form 990

I am assisting a local scholarship organization with their 2020 calendar year tax filing.

In the past they used form 990. However, since less than 33% of revenue comes from public support, I believe they should file 990-PF. (95% of annual revenue comes from investment income.)

I am have not real familiar with 990 PF, but it appears they are subject to NIT and the 5% distribution rule. Also they have until 12/31/21 to pay out additional scholarships to make up for the 2020 year distributions.

Can anyone here confirm or disagree with me?

Thank you for any comments you might have.

There are several ways to meet the public support test on Schedule A. Try another one.
Or, is this year a one off fail? Maybe they can pass based on facts and circumstances.

There are several ways to meet the public support test on Schedule A. Try another one.
Or, is this year a one off fail? Maybe they can pass based on facts and circumstances.

I have looked at the last three years and they are consistent, about 95% from investment income and very little donations.

So given that this is a PF, is there anyway to avoid the 5% distribution rule?

They have the resources and willingness, I just want to make sure I am not overlooking anything.

Thank you for your response.

No way for a PF to avoid the distribution rule that I know of.
Why aren't they giving out scholarships if that's their exempt function?

No way for a PF to avoid the distribution rule that I know of.
Why aren't they giving out scholarships if that's their exempt function?

They have paid out scholarships on a yearly basis but were not aware of being a PF and the 5% rule.

Per my research, they are a "non-operating" foundation so they do not meet the exception under 4942(a)(1).

Thank you for your comments!