book value, actual cost (with or without depreciation), or outstanding offers. For transaction expenses, describe how the amount of the expense was determined, e.g. an hourly rate or fixed fee.
In columns (e) and (f), put the EIN, name, and address of recipients. If any recipient is an individual, don’t list his or her Social Security Number. If you’re a membership organization and distributed assets to your members, you don’t need to list the names of individual members, but can aggregate them into classes of membership, or into one group if you only have one class of membership. If the recipient is a tax-exempt organization, in column (g) enter the section of the Internal Revenue Code under which they are tax-exempt, e.g. 501(c)(3) or 501(c)(4). If the recipient is not tax exempt, list the type of entity, e.g. government agency, governmental unit, limited liability company, or individual.
Schedule N can be found here, and more detailed instructions for filling it out are on pages 4-5 of the linked document.