A 990-PF Opens Where the Last One Closed. 94.9% of the Time.

They are the only figures on the form that no return has to prove. And they decide what is due by December 31.

Note 1 ended with five questions for a controller. The fifth was whether last year’s return applied the carryover it had. This note is about how to answer it, and why the answer is sometimes not what the return says.

A foundation’s payout is kept across six years. What is left undistributed in one year is due by the end of the next. What is distributed beyond a year’s amount may be applied in any of the five years that follow, oldest layer first, and what is left of a layer after its fifth year is gone (§ 4942(i); Treas. Reg. § 53.4942(a)-3(e)).

So the chain has to be carried, and three things make carrying it hard.

It compounds. An opening figure carried across wrong is carried wrong for years. Each later return is internally consistent while resting on it, and the form’s arithmetic will re-add perfectly on top of a figure that was never right.

It does not travel. A change of firm does not transfer the workpapers. The next preparer meets the chain as a stack of PDFs and re-keys the opening lines from them. The Parts of the form were renumbered for 2020, and the old numbering survives in print long after it stopped being right, so even reading the right return can mean reading the wrong line.

The counting is easy to get wrong by one. An excess arising in 2021 may be applied in 2022 through 2026. Count the five years from 2021 instead of after it, and a live layer is retired a year early. Count from 2022 and a dead one is kept a year too long.

We read every e-filed 990-PF of every private foundation with at least $10 million in assets, 65,637 returns across 11,842 foundations, in order, and held each year’s opening lines against the prior year’s closing lines.

• 94.9% of year-to-year links agree to the dollar on every opening line, the balance sheet included. 2,565 do not.
• 1,028 links open the carryover at a figure the prior return did not close at; 859 open the undistributed income somewhere other than where it closed.
• Where a carryover opens above the prior closing, $1.3 billion appears, across 527 links. Where it opens below, $878 million is dropped, across 501.
• 82.6% of 11,701 foundations agree on every filed year and every link, across the whole chain.

Inside a single year the form does better: 98.8% of 59,894 filed years re-add on every line of Part XII from the return’s own openings and elections. The arithmetic is almost never the problem. The join between one return and the next is.

Where a year does differ from its own recomputation, it is the same few lines each time. The most frequent, 273 filed years, is the one the form’s instructions caution against by name: carryover applied ahead of the year’s own distributions, or beyond what was left undistributed. An old excess applied to the year’s amount while the year’s own distributions are elected to corpus comes out as a new excess with five fresh years. In 108 filed years, carryover was left unapplied while the year’s amount stayed undistributed. In 173, the lapse reported on line 8 is not the unused excess from five years back.

None of this is a finding against anyone. A return may rest on something the public file does not show: an amended return not yet published, an election statement, a corrected valuation, a year filed on paper. Where two filed documents disagree, that is a question to put to the file. The answer is the firm’s.

Three ways the opening position changes the December number.

It opens high. The carryover on line 3 is larger than the prior return closed with. The foundation believes it has a cushion. If the cushion is a layer that already lapsed, or one built on a year whose grants did not all qualify, the cushion is a ghost, and the shortfall it hides becomes real on January 1.

It opens low. A live layer is left off line 3, or retired a year early. The return then shows more undistributed income than the rules require, and the foundation plans December wires against a figure that is too high. Nobody is penalized for giving more. But a board that accelerates grants under deadline pressure to cover a requirement that was already met has made a decision it did not know it was making.

It opens right and is applied wrong. The layer is on line 3 but never reaches line 5, and the year’s own amount is reported as undistributed. This is the case Note 1 described: the foundation believes it owes last year’s full amount by December 31, when the carryover had already covered part of it.

A worked example, continuing the foundation from Note 1, in thousands of dollars. At the end of 2024 it closed with two layers on line 10: $400 from 2021 and $500 from 2023, $900 in all. In 2025 a new firm took the return over and opened line 3 at $500, treating the 2021 layer as expired. It was not; it was good through 2026.

The controller’s December plan is built on $1.6 million. The requirement is $1.2 million. The $400,000 difference is neither a penalty nor a windfall; it is a board decision that was never put to the board. And the filed 2025 return will re-add perfectly, because its only error sits on the one line it did not compute.

This is not rare. On the latest return we hold for each, 4,837 foundations report undistributed income with a date on it, $19.8 billion between them; 4,014 of them filed through a paid preparer. The chain behind each of those figures is what the preparer opened with.

Internal controls, not statutory dates. Before the December wires are sized, not after.

Open the two returns side by side. Last year’s as filed, this year’s as drafted or as the client holds it. Three joins:

1. Last year’s undistributed income for the year (line 6f) is this year’s line 2a.
2. Last year’s line 10, the carryover by year of origin, is this year’s line 3, each layer one year older, and the oldest one gone if last year was its fifth.
3. Last year’s closing balance sheet is this year’s opening balance sheet.

If a join does not meet, find the reason in the file before you change anything. An amended return. An election statement on line 4b, 4c or 7. A short year. A year filed on paper that the IRS has not published. Write the reason beside the figure. If there is no reason in the file, the question goes to the prior preparer, in writing, and the December number waits for the answer.

Count the layers from the year after. A 2021 excess is good through 2026. Confirm each layer’s fifth year against its year of origin on line 10, not from memory.

Then take the fifth-year layer to the board. If a layer is in its last year, paying the full requirement during the year lets it lapse; paying less lets the layer cover the rest. Both satisfy the rule. Which to do is the board’s decision; knowing it is a decision is the controller’s job (Note 1).

Write down which return each opening figure came from. Not “prior year return” but the specific filing: its period, its submission date, and where the firm’s copy is. A successor will open the chain from that line.

Before we size the December wires, can you confirm three things from last year’s filed return against this year’s draft?

1. That this year’s line 2a equals last year’s line 6f, and this year’s line 3, year by year, equals last year’s line 10 moved forward one year.
2. That every carryover layer on line 3 is still within its five years, counted from the year after it arose, and whether any layer is in its last year.
3. That last year’s return applied the carryover on line 5 before reporting undistributed income on line 6f, and if not, why.

• Population: every private foundation in the IRS e-file index with at least $10 million in assets as of September 26, 2026: 11,842. Every Form 990-PF the IRS has published for them as e-file data: 65,637 returns, tax years ending 2020 to 2025 for the most part. Where a period was filed more than once, the latest submission stands.
• Within a year: each Part XII re-added from the return’s own opening lines and elections under § 4942(h), Treas. Reg. § 53.4942(a)-3(e)(1) and (e)(3), and the form instructions. An election stated on line 4b, 4c or 7 is taken as filed.
• Between years: 50,339 pairs of consecutive returns, each opening line held against the prior closing line, the balance sheet included. 2,483 pairs were not consecutive periods and were not compared; a gap is stated, never bridged.
• Arithmetic: exact decimal, held to the regulation’s worked example and to fifteen real returns read a second time by an independent program sharing no code with the first.
• No foundation is named. No figure here says a foundation is late or has given too little; whether any figure met a requirement is counsel’s question.

Full method, data and the two verifier scripts: the carryover chain.

Which lines carry over from last year’s 990-PF?
Line 2a of Part XII (undistributed income from prior years) is last year’s line 6f. Line 3 (excess distributions carryover, by year) is last year’s line 10, each layer one year older. The opening balance sheet is last year’s closing balance sheet.

How long can a foundation carry an excess distribution?
Five tax years after the year it arose, applied oldest first and only to the extent the later year’s own distributions leave its amount unpaid. An excess from 2021 may be applied through 2026.

If the opening figure is wrong, is the return wrong?
The return reports what it opened with. A difference between one filed return and the next is a comparison of two documents, and the file may hold the reason. The question is what to carry forward; the answer belongs to the firm that signs.

Can a new preparer rely on the prior return’s closing figures?
The prior return is the starting point, and it is the only one the public file provides. Whether to rely on it is a professional judgment; the November check above is a way to see where the two filings agree before making it.