Schedule F attaches to Form 990 whenever a tax-exempt organization’s foreign activities cross specific dollar thresholds, and the instructions for Form 990 Schedule F work in layers: three trigger questions on Form 990, Part IV decide which parts of the schedule you complete, and each triggered part carries its own disclosure rules plus a mandatory narrative in Part V. Getting the layers right matters because an incomplete Schedule F is treated as an incomplete Form 990, and the 2026 penalty cap runs as high as $65,000.
The Three Questions That Trigger Schedule F
Look first at Form 990, Part IV. Three lines determine whether you file Schedule F and which parts you complete:
- Line 14b asks whether the organization had aggregate revenues or expenses over $10,000 from grantmaking, fundraising, business, investment, or program service activities outside the United States, or held foreign investments with an aggregate book value of $100,000 or more. A “Yes” requires Parts I and IV.
- Line 15 asks whether the organization reported more than $5,000 in grants or other assistance to any single foreign organization. A “Yes” requires Parts II and IV.
- Line 16 asks whether the organization provided more than $5,000 in aggregate grants or other assistance to foreign individuals. A “Yes” requires Parts III and IV.
Any organization that triggers any of these lines also completes Part V. Two thresholds behave differently and are easy to misread: Part II’s $5,000 test is per recipient, so one large grant to a single foreign entity triggers the requirement even if total foreign grantmaking is small. Part III’s $5,000 test is measured in the aggregate across all foreign individual recipients.
Part I: The Organization’s Own Foreign Activities
Part I reports what the organization spent operating abroad. Program costs, fundraising costs, investments, and unrelated business activity go here. Money passed to a foreign partner organization does not; that belongs in Part II.
The IRS groups countries into geographic regions rather than asking for country-level detail. For each region where you operated, identify the type of activity and, if it is program services, write a specific description of the program. Labels like “charitable activities” won’t satisfy the IRS. Describe the actual work: maternal health clinics, teacher training workshops, water infrastructure construction.
Report total expenditures by activity and region using the same accounting method the organization uses for its financial statements, and identify that method in Part V. Investments and program-related investments are reported at total book value at year-end, not amounts spent during the year.
Part I also asks whether the organization monitors the use of grant funds outside the United States. If you answer “Yes,” Part V must describe those monitoring procedures. This is a place the IRS examines closely. “We review reports” is not enough. Describe the frequency, the method, and the type of reports or site visits you use.
Part II: Grants to Foreign Organizations
Part II covers grants and other financial assistance given to foreign organizations, foreign governments, and certain domestic intermediaries that pass funds to designated foreign recipients. Each recipient that received more than $5,000 during the tax year gets its own row.
For each qualifying recipient, report:
- The region where the recipient’s principal foreign office is located, or where the funds will be used if the recipient has no foreign office.
- A specific purpose. The instructions explicitly reject general terms like “charitable” or “educational.” Write the concrete use: construction of a rural health clinic, purchase of medical supplies, disaster relief following an earthquake.
- The cash grant amount in U.S. dollars.
- The manner of disbursement: wire transfer, check, electronic funds transfer, or another method.
- Non-cash assistance, including a description of the property, its fair market value, and the valuation method.
You also tally the number of recipients in three due diligence categories: those recognized by the IRS as Section 501(c)(3) organizations, those recognized as charities by their home country, and those for which the organization obtained an equivalency determination.
Equivalency Determinations and Expenditure Responsibility
An equivalency determination is a formal finding that a foreign organization is functionally equivalent to a U.S. public charity. Under Revenue Procedure 2017-53, the determination must be prepared by a qualified tax practitioner (an attorney, CPA, or enrolled agent) and can generally be relied on for two consecutive tax periods.
When a grantee doesn’t qualify as a public charity equivalent, private foundations must exercise expenditure responsibility under IRC Section 4945 to avoid treating the grant as a taxable expenditure. Treasury regulations require a pre-grant inquiry into the grantee’s identity, history, and management; a written grant agreement signed by an officer of the grantee covering how funds will be used and how the grantee will report back; and ongoing reporting obligations, including annual reports on how the money was spent. The agreement must also restrict the use of funds from lobbying, electioneering, and purposes outside Section 170(c)(2)(B).
Public charities are not held to the expenditure responsibility standard, but they should still document their due diligence. IRS examination guidelines indicate auditors may request grant agreements, evidence of how funds are controlled and monitored, periodic reports from grantees, and a complete list of distributions with recipient names and amounts.
Part III: Grants to Foreign Individuals
Part III covers grants and assistance given directly to foreign individuals. The $5,000 threshold is aggregate across all foreign individual recipients.
Individual names are not disclosed. Report by type of grant (scholarships, medical assistance, disaster relief, and similar categories) and by region, with the estimated number of recipients and the totals of cash and non-cash assistance. Privacy protections drive the design, but the IRS expects you to explain in Part V how you estimated the number of recipients and which accounting method you used for the cash and non-cash figures.
Part IV: Foreign Offices and Related Entities
Every organization filing Schedule F completes Part IV. This section uses yes-or-no questions to map the organization’s structural links to foreign entities.
The questions are designed to identify obligations to file other specialized international forms, including Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation), Form 3520 (Annual Return to Report Transactions With Foreign Trusts), and FinCEN Report 114 (the FBAR for foreign bank accounts). A “Yes” answer does not mean something is wrong. It flags a separate filing that lives outside the Form 990.
Part IV also asks about foreign offices, employees, and agents. For each foreign office, disclose its location and primary function. For each related foreign entity, report the name, country of incorporation, principal address, and a relationship code identifying whether the entity is controlled by, controlling, or under common control with the filing organization.
Part V: The Narratives Everyone Must Write
Part V holds the written explanations the other parts reference. Every Schedule F filer has at least some Part V content, and skipping it is one of the quickest ways to draw an IRS inquiry.
The mandatory narratives include grant monitoring procedures referenced at Part I, line 2; the accounting method used for the expenditure and investment figures in Part I; the accounting method used for the cash grants and non-cash assistance figures in Parts II and III; and the method used to estimate the number of individual recipients in Part III.
Part V is also where you explain unusual or complex transactions that don’t fit the structured parts of the form. Whatever you write, identify the part and line number it supports so the IRS can match your explanation to the data.
Sanctions Screening Before You Disburse
Schedule F reports foreign activity to the IRS. It does not clear the organization under other federal law. Under Executive Order 13224, U.S. persons are prohibited from conducting transactions with individuals and entities on the Treasury Department’s Specially Designated Nationals and Blocked Persons List. Nonprofits are U.S. persons. A grant to a designated person exposes the organization to serious criminal and civil penalties regardless of charitable intent.
Any organization completing Schedule F should screen its foreign grantees and partners against the SDN List before disbursing funds. Treasury has published voluntary best practices for U.S.-based charities operating internationally, recommending a risk-based due diligence approach that includes screening beneficiaries and partner organizations. The guidelines are voluntary. The underlying prohibition is not.
Penalties for Late or Incomplete Filing
Schedule F is part of Form 990, and the Form 990 penalties apply to the entire return, schedules included. Under IRC Section 6652(c)(1)(A), the base statutory penalty is $20 per day, capped at the lesser of $10,000 or 5% of gross receipts. For organizations with gross receipts over $1,000,000, the rate rises to $100 per day, capped at $50,000.
The amounts are adjusted annually for inflation. For returns required to be filed in 2026, the penalty is $25 per day, up to the lesser of $13,000 or 5% of gross receipts. Organizations with gross receipts exceeding $1,309,500 face $130 per day, capped at $65,000.
Penalties can be abated for reasonable cause, evaluated case by case on all the relevant facts. An incomplete Schedule F filed with an otherwise timely Form 990 can still trigger a penalty, because missing required information counts as a failure to file under the statute.
Records to Keep
The IRS can request documentation for every figure on Schedule F. The general retention rule is three years from the date the return was filed. For income attributable to foreign financial assets exceeding $5,000, the assessment period extends to six years, so the records should follow.
Worth keeping: grant agreements, grantee reports, wire transfer confirmations, equivalency determinations, board minutes approving foreign grants, and correspondence with foreign partners about fund usage. If an auditor asks how you monitored a grant reported in Part II and the documentation described in your Part V narrative isn’t there, the credibility of the entire return suffers.