Adjusted Net Income and Investment Error [F990PF-035-01] - How do I resolve it?
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IRS  Error code: Form 990-PF: [F990PF-035-01]

Rejection Message: 

If your foundation is classified as a private operating foundation under section 4942(j)(3) or 4942(j)(5), then for the current calendar/fiscal tax year, you have to enter in Part XIII, Private Operating Foundations, the lesser of the adjusted net income of Analysis of Revenue And Expenses (from Part I) or the minimum investment return of each year (from Part IX).

What does it mean:

Since Part XIII calculates the Qualifying Distributions made directly for Active Conduct of Exempt Activities, you need to complete it to ensure Section 4942(j)(3) or 4942(j)(5) continues to apply for your private foundation in the current calendar/fiscal tax year

Resolution:

Complete the required portion in Part XIII to ensure calculation of the Quality Distribution made for Active Conduct of Exemept Activities.

Follow the below steps to report Adjusted Net Income:

1. From the dashboard, select the organization and the tax year.
2. You need to click on the 'Rejected by the IRS' button to find the list of errors for the rejected return. Then, click the 'Fix Me' button to resolve the rejection error. 
3. Based on the filing type you have chosen, you will be navigated to the corresponding page.
   • Interview-based filing - You'll be directed to the Adjusted Net Income & Qualifying Distributions page, under the Private Operating Foundations section. Here, the organization must provide the appropriate details to calculate Adjusted Net Income & Qualifying Distributions' value.
   • Form-based filing - You'll be directed to Part XIV, Line 2a of Form 990-PF. Here, provide the adjusted net income value for the tax year.
4. Review the details, and click the Transmit button to re-transmit your return to the IRS at no additional cost.

We'll update you on the status of the return once we hear back from the IRS.

For any further assistance, we recommend contacting the IRS e-Help Desk Toll-Free Number 1-866-255-0654.